Bill To Raise Nebraska’s Sales Tax Draws Plenty Of Opposition

A bill to boost the state sales tax one cent was the subject of a legislative hearing on Wednesday. Elkhorn Sen. Lou Ann Linehan is the sponsor of LB1315 and is part of a larger package of proposals to raise state revenue in order to provide additional property tax relief.

She says property taxes, which are collected by local governments, make up the largest portion of taxes paid by Nebraskans at over $5 billion per year, compared to roughly $3 billion in income taxes and $2 billion in sales taxes.

Linehan says the state already devotes approximately $1 billion per year to two property tax relief programs. LB1315 would generate a portion of the additional $1 billion per year needed to achieve Gov. Jim Pillen’s goal of reducing statewide property tax collections by 40%.

The state Department of Revenue estimates that the bill would increase state general fund revenue by approximately $305 million in fiscal year 2024-25, $467 million in FY2025-26 and $485 million in FY26-27.

There were plenty of opponents to the bill at the hearing. Rebecca Firestone of OpenSky Policy Institute says the proposed tax shift would continue the trend of making Nebraska’s tax code more regressive. She says increasing the sales tax rate would raise the prices of things all Nebraskans pay for, including items that could be considered necessities such as cars, clothing and school supplies. “This would disproportionately affect families with low incomes, who pay a greater percentage of their earnings in sales taxes than those with higher incomes,” Firestone says.

John Gage testified on behalf of Americans for Prosperity. He says raising the sales tax rate to reduce property taxes would benefit wealthy landowners at the expense of “average Joes.” “Long term and prudent tax reform will only be achieved when the Legislature has the courage to limit spending by local governments, especially schools,” Gage says.

Bryan Slone represented the Nebraska Chamber of Commerce and Industry, the Lincoln Chamber of Commerce, the Nebraska Bankers Association and the National Federation of Independent Business. Slone says they support other proposals introduced this session to limit the growth of local property tax collections, but they are concerned about the proposed tax shift’s effects on Nebraska’s workforce.

“In a tax shift, somebody’s picking up the tab on the other side,” Slone says.