The Governor’s new property tax relief plan for the special session is in deep trouble. Last Thursday the Legislature voted to adjourn until Monday, August 12, in order to fix several problems in the bill and to garner more support for it. LB9 along with AM51 is getting tossed about like a wave of the sea without enough votes to get it passed. It is not my intention today to sink the Governor’s property tax relief bill; instead, I want to save it. Last Thursday I offered Nebraska State Senators a way to fix the Governor’s tax plan in order to make it work for Nebraska. Today I would like to share the three most important changes for fixing the Governor’s new tax plan.

The first item in the Governor’s new tax plan which needs to be fixed is the part which places a two percent excise tax on new agricultural and manufacturing equipment. Whereas the EPIC Option Consumption Tax would never tax business-to-business transactions, including agricultural and manufacturing equipment, the Governor’s plan does just that. It is always a mistake to tax necessary manufacturing and agricultural equipment.

Taxing agricultural equipment encourages farmers and ranchers to purchase their equipment in other states where taxes are cheaper. We call this phenomenon “border bleed”. Dealers located near border states with cheaper taxes on agricultural equipment would especially suffer from a loss of income as farmers and ranchers pass them by on the highway to purchase their equipment in other states.

The second item in the Governor’s new tax plan which needs to be fixed is the Tax Equity & Educational Opportunities Support Act (TEEOSA). TEEOSA is the program which provides state aid to public schools. Now is the best time to reform TEEOSA because the Legislature is working on major tax reform legislation and because several school districts will soon lose a portion of their state aid, which will result in significant increases in future property taxes. For example, in Fiscal Year 2024 the Bayard Public Schools, where I live, is set to lose $427,947 in state aid, while the Morrill Public schools will lose $587,030, and the Sidney Public Schools will lose $465,167. The last thing folks living in these school districts need is another increase in their property taxes and that is precisely what will happen if the Legislature does not fix TEEOSA now.

Nebraska needs to replace TEEOSA with a new program that would benefit all school districts across the State. The EPIC Option Consumption Tax bill (LB16) that I introduced for the special session already contains a comprehensive plan for replacing TEEOSA. I worked with three school district superintendents to create a new replacement plan for TEEOSA with simplified formulas that would benefit all school districts across the State. The Governor could fix TEEOSA simply by utilizing the plan already outlined in LB16.

The third item that needs to be fixed in the Governor’s new tax plan is to end our state’s dependence upon property taxes and income taxes. As the Creighton University economist, Ernie Goss, said when he testified before the Revenue Committee on the Governor’s new tax plan, “Sales taxes are the least regressive form of taxation.” Moreover, as the U.S. economy continues to transition towards a service economy, as opposed to a manufacturing economy, it will become increasingly more important and inevitable for states to begin taxing consumable services, and not just consumable goods.

Therefore, Last Thursday I suggested that we begin implementing the EPIC Option plan with the goal of taking the state income tax rate down to zero and the property tax rate also down to zero. By setting these rates at zero, the Legislature could avoid having to amend the State Constitution and these taxes could be reinstated by a vote of the people at any time in the future should the State ever experience a significant revenue shortfall.