Switching to a consumption tax would be a regressive tax change

Replacing all other taxes with a consumption tax like that proposed in LR 264CA – a measure presently being discussed by lawmakers – would be a highly-regressive tax change that no other state has enacted.

This is because low- and middle-income Nebraskans pay a greater share of their income in sales taxes than wealthier residents. The consumption tax proposed in the measure would essentially be a sales tax on all new goods and services.

Consumption tax proponents have discussed enacting a “consumption tax monthly allowance” to offset the measure’s impact on low-income Nebraskans, although that is not specifically called for in LR 264CA. If such an allowance were passed, however, the weight of the tax shift and the responsibility of funding key state services would fall more heavily onto Nebraska’s middle-income families.

Seniors and retirees across all incomes would also be hit hard by a consumption tax as they’ve paid income taxes throughout their lives only to be suddenly taxed a high rate on their consumption, including nursing home care, doctor’s visits and prescription medications.

You can read more about the consumption tax proposal here. Debate on LR 264CA is being streamed live by Nebraska Public Media.