Sales tax revenue is contributing to Nebraska surplus
While our state and nation continue to recover from the COVID-19 pandemic’s impact on our economy, it is clear that Nebraska’s sales tax is a contributing factor to the state’s resiliency.
Sales tax data released by the Department of Revenue gives us an itemized list of each city and county and their net taxable sales for January 2021 and compares it to January 2020. While not every city and county saw increases, overall, the state saw a 10.8% increase of net taxable sales compared to one year prior. That’s an increase of $271.7 million in taxable sales which equates to an extra $15 million for the state.
Now, let’s imagine that we update our tax code to include services in that tax base. Right now, services are mostly exempt from Nebraska sales tax. That would mean more revenue for the state, but it would also mean more revenue for the municipalities, since cities can also collect sales taxes. This means the state and cities would need less revenue from other places – like the income tax or property tax, respectively.
Many states are reforming their tax codes to be more reflective of the 21st century economy. While Nebraska stands still and does nothing, other states surpass us in competitiveness. Sales tax collections, especially during the pandemic, provide evidence that broadening the base is a solution to some of Nebraska’s concerns.