Nebraska State Line by J. Stephen Conn is licensed under CC BY-NC 2.0
A tax shift from property to sales taxes will do little to reduce the overall tax burden of Nebraskan families. Following the Governor’s proposal, a 6.5 cent sales tax would leave Nebraska with one of the highest sales taxes in the entire country, outpacing progressive bastions such as Illinois and Vermont. The sales tax hike would also make Nebraska less economically competitive and an outlier when compared to neighboring states. Of Nebraska’s six neighboring states, five have a sales tax below Nebraska’s under the proposed plan, with only Kansas tying Nebraska at 6.5 percent.
An increased sales tax will also result in higher prices when Nebraskans purchase goods and services. The cost of essential goods such as cars, clothing, and even diapers would see a price increase. When you couple the increased sales tax rate with the elimination of the sales tax exemptions for countless goods and services, Nebraskan families will face even higher costs. If a Nebraskan needs legal counsel or a farmer needs to get a new part for his farm equipment, they’ll be paying a higher price – all at a time when American families are already struggling to pay their bills.
Yet the sales tax hike is not the only pay-for included in the bill that will adversely affect Nebraska. The Governor’s proposal to increase cigarette taxes by an additional $2 will adversely affect Nebraska’s lower-income residents, with roughly 28% of Nebraskans earning less than $25,000 being smokers, while only 8.9% of Nebraskans earning $75,000 or more smoke. Increasing the cigarette tax will just mean less money in the pockets of Nebraska’s most vulnerable. Additionally, increasing the tax on cigarettes and similar vaping products will benefit Nebraska’s neighboring states, with research showing that higher taxes on cigarettes create a substantial movement of black-market tobacco products into high-tax states from low-tax states. A $2.64 cigarette tax puts Nebraska far above neighboring states, only worsening the potential impact for black-market products to make their way into the state.
Nevertheless, Nebraska Governor Jim Pillen is pushing forward with his tax shift proposal – continuing calls for raising the state sales tax by 20%, up from 5.5 to 6.5 cents, as well as eliminating certain sales tax exemptions such as those for soda and candy, veterinary services, clothing repairs, business legal services, and replacement parts for agricultural machinery and equipment. The plan also hikes the state’s cigarette tax an additional 400%, up to $2.64 per pack. The Governor says the additional revenue will be used to reduce property tax rates.
This plan does little to provide Nebraskan families with tax relief but rather just shifts the burden away from property towards other goods by hiking countless taxes.
Similar “tax shift” proposals were rejected by former Nebraska Governor Pete Ricketts, with him arguing that hiking one tax to reduce another constituted a tax increase.
Contact your legislators today telling them you oppose any tax hikes for Nebraska families. Find their contact information here: https://nebraskalegislature.gov/senators/senator_list.php