A proposal to ask voters if they want to replace property, income and sales taxes with a consumption tax fell short in the Nebraska Legislature Wednesday.
Sen. Steve Erdman is the lead sponsor of the proposed state constitutional amendment debated Wednesday. It would abolish property and income taxes, and replace them with a consumption tax on the sales of new goods.
Unlike the existing sales tax, the new tax would not apply to used goods. But it would expand the tax to services and end exemptions. Estimates on the new tax rate ranged between 7 and 11 percent. Erdman said a consumption tax would give people more control.
“Under the consumption tax, you can never, never be overtaxed, because you decide how much tax you pay, and when you pay them,” Erdman said.
Sen. Carol Blood opposed the proposal. She said her last election opponent had campaigned in favor of the consumption tax.
“And he actually said ‘Well, if people don’t want to pay the tax, they can just not buy the product.’ You know what my seniors have to say about having to pay taxes on their medication? They can’t do it,” Blood said.
Sen. Matt Williams also opposed the proposal. He said it would raise taxes on insurance policies from the current 1 percent to 10 percent, driving companies out of the state.
“It would be disastrous, and actually destroy the insurance industry in Nebraska,” Williams predicted.
Sen. Mike Hilgers applauded Erdman for thinking big, and said he’d support the proposal at the first round of voting.
“If this does what Sen. Erdman talks about, (it) could be transformative for our state…so I will be voting on General File green on LR11CA, because I think this conversation ought to continue,” Hilgers said.
Sen. Megan Hunt opposed the idea. Hunt castigated her fellow senators for not doing things to increase the state’s population and grow the tax base, which she has said would include things like increasing the minimum wage and enacting stronger protections for LGBT people.
“You are all in a hamster wheel, going around and around and around, trying to figure out the solution, trying literally any harebrained idea that comes your way, except for the ideas that’ll actually work,” Hunt said.
Erdman said the consumption tax is being promoted by economist Arthur Laffer, an architect of California’s property tax limiting Proposition 13 in the 1970s and an advisor to former President Ronald Reagan. And Erdman insisted Nebraska needs fundament change in its tax system.
“There’s only one way to fix this tax system that’s broken – one. And that’s draw an end to what we currently do and implement something that works. This works. Will there be winners and will there be losers? There could be. But when the end is all done and it’s all put in place, the winners will be those who pay taxes in the state of Nebraska,” he said.
Sen. Steve Lathrop said it’s important to know the details of who would gain and who would lose.
“You don’t change a tax system to something which is a radical change…without having a full understanding of who the winners and losers are. Because there will be winners and losers,” Lathrop said.
Sen. Rich Pahls expressed reservations about advancing the proposal.
“I’m not there yet. We do need changes. I’m not going argue that. But I don’t know if I have the information inside my noggin to make an intelligent decision,” Pahls said.
Pahls wound up voting for the proposal, as did 22 other senators, for a total of 23. But it needed 25 to advance. Erdman indicated he’s not giving up for the future, and said Laffer would be in Lincoln to talk to senators about the idea on Thursday.
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May 06, 2021 at 06:09AM
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