The Senate passed a bill Wednesday to implement a nickel tax on alternative nicotine products like nicotine pouches and vapes, with funding to go toward pediatric cancer research at the University of Iowa.
Senate File 2480, passed with unanimous support, would create a 5-cent tax on these other nicotine products on a per-unit basis. Containers of nicotine pouches containing up to 20 pouches would be taxed 5 cents, adding a proportionate tax for each unit above 20 within a container.
Vape products would be taxed at 5 cents per milliliter of nicotine or a nicotine analog in a solution, with the tax applying both to disposable vapes and vape cartridges, but not to components, parts or accessories used in the device “when not sold in combination with any substance containing nicotine.”
The funding generated from this tax would be put into the state’s health care trust fund, a Medicaid appropriation program. From there, up to $3 million would flow to the Iowa Board of Regents specifically to conduct pediatric cancer research, clinical therapy trials and provide physician-scientist leadership at the University of Iowa Stead Family Children’s Hospital. The measure was amended to ensure the first $3 million goes to the UI system — any excess revenue generated past this point would stay within the pool for Medicaid funding.
During the subcommittee meeting on the measure, health care and anti-nicotine advocates called for implementing a higher tax on these nicotine products as well as raising the tobacco tax, saying the nickel proposal was not enough to discourage new or current users from buying the products. Sen. Kara Warme, R-Ames, who floor managed the bill, acknowledged these concerns, but said she supported the bill moving forward to create funding for cancer research.
“I understand that the level of tax we’re looking at here is not likely to be enough to deter usage, but it is enough to create this investment in pediatric cancer research that we all want to get behind, with any remaining funds going to the health care trust fund for funding Medicaid in our state — which again is impacted by the costs of these addictive products,” Warme said.
While the legislation passed without opposition, several Democrats said they would like to see a higher tax that would serve as a deterrent. Sen. Molly Donahue, D-Marion, said she supported the cancer research funding, but asked Warme if she would work with her or other members of the Senate Health and Human Services Committee in 2027 to “up that tax, so that we can really make an effort to curtail the use of these.”
Warme said she was willing to continue work on the issue, and said she supported raising taxes on nicotine and tobacco products — pointing to her support for raising the excise tax for cigarettes and tobacco products, and create a new tax on consumable hemp and vapor products, provisions originally included in Gov. Kim Reynolds’ “MAHA” bill. Though the bill received a 9-8 vote in the Senate HHS Committee, because the bill did not receive approval from 10 members of the 18 member committee, it did not advance.
“I brought forward the governor’s proposal of an increase in cigarette tax,” Warme said. “(I) reached across, looking, pleading for votes to get it done, and very publicly came up one vote short. I thought it was important that we take that public vote, and I would be happy to continue the discussion so we can do things to lower our lung cancer, and help us continue to take steps in the right direction.”
The governor’s proposal also included several other provisions related to “Make America Healthy Again” initiatives, including allowing for the over-the-counter distribution of ivermectin, as well as requiring the state to continuously request waivers from the federal government to keep in place restrictions on purchasing unhealthy foods through the Supplemental Nutrition Assistance Program (SNAP) and the federal Summer EBT program. This measure has advanced as House File 2676, but was amended early in the House committee process to remove the nicotine and tobacco tax components.
Sen. Bill Dotzler, D-Waterloo, said though he believed “quite frankly, the industry is the one that wrote” the nickel tax bill, he still supported moving the measure forward because he supported funding pediatric cancer research.
He also pointed to the measure as an nicotine industry-supported measure because of conflicting reports on how much money would be generated by the tax. Dotzler said while representatives for companies making and selling these products told lawmakers the tax would generate significantly more than $3 million in a year, the Legislative Services Agency fiscal note on the proposal predicted it will take until 2031 for the tax to generate $3 million.
“The fact that we have this bill and there’s some money going to children’s cancer research makes it a bill that everybody’s going to support,” Dotzler said. “But the reality of the situation is, we are not really helping reduce cancer by this insignificant amount, because people are switching to the vapes, and they’re using more nicotine, because it’s so easy. … Just think, if we’d have had just another nickel on it, we could have hit the $3 million immediately.”
Though he said he was disappointed by the measure, he said he supported Warme in continuing to work on raising nicotine and tobacco taxes, telling Warme, “I know you fully understand these issues, and I have faith that in the future, we can hopefully move this a little farther in the right direction.”
Warme said there was some dispute about the estimated revenue impacts, saying the LSA note was created with “very limited information” because the substances are not taxed currently. She said she was confident, working with industry representatives, that the correct estimate for the tax would be $15 million to $18 million in revenue during the first year of implementation.
“To me, this shows that only a nickel really adds up when we work together — A lot of nickels turns into $15 to $18 million,” Warme said. “And yes, it’s a tiny step forward. But for families who have a little one with cancer, they are begging and pleading and praying for their little one to take a tiny step forward.”
The Senate bill is not the only proposal lawmakers are considering to fund UI pediatric cancer research. On Tuesday, the House passed House File 2758, which would create a standing appropriation of $1 for every Iowan, capped at $3 million, to be appropriated to Board of Regents for pediatric cancer research in the UIHC system.
