BEATRICE – A bill that would increase the state sales tax by one percent is first on the schedule, when Nebraska lawmakers resume floor debate Tuesday.
LB 388 is drawing opposition from groups that oppose a sales tax increase, calling it regressive….hurting those at middle or lower incomes, the most.

Senator Myron Dorn says the Revenue Committee sales tax increase is designed to work alongside a move to front-load income tax credits to provide property tax relief. He says using the additional revenue from the higher sales tax is aimed at cutting property taxes.

"The concept is a one-for-one reduction in property taxes by the schools. It would take the levies for the school districts of about 80-cents down to 20 cents, but clusters a lot more of them in that 50-to-60-cent range. Front-loading the income tax credit and the funding that would come with the one-cent sales tax....for Beatrice Public Schools...would reduce property taxes 52-percent. Many of the districts are in that 35-to-37-percent...for a low range."

The income tax credit had to first be claimed on tax returns….and many Nebraskans haven’t been doing so. Dorn said 65-percent of taxpayers in the Omaha school district are not claiming the credit. 

Dorn said what would be subject to sales tax with a one-percent increase…would change. "It would remove sales tax on electricity, natural gas or propane for your primary residence. That was over a hundred million in revenue that would not be coming in."

Along with replacing property taxes with sales tax revenue, the committee package includes a three-percent hard cap on spending for cities, villages and counties.  Dorn said lawmakers are trying to achieve a better balance between income, sales and property taxes. He said last year, $2.4 million was collected in sales tax….$3.6 million in income tax…..and local governments collected $5.3 million in property taxes.

"Senator Linehan and others have come up with data that shows that on average, people would pay about $90 more in sales tax. Many would be receiving over a thousand dollars in...depending on the value of their valuation on a house in Hickman....would receive a thousand dollar reduction in their property tax."

LB 388 went through about four hours of debate last Wednesday and discussion resumes Tuesday.