The latest attempt in the Nebraska legislature to scrap property and income taxes in favor of a consumption tax, essentially a beefed-up sales tax, failed Wednesday, coming up 2 votes short of the 25 needed for first-round approval.
Under the consumption tax, all sales tax exemptions would end and it would apply to services, although not used goods. Estimates on the tax rate ranged from 7-to-11%
Senator Steve Erdman of Bayard was the lead sponsor and said the measure would simplify Nebraska’s tax system and give taxpayers a greater measure of control over how much they pay, because it would be based on what they choose to buy.
Senator Carol Blood said her last election opponent campaigned on the consumption tax and also failed to understand that when exemptions are eliminated and services are included, some purchases become mandatory – such as medical services and prescription drugs.
Senator Matt Williams opposed the consumption tax, saying taxes on insurance policies would jump from the current 1% to 10% – destroying the insurance industry in Nebraska and forcing companies to leave the state.
Speaker Mike Hilgers, speaking as a senator, praised Erdman for thinking big and supported at least first-round approval to get more information and discussion, a position taken by several other senators.
Erdman indicated he’s not giving up for the future and hoped to make some converts when supply-side economist Arthur Laffer comes to speak to lawmakers today about the consumption tax.
Laffer was a key advisor to President Ronald Reagan and was presented with the Presidential Medal of Freedom by Donald Trump.