LINCOLN – Tax policy has been a controversial topic in Nebraska law for decades. This year, two bills propose solutions to give the state tax breaks.
On February 3, Senator Tom Briese of Albion and Senator Steve Erdman of Bayard presented new tax bills to the Revenue Committee. Both bills aim to modernize the tax system in Nebraska, but each have different approaches.
LB422: Lower the sales tax rate and levy sales tax on additional services
Briese introduced LB422 to reduce the Nebraska sales tax rate from 5.5% to 5%. The bill would also add sales tax to services that would include things like haircuts or tattoos. Currently, many goods are subject to sales tax, while Nebraska services are generally exempt from tax.
Briese said the bill adjusts to the increase in services that Nebraska’s economy has seen over time, and also leaves room for some services that are sales tax exempt.
If passed, the law would come into force in October 2022. Briese said he intended to keep the state’s tax revenue the same. This means that lowering sales tax to 5% shouldn’t reduce Nebraska’s tax revenue, as that bill would include services in sales tax as well.
During the testimony in the legislature, Briese heard support and rejection of the law.
Tiffany Friesen, the editorial director of the Open Sky Policy Institute, testified in support, citing the successes of neighboring states such as South Dakota, where many services are taxed. Sarah Curry, the Platte Institute’s Policy Director, also endorsed the tax policy in the bill.
“Expanding the sales tax base has a better chance of generating (tax) revenue without having to collect taxes,” said Curry.
John Hansen, President of the Nebraska Farmers Union, agreed that the proposal would be a good solution for Nebraska taxpayers.
“We support opportunities to broaden the sales tax rate and support the efforts of Sen. Briese,” said Hansen.
Opponents of the bill were concerned that including services in sales tax would hit low-income people disproportionately, and suggested that more services in areas such as education, health care or medicine should be excluded.
Korby Gilbertson, a registered lobbyist with Radcliffe & Associates of Lincoln, opposed the bill on behalf of 41 organizations. She testified that there is not enough information at this time to release the bill from the Revenue Committee.
“We need a full study first because we don’t know the real numbers and the implications for the state,” Gilbertson said.
Lawmakers also heard concerns from estheticians, a licensed nail technician, tattoo artist and esthetician who said the bill would adversely affect their business during a critical recovery period during the pandemic.
“Taxing personal services will be extremely taxing on individuals and businesses, especially in an uncertain future,” said Tyson Schaffert of Lincoln, a licensed tattoo artist.
The Revenue Committee did not take any action on the bill on February 3.
LR11CA and LB133: EPIC Consumption Tax Act passed and other taxes eliminated
Erdman introduced LR11CA as a constitutional amendment to change the Nebraska tax system. The amendment would pass the EPIC (Elimination of Property, Income and Corporate Tax) law on excise duty, which if passed in 2022 would be put to the vote.
He also proposed LB133 to provide guidance to legislators on how to introduce excise duty. This bill creates the EPIC Consumption Tax Act, which abolishes income tax, sales tax, inheritance tax, property tax and other taxes. This bill would replace tax revenue with a one-time excise duty of 10.64% on services and new goods.
In a column posted on the Nebraska Legislature website on Jan. 29, Erdman discussed the freedom he believes excise tax brings to taxpayers.
“It’s the only tax the taxpayer can control,” Erdman said. “If you don’t want to pay the tax, don’t go shopping.”
There were 18 people testifying in support of the law, from rural and urban Nebraskans to farmers, business owners and more. Several of these proponents discussed their frustrations with current tax policies, including the property tax burden.
Lee Todd of Lincoln testified in support of the bill. He grew up on a farm in northern Nebraska and works in real estate.
“We have no control over our property taxes, but I can control what I buy and that empowers,” said Todd. “That’s what the consumption tax does.”
During the Revenue Committee hearing, Erdman said that the excise tax prevents double taxation by only taxing new goods instead of used goods.
The bill would also exempt certain items from excise duty, including the sale of land, fuel, land or business services, investment, education, and used land.
“This is the Taxpayers Bill of Rights,” he said. “It neither benefits the poor nor the rich.”
The senators also heard opposition from four testers. The President of the Nebraska Farmers Union, John Hansen, who previously testified on LB422, rejected the bill. Hansen was concerned about whether the funds would be fairly distributed to cities and school districts, and questioned the plausibility of a consumption tax.
“I understand good intentions, but I understand the real gap between theory and (what) is practical,” said Hansen. “We need to lower property taxes, but I don’t think that would work.”
Erdman closed the hearing by calling on other senators to support the bill.
“This is a policy and a proposal that you can vote on,” Erdman said. “I have promised hundreds of people that I will help them. I ask you to help me, to help them. “
Written by Celena Shepherd
Celena is a senior at the University of Nebraska-Lincoln studying journalism, advertising, and public relations. She enjoys traveling, trying new restaurants, and spending time with friends and family. She is from Omaha and explores various career paths in communication.