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1 Joseph Bishop-Henchman, Testimony to the Joint Session of the Nebraska Revenue, Education, and Retirement Committees 1 (2019)

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Testimony to the Joint Session of

the Nebraska Revenue, Education,

and Retirement Committees

Joseph Bishop-Henchman, Tax Foundation, April 25, 2019

Members of the Revenue, Education, and Retirement Committees,

Thank you for the opportunity to testify today on LB 289 as amended by AM
1381. My name is Joseph Bishop-Henchman, and I am with the Tax Foundation
in Washington, D.C. We are a national think tank that collects data and conducts
analysis on tax issues. We do not take a position on legislation, but I would like to
make three informational points.

First, sales tax broadening is a common trend undertaken in many states now,
as a way of modernizing the sales tax to reflect today's service-based economy.
However, you should be aware that including sales tax exemptions only for
necessities is a difficult task, as every sale of a good or service is considered a
necessity by someone. Additionally, picking only a few goods and services to
subject to sales tax, rather than a more comprehensive approach that doesn't
leave many exemptions on the table as you do here, can leave the sectors you are
expanding the sales tax to feeling unfairly targeted.

Second, cigarette tax revenue declines year over year, due to falling consumption
of that product. This is a nationwide, decades-long trend. Using this revenue dollar-
for-dollar for tax cuts elsewhere may balance in year one but will create a widening
gap in subsequent years as that revenue source resumes its monotonic decline.
Cigarette tax revenue should not be part of a package designed to be revenue-
neutral, because it makes it not revenue-neutral.

Third, Nebraska currently has the 27th highest sales tax in the United States by rate
when you include both state and average local sales taxes. This bill would take it to
17th highest, similar to Colorado's.

Nebraska's property tax is currently 12th highest by collection, and this bill would
take it to 13th or 14th highest, still higher than Kansas, Missouri, Colorado, and South
Dakota. (See table.)

Nebraska would still have the 19th highest individual income tax, just below
Minnesota and higher than Missouri, Kansas, and Colorado, and 16th highest
corporate income tax, as this bill misses the opportunity to address those taxes.


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