Consumption tax proposal to eliminate Nebraska property taxes fails to advance

If you listened to the Nebraska Legislature debate today you would have heard the following quotes from multiple members:

• “Our tax code is antiquated and was written in a time before the internet existed and before people and businesses were as mobile as they are today.”
• “People are mad about their property taxes.”
• “Nebraska can be a national leader and we will be the envy of all other states.”
• “We have to go to the shareholders of this state when we want to make any significant changes to our tax system…we as a legislature are unable to deliver the tax system the people want… which is why we need to put this on the ballot…we need something where everyone gets to vote on it.”

The bill that garnered these statements is LR11CA, a constitutional amendment to create a consumption tax.

Essentially, this provision would prohibit the state and all political subdivisions from imposing a tax on personal income, corporate income, personal and real property, inheritance tax, and sales tax. The replacement would have been a consumption, or sales tax, on the purchase of services and new goods, except for fuel.

Based on these statements, it sounds like this is a good idea. Yet the vote on this provision failed by a vote of 23-19 with 5 members present, but not voting. When a filibuster is not being attempted, a simple majority of the Legislature must support a bill or amendment for it to advance, leaving LR11CA 2 votes short of advancement.

The heated debate on the floor was very similar to the committee hearing on this same issue. There were very few vocal opponents, yet those most passionate about the provision were mad about property taxes and the state’s outdated current tax structure.

There are both pros and cons to this proposal. However, it has been nearly 60 years since Nebraska’s last major tax restructuring, and it is reasonable to be asking voters about potential ballot measures for tax modernization and what they would be willing to support.

While the measure failed, it is an important step because there is needed discussion about creating a more complete vision for tax reform in Nebraska.

The state’s economic competitiveness and the simplicity of our tax code would improve substantially if state and local government relied more on consumption-based taxes and less on taxing property and income. For nearly a decade, the Platte Institute and the Tax Foundation have recommended that the Legislature remove exemptions in the sales tax and use those revenues to reduce the state’s high tax rates. A key reason is stability.

Even though this vote did not garner a positive result, it does show there is substantial bipartisan support across the state’s elected officials to make drastic changes to the state’s tax code, which is an optimistic note for future Legislatures.