LB 388 continues to raise questions about many issues

The good news, LB 388 advanced by a legislative committee, is projected to lower school property taxes by more than half.

The bad news? It would raise the state sales tax by up to a penny, although that might not be necessary. Oh, and it’ll actually cost you more to buy soda and candy and have your dog groomed.

The bill is designed to deliver about two-thirds of the $1 billion savings sought by Gov. Jim Pillen, but he called its advancement “historic and transformational” and a “once in a lifetime” chance at property tax reliev.

Besides lowering local school taxes by half and raising sales taxes by up to 1 cent, other highlights of the bill include eliminating sales tax exemptions on pop and candy, pet grooming, some advertising, state lottery tickets and raising taxes on gambling and smoking-related items such as vaping, cigarettes, synthetic marijuana and CBD. It would do away with the under-used taxpayer state tax credits and send about $500 directly to school districts, cap revenue growth, cap spending by cities and counties except for EMS and corrections and eliminate sales taxes on residential utility bills.

So what are the issues?

Critics argue that the proposal shifts the tax burden from property taxes to sales taxes. This could disproportionately affect low-income families who spend a higher proportion of their income on goods subject to sales tax.

Conservative groups like the American for Prosperity Nebraska oppose the proposal, viewing it as the largest tax increase in Nebraska’s history rather than genuine tax relief.

Some conservative senators, such as Kearney Sen. John Lowe and Bayard Sen. Steve Erdman, have voiced their opposition to a shift in taxes. Erdman is even pushing for an initiative petition drive for the EPIC consumption tax to replace all state and local taxes.

The Platte Institute, typically supportive of tax relief, issued a statement against the proposal, stating that increasing the sales tax rate and extending taxation to business inputs like advertising is a step in the wrong direction.

Increasing the sales tax rate and eliminating exemptions could affect consumer spending and business operations. Businesses may face higher costs, and consumers may cut back on spending, impacting overall economic activity.

Tax increases on items like cigarettes, vaping products, and gambling could have various effects, including potential decreases in consumption, black market activity, or cross-border shopping.

Implementing changes to tax rates and exemptions can add complexity to tax administration and compliance for businesses and government agencies.

Changes to tax policy can have unintended consequences, such as changes in consumer behavior, economic distortions, or impacts on government revenues.

While the proposal includes exemptions for residential utility bills to help low-income families, there may still be concerns about the overall equity of the tax changes and their impact on different income groups.

There may be questions about the long-term fiscal sustainability of the proposed tax changes and whether they adequately address the underlying issues driving property tax burdens and revenue needs in the state.

Overall, the proposal raises various concerns and considerations that policymakers need to address in evaluating its potential impacts and desirability.