'The lobby is going to fight us tooth and nail': Senators hear plan to expand sales tax base to services

Sen. Tom Briese of Albion on Wednesday urged his colleagues to "hold hands and take the leap together" now to modernize and expand the state sales tax base by including dozens of exempt services and, in turn, reducing the sales tax rate.

The goal, he told members of the Legislature's Revenue Committee, would be to enact structural reform that reflects the modern economy and "make a regressive tax less regressive" while yielding the same amount of revenue generated by the current sales tax base.

"The lobby is going to fight us tooth and nail," Briese told the committee at a public hearing on LB422, presaging the testimony that was to follow from a registered lobbyist representing 41 business entities.

Sen. Lou Ann Linehan of Elkhorn, chairwoman of the committee, said the committee had received 70 letters of opposition to the bill.  

And individual barbers, hairdressers and tattoo artists also testified in opposition to the proposal.

Representatives of OpenSky Policy Institute and the Platte Institute supported the bill as a step toward modernizing Nebraska's tax system to reflect a changing economy while reducing the sales tax rate.

John Hansen, president of the Nebraska Farmers Union, suggested the committee consider retaining exemptions for medical services, education tuition costs and food, along with the proposed exemption for business inputs already secured in the bill.

Recognizing the scope of the challenging task of modernizing the sales tax base, Briese said implementation probably should be delayed to 2023 if the bill is enacted.

Briese said he's open to the possibility of exemptions for health, education and housing expenditures.

But he said turning the bill into a proposed legislative study would create "a recipe for a stalemate."

"The lobby is not going to be helpful," he said. "I don't blame them. Their job is not to be helpful on this."

Korby Gilbertson, the lobbyist who spoke for 41 business entities, said the proposal should be subjected to a comprehensive study because it raises the possibility of "a lot of consequences, intentional and unintentional."

Later, during an afternoon hearing, Sen. Steve Erdman of Bayard presented the committee with proposals (LB133 and LR11CA) that would replace the state's income tax, sales tax and local property tax with a new consumption tax.

The revolutionary tax plan would finally resolve the state's ongoing property tax problem, Erdman said, and produce "a revenue-neutral" change that creates a new revenue system tied to purchase of new goods and services by the initial consumer.

"This is not a bill to cut taxes," he said. "This is a revenue-neutral bill."

Erdman said "this is the most significant bill introduced in this body in decades" and would end a pattern of "dribbling away" with efforts to control property taxes.

"My goal is to fix the property tax problem," he said. 

The proposal drew strong support from a parade of Nebraskans largely concerned about ever-rising property taxes.

Hansen, the Nebraska Farmers Union president, opposed the plan, describing it as "the most radical, complicated proposal to be placed in the (state) constitution."

Lancaster County Commissioner Roma Amundson told the committee that the change could lead to a $5 million loss of annual revenue for the county.