State Sen. Steve Erdman of Bayard announced Thursday that he’s introduced legislation that would dramatically change how taxes are collected in Nebraska.
Erdman, district 47 senator, called it “thinking outside the box on steroids.” Erdman did an interview with the Star-Herald Wednesday and held a news conference at the state capitol to announce the bill.
LR 300CA, the EPIC Tax Plan proposed by Erdman would eliminate property tax in its entirety, in addition to individual and corporate income taxes, and inheritance taxes. Those would be replaced by a consumption tax.
A consumption tax, also called an expenditures tax, is a tax on what people spend rather than what they earn, Erdman said.
The bill is in the form of a constitutional amendment that, if approved by the Legislature, will appear on the 2020 general election ballot for consideration by the voters.
“There’s a difference between a consumption tax and a sales tax,” Erdman said. “Sales tax is collected on everything that’s sold. A consumption tax is only collected on an item when it sells the first time.”
Erdman’s bill also removes all tax exemptions so everything a person purchases, food, products and services, will be subject to a consumption tax.
“The bill includes a consumption tax rebate on food items for those who are below the poverty line,” Erdman said. “That way they’ll be held harmless.”
He added the consumption tax is a progressive tax — the more you spend, the more you pay. Preliminary indicators show that under the legislation, an average family of four spending $64,000 a year would pay just over 5% in consumption tax. However, they would no longer be paying property, income and inheritance taxes.
“This legislation will eliminate the need for the state to offer tax incentives to bring companies here,” Erdman said. “That’s because it will be difficult for neighboring states to compete with a state that has zero income and property tax.”
He said the legislation offers an opportunity to invest in Nebraska. Individual taxpayers will decide how they want to spend their money to pay the taxes.
“Property tax is the most regressive tax there is,” Erdman said. “You don’t have to have any money to pay it. You just have to pay it.”
Erdman’s proposed constitutional amendment would also eliminate all the state agencies that collect income tax. He said the property assessment division wouldn’t be needed because the state would no longer keep track of assessments.
Erdman said his goal is to get legislators talking about what the bill would mean and how the state would make it work.
“I’ve gotten a lot of questions about how we’re going to pay for this and that,” he said. “I’m not so much interested in getting off into the weeds right now. I need for people to understand the concept. If the concept is worthy of discussion, then we need to go forward on how to implement all the other provisions.”
Erdman said about 10 of his fellow senators have signed on to the bill. He’s already presented a copy to Revenue Committee Chair Sen. Lou Ann Linehan and Gov. Pete Ricketts. Both have indicated they’re interested in having a discussion, Erdman told the Star-Herald.