Nebraska lawmaker continues effort to eliminate property, income and corporate taxes, replace them with consumption tax

A Nebraska legislator continues his effort to overhaul the state's tax system
Published: Mar. 12, 2023 at 6:29 PM CDT
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LINCOLN, Neb. (WOWT) - State Sen. Steve Erdman aims to change taxes in Nebraska through his priority bill, LB79.

“Starting back in [20]17 when I first came, my goal was to eliminate or fix property tax,” Erdman said. “For the last three years, we’ve been dealing with the EPIC Option.”

EPIC Option stands for eliminating property, income and corporate taxes. It proposes replacing those sources of revenue for the state with a consumption tax.

“We had a petition drive to do a 30% reduction. That failed. Followed that with a 35% petition drive, 35% to reduce your property tax. That failed to stop because of the pandemic. For the past three years, we’ve been dealing with EPIC Option, which is to eliminate all property tax, real and personal, all income tax, corporate and individual, sales tax as well as inheritance tax.”

Erdman distinguished between a consumption and a sales tax, which his proposal eliminates: “A consumption tax is collected from the first person who purchases something or a service someone hires for their own personal use. A sales tax is every time something sells,” he said.

Creighton economist and director of the Institute for Economic Inquiry, Ernie Goss, weighed in on the implications of this.

“I would argue that the consumption tax has less of a negative impact on economic activity than the alternative, income, property and some of the sales tax, likewise,” Goss said.

Some worry that 7.5% would not balance the budget of the state, including Bryan Slone representing the Nebraska Chamber of Commerce and Industry and Rebecca Firestone from OpenSky Policy Institute, both of whom testified on March 3 in the committee hearing.

“They came up with 22%, and I’ve invited those people to come to my office to prove to me that it’s 22%. I’d be more than willing to show them my study.”

Erdman said his study was conducted by Beacon Hill Institute.

The State Department of Revenue estimates that the bill would lose the state money, resulting in a “net revenue loss of $763 million in fiscal year 2025-26, $2.3 billion in FY2026-27 and $5.1 billion in FY2027-28,” according to a legislative release following the committee hearing for LB79.

Opponents also argue that low-income individuals will shoulder much of the burden.

“It is a valid concern,” said Goss. “But I think in terms of overall impacts I would argue it comes back in the form of greater economic activity. When you consider the fact that your income, your wages will be higher. Your overall economic activity will be higher so in the end all Nebraskans will benefit in my judgment for consumption or what’s sometimes called the EPIC tax.”

No other states in America have EPIC Option, but Erdman pointed to states like South Dakota and Wyoming with no income tax.

“Our current tax system is broken. We figured that a long time ago. We’ve been functioning under this same broken tax system since 1967,” he said.

If the bill doesn’t pass, the EPIC option group is spearheading a petition drive to get the measure on the 2024 ballot – a similar effort failed for last year’s election.

The constitutional amendment, LR264CA, for this last year lost by two votes last year to advance in consideration.

This year, 6 other state senators co-sponsored the consumption tax bill, including State Sen. Tom Brewer, Robert Clements, Steve Halloran, Mike McDonnell, and Dave Murman.