News Release: Platte Institute to Support Sales Tax Reform
NEWS RELEASE from the Platte Institute
Contact: Adam Weinberg
Phone: (402) 452-3737
aweinberg@platteinstitute.org
Nebraska's Sales Tax Summary
Platte Institute to Support Sales Tax Reform
Nebraska Sales Tax Could Be Among Country’s Lowest
LINCOLN, NE – The Platte Institute plans to support Sen. Tom Briese’s Legislative Bill 946, a bill that would end sales tax exemptions on services and give Nebraska one of the country’s lowest sales tax rates.
The bill aligns with most recommendations in the Platte Institute’s sales tax report. A summary of the report is attached.
“The governor has yet to support a larger property tax plan that includes ending sales tax exemptions. But the Legislature still has the opportunity to end these exemptions and make reforms to either the property, income, or sales taxes,” said Jim Vokal, Chief Executive Officer of the Platte Institute.
“LB946 is a great example of how tax reform can improve Nebraska’s competitive position. By collecting sales tax on consumer goods and services alike, the state can make our tax system fairer, levy one of the lowest sales tax rates in the country, and still pay its bills,” said Vokal.
Right now, the state collects a 5.5% sales tax on most goods purchased in Nebraska, averaging around 7% once local sales taxes are included. However, most services are exempt from sales tax. LB946 would initially collect a 4% state sales tax on currently taxed goods and newly-taxed services. The tax rate could also drop further as revenues grow.
The Tax Commissioner would review the new sales tax receipts each year for the first four years following the rate cut and would reduce the sales tax rate if revenues increased. In 2018, the state collected about $1.6 billion in net receipts from sales and use tax.
Under LB946, sales taxes would be reduced on everything that is currently taxed, including car sales, utility bills, phone service, household goods, nonprescription drugs, restaurant meals, and prepared foods.
In exchange, sales taxes would be collected on all services purchased unless otherwise exempted by the Legislature. The Platte Institute plans to recommend an amendment to LB946 which would prevent the sales tax from being imposed on business-to-business services.
“The sales tax we have today is outdated and arbitrary. There’s no real economic reason you should pay seven percent tax to buy a car and zero percent tax to buy swimming pool cleaning services,” said Adam Weinberg, co-author of the Platte Institute report, “Nebraska’s Sales Tax.”
“LB946 is good news for taxpayers because any additional state sales tax you pay would be used to reduce the tax rate, not to increase state spending,” said Weinberg.
Whether a taxpayer would pay more sales tax in a given year depends on how much they choose to spend on goods and services. If an Omaha taxpayer spent $10,000 on taxable purchases at the current combined rate of 7%, they would have to spend $12,728 to pay more tax under the proposed 5.5% combined rate.
Based on 2019 numbers from the Tax Foundation, the proposed 4% state sales tax rate for Nebraska would initially tie for the 10th lowest, charging the same rate as neighboring Wyoming. However, once average local sales tax rates are included, Nebraska’s competitive position would improve to 7th lowest.
Because five of the top ten states do not have a state sales tax (Alaska, Delaware, Montana, New Hampshire, and Oregon), once fully implemented, LB946 could potentially give Nebraska the lowest sales tax among states that levy them.
To schedule an interview on this topic please contact Adam Weinberg at (402) 452-3737 or aweinberg@platteinstitute.org.
The Platte Institute advances policies that remove barriers to growth and opportunity in Nebraska. More media resources are available at PlatteInstitute.org/Media.