Consumption tax petition drive and legislative bills announced in Nebraska

LINCOLN — Backers of replacing virtually all state and local taxes with a new consumption tax announced a two-pronged effort to get the issue before voters Thursday.

Paul Von Behren of Fremont launched a pair of initiative petition drives, and State Sen. Steve Erdman of Bayard introduced a trio of legislative measures. The petitions match two of Erdman’s measures, which propose constitutional amendments.

If passed by voters, Legislative Resolution 6CA would prohibit any governmental entities in the state from imposing any taxes other than a retail consumption tax or an excise tax, starting in 2026. That would eliminate property, sales and income taxes, along with some minor taxes.

LR 7CA would require the state to impose a consumption or excise tax on all new goods and services with the exception of groceries, starting in 2026. Under the measure, state lawmakers could authorize local governments to impose their own consumption or excise taxes.

Legislative Bill 79 spells out the details of how the plan would work, including what would be subject to the new consumption taxes and how the resulting tax revenue would be distributed to support state and local government entities. The measure would set the consumption tax at 7.5% on goods and services.

Erdman said the new plan differs from those he introduced previously in some key ways. It would exempt groceries from the consumption tax to spare low-income Nebraskans from tax increases, while dropping the idea of achieving the same goal by sending out monthly checks to all Nebraskans.

But the goal remains to get rid of property taxes. Erdman said the plan would attract new people and businesses looking to escape other taxes, while state government, schools and other local governments would get the same amount of money they do now.

“This is not a cost-cutting proposal,” he said. “It is a different tax system.”

Past versions of the consumption tax have fallen short in the Legislature. Last year’s proposal got only 19 votes to advance to the second round of consideration.

If passed by the Legislature and approved by voters, LR 11CA would eliminate virtually all state and local taxes in Nebraska and instead apply a consumption tax on all services and new goods. The measure would allow local governments to impose their own consumption taxes in addition to the state tax.

A bill Erdman introduced last year would have set the consumption tax rate at 10.64%, though Erdman said further analysis showed that a 9.8% rate would be sufficient to match the $9.7 billion collected through the taxes that would be eliminated.