LB 79, along with a pair of constitutional amendments – LRs 6CA and 7CA – will be heard tomorrow afternoon by the Revenue Committee and would combine to replace most state and local taxes with a single tax on consumption of new goods and services. That tax rate, however, would need to be at least 22% for the state to continue funding its current obligations, according to analysis from OpenSky Policy Institute and the Institute on Taxation and Economic Policy (ITEP) from a new policy brief released today.
Because low- and middle-income Nebraskans spend more of their income on consumption than their wealthier counterparts, the proposal would impact them the most. This is particularly the case for out-of-pocket medical and dental expenses, which many lower-paid and uninsured people already struggle to afford and which would be subject to the consumption tax as proposed. Even nursing home care would be taxed, imposing a significant burden on fixed-income seniors who would see their costs increase by nearly a quarter.
The proposal also relies on income derived from expanding the consumption tax to items the state can’t legally tax under federal law, including internet services, airfare and purchases made by the federal government.
For more information on the analysis conducted by OpenSky and ITEP, see our new policy brief.