Each week I have been writing about the Nebraska Taxpayer’s Bill of Rights. The Nebraska Taxpayer’s Bill of Rights will be included in legislation I will introduce in January for the consumption tax. So far, I have discussed the failures of the income tax, the property tax, and the inheritance tax. This week I will explain why the consumption tax works better than any other form of taxation.

The fourth right delineated in the Nebraska Taxpayer’s Bill of Rights states that “Because the consumption tax manifests a security against government excess, it shall be preferred above all other tax systems in the State of Nebraska.”

The consumption tax is the only tax system which naturally regulates itself. The consumption tax has a built-in mechanism which naturally prevents the government from taxing its citizens too much. Whenever the government raises the rate of the consumption tax, the result is less money for the people to spend; hence, less revenue for the State. Consequently, the consumption tax forces the State to find that delicate balance between government spending and healthy commerce.

Alexander Hamilton was a fan of the consumption tax, who explained this very same principle in Federalist Paper #21. Hamilton said, “It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of revenue.”

Whereas the financial condition of the private citizen is never the concern of the State under the other forms of taxation, it suddenly becomes the concern of the State under the consumption tax. That’s because State spending suddenly becomes tied to consumer spending. Unless people are out shopping and spending their own money, the State won’t have any money to spend.

The consumption tax is the only tax that the consumer controls. The State controls all other forms of taxation, but the consumer controls the consumption tax. The consumer avoids paying the tax simply by refusing to shop or by purchasing used goods instead of new goods.

All forms of taxation allow the government to spend other peoples’ money. So, regulating when the government gets to go shopping makes all the difference in the world. Taxation makes the most sense when the private citizen gets to go shopping first. All other forms of taxation allow the government to go shopping first, while the private citizen gets to spend whatever is left over. The consumption tax, however, turns the tables on taxation and allows the private citizen to go shopping first, while the government spends whatever is left over.

Finally, the consumption tax is the only form of taxation which taxes people within their means. Under the consumption tax a private citizen will never pay any more taxes than what he or she can afford to pay. Moreover, the monthly allowance that will come with my version of the consumption tax will ensure that those living at or below the poverty line never make a positive net contribution in taxes to the State. In fact, the State will only keep the taxes on what any person spends above the federal poverty line.

As you can see, the consumption tax is the only form of taxation which equalizes the playing field between the private citizen and the government. For this reason, it has earned the reputation of being called the Fair Tax. However, my bill will be known as the EPIC Fair Tax, where the word EPIC stands for the Elimination of Property, Income, and Corporate taxes.

As you may know, each week I have been writing about what I am calling the Nebraska Taxpayer’s Bill of Rights. The Nebraska Taxpayer’s Bill of Rights will be included in legislation I will introduce in January for the consumption tax. Last week I discussed what is wrong with property taxes. This week I will expose what is wrong with the inheritance tax.
The fourth right delineated in the Nebraska Taxpayer’s Bill of Rights states that “The State of Nebraska shall never impose or collect a tax on the inheritance of its deceased citizens.”

The inheritance tax is a form of double taxation. In Nebraska we already tax a person’s income and property, so taxing what a person passes down to his or her heirs adds another layer of taxation to what has already been taxed at least once before. How many times does the government need to tax a dollar?

There are only six states that still impose an inheritance tax on their deceased citizens and Nebraska is one of them. Among these six states, Nebraska’s inheritance tax ranks as the absolute worst in the nation! According to Kiplinger, Nebraska is the worst state in the union for retirees, and much of that ranking is due to our inheritance taxes. That is not a badge of honor we should be proud to wear.

There are some very good reasons why economists rank Nebraska’s inheritance tax as the worst in the nation. For instance, Nebraska’s inheritance tax applies to all property, including life insurance proceeds paid to the estate. Distant relatives qualify as a Class 3 beneficiaries and get taxed as a rate of 18 percent. The inheritance tax even applies to the transferring of any property to another person within three years of the death of the deceased person. How does one plan for that?

Nebraska’s inheritance tax gives wealthy people the right incentive to move. Nothing encourages people to move out of our state quite like our inheritance tax. Anyone wishing to pass down their nest egg to the next generation would do well to move to another state, such as Wyoming, which has no inheritance tax. Because the super wealthy know better than to retire in a state like Nebraska, the inheritance tax has primarily become a tax on the middle class of our state. Those who tend to get hit by the inheritance tax in Nebraska are those who cannot afford to move to another state.

Contrary to the popular opinion of those who advocate for the redistribution of wealth, the inheritance tax does not redistribute the assets of a wealthy person because that person is dead! Instead it punishes another person for acquiring that wealth. The inheritance tax does not punish a person for dying as much as it does their children for inheriting their wealth. As Milton Friedman once said about these kinds of taxes, they are “…much less taxes on being wealthy than on becoming wealthy.”

Because the inheritance tax punishes the acquiring of wealth, it is the enemy of upward mobility. The inheritance tax inhibits upward mobility for the next generation who may be struggling to pay down their mortgages, college loans, car loans or credit cards. For most heirs in Nebraska, inheritances give them the lift they need to finally pay down some of their indebtedness or finally repair the leaky roof.

The time has come for Nebraskans to reform its inheritance tax, and I say the best kind of reform we could possibly make is to abolish it altogether. Whereas, the inheritance tax is a double tax, which punishes the acquisition of wealth and inhibits upward mobility, the consumption tax is a single tax which encourages the acquisition of wealth and promotes upward mobility.

As you may know, each week I have been writing about what I am calling the Taxpayer’s Bill of Rights. Last week I discussed what is wrong with taxing incomes. This week I will expose what is wrong with taxing property. Property taxes come in two forms, personal property taxes and real estate taxes. In Nebraska personal property taxes are imposed on all business equipment, whereas real estate taxes are imposed on commercial, residential, and agricultural real estate.

The third right contained in the Taxpayer’s Bill of Rights states: “The State of Nebraska shall never impose or collect a tax on the property already owned by its citizens, regardless of whether such property is real or personal, tangible or intangible.”

The primary problem with property taxes is that an owner never fully owns the property once purchased. If you don’t believe me, see what happens if you stop paying your property taxes. Whereas personal property taxes may expire after a period of time, real estate taxes never expire. Consequently, a person never truly owns the home or the land he or she buys.

The property tax on real estate is the tax that never ends. As Alexander Hamilton warned, it is a tax that “continually plunders the people.” Any tax that continually plunders the people is morally wrong because it undermines a person’s basic right to fully own property. The right to fully own real estate originated in the Law of Moses.

The real estate tax means that the State is a forever part-owner of your home or property. Because the State is a part-owner of your home or property, it effectively gives the State a property right in you. In other words, you as the landowner no longer may act as the sole decision-maker regarding the use of the land. What you do with your land now concerns the State.

Because the real estate tax prevents a person from ever fully owning their own home, those who purchase real estate become eternal slaves to the State. This makes retirement especially difficult. In order to retire, a person must have enough income to continue paying their real estate taxes for the rest of their life. This implies that homeowners effectively become slaves of the State until the day they die.

When real estate taxes are imposed on commercial properties, the prospect of starting a small business becomes a much more difficult and daunting task. Many a business has failed in Nebraska because the business owner could not pay the commercial real estate tax. Because Nebraska ranks as the seventh worst state in the Union for property taxes, the best thing we could do to attract new businesses to our state is to remove the tax on commercial properties altogether.

Repealing the property tax is the best thing we could ever do for our State. As Sen. Steve Halloran of Hastings once said, if we ever repealed the property tax, “We would have to build a wall around Nebraska to keep the people out…and Colorado would pay for it.”

As you may know, I have begun outlining the Taxpayer’s Bill of Rights. The Taxpayer’s Bill of Rights will appear in legislation I will introduce for the consumption tax in January next year. The first basic right that I talked about last week had to do with taxing people in a fair and equitable way. Today I will address the second right in the Taxpayer’s Bill of Rights. The second right states that “the State of Nebraska shall never impose or collect a tax on the income of its citizens, whether such income tax be of a personal nature or of a corporate nature.”

The income tax violates the very nature of our own personhood. Each individual has an inherent and incumbent right to own himself or herself as well as the products of his or her own labor. The income tax violates this most basic right that we have to own ourselves as well as the fruits of our own labor.

The income tax has proven over time to be an ineffective tax system. The primary reason that the personal income tax is ineffective is that it discourages people from working or making money. Because it punishes people simply for making money, it is a system which promotes poverty over prosperity. So, the personal income tax treats making money as if work is somehow evil or a bad thing for a person to do.

The progressive or graduated nature of the personal income tax especially discourages people from making money. According to the progressive income tax, the more money a person makes, the higher percentage that individual pays in income taxes. So, the progressive income tax is effectively designed to keep people poor. This makes the personal income tax the enemy of personal upward mobility. Wouldn’t it make more sense to have a tax system that is favorable to economic advancement? I think so.

Those who advocate for the personal income tax usually do so for reasons of income redistribution. But, as we have already seen income redistribution of this kind does not work and it is a fundamental violation of our most basic personal freedom. As Milton Freedman once said, “I find it hard, as a liberal, to see any justification for graduated taxation solely to redistribute income. This seems a clear case of using coercion to take from some in order to give to others and thus conflict head-on with individual freedom.”

The same principles hold true for the corporate income tax. The corporate income tax is effectively designed to keep small businesses small. The more money that a business makes, the higher percentage that business must pay in corporate income taxes. Consequently, the corporate income tax constitutes the ultimate anti-business tax. Moreover, the corporate income tax violates the nature of a corporation in the same way that the personal income tax violates the nature of personhood.

By way of contrast, the consumption tax respects personhood and honors personal freedom. The consumption tax allows individuals to keep everything they earn. No tax is ever collected until the taxpayer is ready, willing, and able to part with a portion of his or her income. Because the consumption tax comes with a monthly pre-bate allowance, the least advantaged members of society never make a net contribution in taxes to the State. Consequently, the consumption tax promotes personal and corporate upward mobility whereas the income tax discourages it.

If the best tax system is the one which best maximizes upward mobility, then the income tax will never win that prize. The more I study the consumption tax, the more I realize that it is the tax system which benefits all income earners the most, but especially the lowest income earners of society.

In last week’s article I said I would introduce you to what I am calling the Taxpayer’s Bill of Rights. The Taxpayer’s Bill of Rights that I will begin outlining today will be included in legislation I will introduce in January for the consumption tax. The Taxpayer’s Bill of Rights consists of ten rights or protections which ought to be afforded every taxpayer in the State of Nebraska.

The first right in the Taxpayer Bill of Rights states, “The citizens of Nebraska are entitled to a fair tax system, one which favors neither the poor nor the rich, neither rural dwellers nor urban dwellers, neither business owners nor laborers, and that is no respecter of race, religion, creed, or sex.”

The operative word in this first taxpayer right is the word ‘fair.’ Fairness is rightly defined as equality under the law. In other words, fairness occurs when everybody gets treated the same or equally, regardless of such things as one’s place of residence, occupation, race, religion, creed or sex. Fairness in this context stands in contrast to social justice theory, which seeks to rectify the past wrongs of society.

When fairness is applied to tax systems, the goal becomes to create the kind of tax system which affects everyone in the same way without inhibiting their upward mobility. A tax system that is fair is one that does not punish a person simply for earning a modest living. In short, Nebraskans need the kind of tax system which encourages everyone to save their money, invest for the future, and plan for retirement. The consumption tax is the only tax system known to economists which encourages savings, inspires investing, and enables retirement. In other words, everyone benefits from the consumption tax, including those who live below the federal poverty line.

The citizens of Nebraska are entitled to a tax system which promotes prosperity instead of poverty. In other words, we need the kind of tax that ends. For instance, the income tax continuously punishes people simply for making money, the property tax continuously punishes people for owning property, and even after a person dies the inheritance tax is waiting there to punish a person after death simply for handing down that property to the next generation. That’s a continuous triple tax system which never ends, even after death! What makes the consumption tax fundamentally different from these other kinds of taxes is that the consumption tax has an end to it. A person only gets taxed once, at the initial point of sale and that’s it! And that is why I can say that the consumption tax promotes prosperity instead of poverty.

In Federalist Paper #30 Alexander Hamilton warned the American people against certain evils of taxation. One such evil, he said, occurs when the people are “subjected to continual plunder.” That is precisely what our State’s current tax code does. Nebraska’s current tax code discriminates against everyone, except the super-rich. Therefore, the time has come for the people to shed this burden from our backs and replace our tax code with a system which is fair to all Nebraskans.

The Declaration of Independence asserted that all men are created equal and have the inalienable right to pursue happiness. Therefore, nothing should ever hinder a person’s right to pursue happiness, especially when such a pursuit includes upward mobility. When it comes to the pursuit of happiness, everyone should be entitled to the same kind of tax system, and that tax system should not punish people for improving their standard of living. The consumption tax is no respecter of a person’s place of residence, career choice, race, religion, creed or sex. Everyone has the same opportunity for advancement under the consumption tax, and that is why I like it so much.

Like your new property taxes this year? I didn’t think so. I have received several calls and emails about the loss of the $10,000 personal property tax exemption that was eliminated by the implementation of LB 1107, the so called property tax relief bill. The more accurate name for this bill is “the decrease in the increase” bill, because that is what it really is. This bill did absolutely nothing to actually lower your property taxes this year. Let me explain why.

Over the course of the last five years property taxes statewide increased $813 million. As you can quickly figure out, that amounts to an annual increase of $162 million. LB 1107 grants to the people of Nebraska an annual reduction of $125 million in their property taxes. Sounds great, right? When subtracted from the annual increase of $162 million, it results in a net increase statewide of $37 million per year, instead of the usual $162 million. But, it gets worse.

Getting back to the loss of the personal property tax exemption, Statewide that exemption amounted to relief of $16 million per year prior to LB 1107. The personal property tax exemption was available to all businesses, including agricultural businesses, who had personal property associated with their business.

So, the net amount of property tax relief under LB 1107 is really $109 million statewide, instead of the $125 million as advertised by the advocates for this bill. Some said this bill is historic and significant property tax relief!

In essence, what this bill did was force us all to give up a guaranteed reduction in the personal property tax exemption for what we might get back if the State happens to get enough revenue to fund it. By now most of you have received notice from your county assessor informing you about the loss of your personal property tax exemption. Surprised? Frustrated? I understand your pain. For these reasons and more, I voted against LB 1107.

Nebraskans need a real solution to their tax problem, and the first step in any recovery program is to admit that a problem exists. Nebraska’s tax system is broken. It is unworkable. It is kaput! We can no longer afford to continue to play this ridiculous game of hide and seek taxation. What we need is something brand new. We need something that works, we need a tax system that is fair, and we need the kind of tax system that politicians can never tamper with.

So, what is the solution? The solution, in my humble opinion, is the consumption tax. In the weeks ahead I am going to introduce you to what I am calling the Taxpayer’s Bill of Rights. The time has come for taxpayers in Nebraska to begin asserting their rights as taxpayers. And when these rights are properly understood, the consumption tax begins to emerge as the obvious answer and self-evident solution to all of Nebraska’s tax woes.

I am very excited about the consumption tax solution to our State’s tax problem and I looking forwarding to discussing it with as many Nebraskans as possible in the days, weeks and months ahead.

Just before noon on Thursday, August 27th, a fire was observed in northern Banner
County near the Hubbard gap road. Due to extremely dry conditions, it expanded rapidly.

The fire started on the Terry Brown ranch and moved west. The fire burned a significant portion of the Brown ranch. A fence repair fund for the Brown’s has been established at Z M Lumber Company in Scottsbluff. All donations are deeply appreciated.

The Banner County Commissioners signed an emergency declaration, asking the Governor to help fight the fire. The Governor then declared an emergency and sent State resources to help battle the fire.

More than 100 firefighter units responded to the fire and some of these came from neighboring states. The Army National Guard dispatched Blackhawk helicopters equipped with 780 gallon water buckets to drop water in the canyons while the Nebraska Forest Service used aircraft to drop retardant on the fires.

The Governor came to Gering last week to thank the firemen for their heroic efforts in containing the fire and protecting life and structures. I appreciate the Governor highlighting the efforts of the many volunteers who stepped up to help as they always do.

I have seen how much time and effort volunteers put into training, getting certified, and preparing to handle these kinds of emergencies. Volunteers make rural Nebraska a much safer and secure place to live. Without these folks we could not do all that we do.

It is amazing that once a call comes in, these first responders will drop whatever they are doing and come to our rescue. So, I ask that when your fire department, EMT service, or other first responders ask for your financial help that you would thoughtfully consider making a contribution. In a way, your life may depend upon it! So please give generously to the people who volunteer to make our lives better and remember to thank them for their service.

Thank you for reading my articles in the newspaper. As always, please feel free to call my office with whatever concern you may have. My office phone number is (402) 471-2616.

As August comes to a close, I think about all of the events I have missed this summer: The parades, the festivals, the community celebrations, and especially the county fairs.

These events have always presented me with an ideal opportunity to listen to the public and to get ideas for new legislation from the constituents of Legislative District 47.

No one knows what our state needs more than its citizens. The best ideas are the ones that make people’s lives better, and I have found that these often come from ordinary folks.

One such idea came about when I was at the 2016 Paxton Labor Day Parade. There had been a fire north of Lake McConaughy that destroyed several homes and structures. Some of the properties had seen a valuation increase even though the buildings had burned down.

The Nebraska State Statute at that time said that whatever was the value of a person’s property on January 1st at 12:01 a.m. determined what he or she would pay in property taxes for the entire year. I didn’t think that was right.
That incident gave me an idea for changing the tax code. So, I set out to change the law in order to provide a tax break to those who experienced these kinds of setbacks, especially early in the year. So, last year I introduced legislation, which became a law in Nebraska. This bill allows for a valuation decrease if your property sustains at least a 20 percent loss before July 1st. So, the idea for this bill came to me simply by marching in a parade.

I was unable to attend the county fairs this year because the State Legislature reconvened during the summer to complete the last 17 days of its 60 day Legislative session. This kept me away from the Panhandle from July 20 through August 13.

I feel that I have missed a significant part of the summer this year. These social events are very beneficial to our wellbeing as Nebraskans. We are much better off physically, mentally and spiritually when we get out to visit with friends and celebrate the blessings of liberty that God has bestowed upon us all. We should always set aside some time to enjoy living in the greatest country on earth.

Please join me in praying for rain to clear the air and to help put out the fires that are burning out of control in the western United States. The air quality is so bad in Wyoming that tourists cannot see the Grand Tetons from Grand Teton National Park! We also need rain to replenish our water supplies and to provide much needed moisture for the farmers as they plant their fall crops.

Thank you for reading!

The Nebraska Legislature has now adjourned for the year. I have now completed my fourth session in the Legislature. This was the first time since I have been elected that we completed the full session. In previous years we adjourned three or four days early. Perhaps we should have adjourned early again this year as well, except for the passage of the bill to ban dismemberment abortions. That bill passed on the last day of the session.

Concerning dismemberment abortion, I can’t believe anyone would think that removing a living human being piece by piece from the mother’s whom is ok. That was an amazing opportunity we had, as Legislators, this year to protect the most vulnerable among us.

The Legislature also passed what some are now calling “historic property tax relief”. I suppose you could call it “historic” when it is such a minute amount. It is so minute that you will hardly even notice that your property taxes have been reduced.

One of my fellow Senators has developed a spreadsheet to calculate the reduction that Nebraskans will see on the property taxes due to LB 1107. Oh, did I forget to tell you that you will only get a reduction if the state has a revenue increase? If it doesn’t, sorry, but no relief.

LB 1107 contains an income tax credit on your State Income Tax Return, or if you don’t owe any money to the State, you will receive a refund on a small percentage of what property taxes get paid to the operation of the school, but not on your total property taxes paid to the school; just the operating revenue. For example, if your mill levy for your school is $1.05 you may get a 4 percent credit. So if you paid $1,000 to the school, you could get a $40 credit. Next year that figure should double, and the third year it should come in somewhere near $125. Of course, all of this is contingent upon the State’s revenue actually increasing.

For those who normally file no income taxes with the State, it may cost more to file the return than the refund they would receive. For instance, the person who pays a tax preparer $200 to prepare a State Income Tax Return for a refund of only $100 would find himself or herself at a loss of $100.

Now here is where this bill really gets interesting: The business incentive portion of the bill, called the Nebraska ImagiNE Act, has the same mechanism for giving tax relief to businesses as the property tax portion of the bill does to property owners. It’s an income tax credit, too. But, when it comes to business tax incentives the bill doesn’t require there to be an increase in State revenue in order to allow these businesses to cash in on their income tax credit. And there has never been any reconciliation about where the money will come from in order to pay for these business tax credits.

As I said last week, I have asked several proponents of this bill to explain to me why we have to have funds already available in order to give the good people of Nebraska a credit on their property tax bills but not for businesses. Here was their poor attempt at answering my question: “We have made adjustments in our budget for that.” So, just like in years past when we had to cut a check for a refund, we just pay the bill with no questions ever being asked. There is absolutely no provision in the bill which says that if the State doesn’t have the revenue, the businesses don’t get the credits. It seems to me that what is good for the goose ought to be good for the gander! But, I guess that’s not how things work in the Nebraska Legislature.

Finally, I would like to remind everyone in Legislative District 47 to fill out the U.S. Census, if you haven’t already done so. Many government programs are tied to the information gleaned from the census, and I would hate to see folks living in the Panhandle miss out on these benefits just because some folks never bothered to fill it out.

We are now in the home stretch in the Legislative Session with only 3 days remaining to complete the 60 days requirement.Last week there was a compromise bill brought to the floor (LB 1107) that dealt with property tax relief, tax incentives for businesses, and a $300 million contribution to a new hospital for the University of Nebraska Medical Center.

This bill has been promoted as the Great Compromise. The bill combines three pieces of legislation, regardless of previous opposition to each of them, into a single bill. What this Christmas tree bill accomplished was to paint everyone in the Legislature into a corner. None of these three bills ever had enough support to stand on its own merit.

This is a very poor way to pass legislation. The property tax portion of the bill is not property tax relief at all. Instead, it is a reduction in the increase of your property taxes. As a case in point, consider that property taxes state wide have increased substantially more annually than the 125 million dollars that the relief package would give. For instance, last year property taxes state wide increased 200 million. Consequently, property taxes under LB 1107 last year would have increased by 75 million dollars statewide. So you see why I don’t refer to this bill as property tax relief. Relief to me means I pay less than I did the year before.

The method these Legislators have chosen to use for refunding property taxes is an income tax credit or refund on the taxes paid to your public school. It is a very small percentage of that amount. In fact, it may be enough for you to eat out once or twice. To the contrary, I had a constitutional resolution in 2018 (LR 3 CA) that was based upon the same idea, except that mine was an income tax credit of 50 percent of the taxes paid to your public school. So, when the concept of an income tax credit or refund was my idea, it wasn’t any good, but when the Super 7 group of Senators comes up with the same idea, but for a significantly smaller amount, it is suddenly a good idea.

This bill is 149 pages long. One rural Senator said that this was a very well-thought-out bill; it was not just thrown together. Because the Senators in the Unicameral only had 10 hours to read these 149 pages before debating them on the floor of the Legislature, the whole situation reminded me of what Speaker Nancy Pelosi said in the U.S. Congress in 2010 about the Affordable Care Act when she said, “We have to pass it in order to find out what’s in it.”

We have had numerous bills to deal with in the last 10 days. It is difficult to deal with all of those bills and begin studying and understanding a 149 page new bill overnight. Consequently,
I have asked proponents of this bill seven or eight times from the floor of the Legislature about how it is to be funded. They claim that we must somehow find the 125 million dollars in order to be able to afford this property tax relief measure. When it is an income tax credit, the state does not need to refund the taxpayer for the property taxes paid. Instead, the state simply eats the cost by taking in less money through income taxes. And that is exactly what happens with business incentives.

Here is my dilemma. The business incentives earned in this bill will be an income tax credit as well. We have never mentioned once that we must first generate the revenue to fund these tax incentive programs for businesses. No one, not even the chairman of the appropriations committee, wants to answer why it is one way for a property tax refund and another way for business incentives? I will have more to say on this matter.