Increasing Sales Tax is Wrong Solution for Providing Property Tax Relief

Feb 13, 2019 by AFP

Grassroots group urges the legislature to oppose a tax shift, focus on underlying property tax issue

LINCOLN, NE – Ahead of tomorrow’s hearing on L.B. 314, a bill that would increase the state sales tax, forcing Nebraskans to pay $2700 per household annually in sales taxes without factoring the proposed exemption removals, Americans for Prosperity today called on members of the Revenue Committee to oppose the legislation. The bill also includes a provision that would make Nebraska’s beer tax the highest in the country. Based on the fiscal note, which is calculated by new and increased taxes, the bill would increase revenue collections by $908 million this biennium.

Although this bill is intended to alleviate Nebraska’s high property tax burden, a tax shift is not the solution to addressing the underlying issue of our state’s high property taxes – increasing local spending. AFP-NE believes legislators must look for ways to reduce and restrict the growth in spending for local taxing entities to deliver meaningful property tax reform.

“Trying to tax and spend our way out of our property tax issue is the wrong approach. This bill is a tax shift and will not provide the tax relief our farmers, families, and businesses need,” said Jessica Shelburn, AFP-NE State Director. “The legislature needs to address the issue of ever-increasing, wasteful local spending that is the main driver of our high property taxes and abandon the across the board tax hikes this bill proposes. We will continue to advocate for a tax system that promotes economic growth through low rates and a broad, level tax base with few exemptions or deductions.”

Background:

The sales tax increase would hit low-income communities the hardest, as they already spend a disproportionate amount of their income on sales taxes.

Additionally, studies have also shown sales tax increases prompt people to leave the state to make their purchases. With neighbors like Colorado, Missouri, South Dakota, and Wyoming already having lower state sales taxes than Nebraska, this proposed increase would make it even more likely that Nebraskans will choose to do their shopping out of state whenever possible, hurting our local businesses.

The proposed wealth tax would negatively affect the state’s competitive environment to live and start a business. Punishing those taxpayers and the revenue they would pay in taxes would drive many Nebraskans to leave the state. A recent Wall Street Journal article shows many high earners in high-tax states left, resulting in lower than expected state revenues.