LINCOLN – As proposals emerge to meet the Governor’s goal of a 40% decrease in revenue generated from property taxes, let’s be clear that sales taxes are the most regressive tax category.

In the latest edition of Who Pays, the only distributional analysis of tax systems in all 50 states, the Institute on Taxation and Economic Policy concluded that low-wage families in Nebraska pay almost five times more as a share of their income in sales and excise taxes than the best-off families. Low-wage families may pay a larger share of their income in property taxes than top wage earners, but the difference is only 2.5 times.

Policymakers, including Governor Pillen, have pointed to the regressivity of property taxes in discussing proposals to shift a portion of what’s currently paid to fund cities, counties and schools through property taxes to sales taxes. These proposals come less than a year after the Pillen administration supported sweeping income tax cuts that overwhelmingly benefited the wealthy and out-of-state corporations.

The implications of those tax cuts would shift Nebraska’s tax system from 20th least regressive to 20th most regressive.

“It’s a policy choice that wealthy families in Nebraska pay less in taxes proportionately than low- and middle-income families, and recent tax cuts only made it worse,” said Dr. Rebecca Firestone, Executive Director of OpenSky Policy Institute. “If policymakers want to seriously address a regressive tax system this year, we should be focusing on property tax ‘relief’ for those who need it the most.”

Policymakers this year should consider proposals that would look at a taxpayer’s property taxes paid relative to their income and expansions of the state’s homestead exemption.

These are programs that could help thousands of households across Nebraska while not raising taxes on hard-working families when they must purchase a car, pick up school supplies or buy diapers. 

Over the coming days and weeks, OpenSky will be examining the proposals more closely and providing research and analysis to help policymakers to make informed decisions. A revenue system where everyone pays according to their ability is critical in creating opportunities for all Nebraskans.

Contact Communications Director Todd Henrichs at 402-499-2892 or thenrichs@openskypolicy.org for more information.