Eliminate income tax requirements? Sounds great. However, at closer look, one sees that the revenue from income tax will have to be replaced with another source of revenue. Say hello to LB 405, a bill introduced by Omaha Senators Beau McCoy (District 39) and Brad Ashford (District 20) at the request of the Governor Heineman. The bill would eliminate income tax for all Nebraska businesses and individuals, including retirees. An amount of approximately $2.4 billion currently generated through income-based taxes would be transferred to collection by way of adding sales tax to items not currently taxed. Under this scheme, the contribution of the wealthy would be reduced while that of the middle-class and the poor would be increased.
"It is estimated LB 405 will cause 80 percent of Nebraskans to pay higher taxes, especially those earning incomes less than $60,000 annually" said Jon Bailey, Director of Rural Research and Analysis at the Center for Rural Affairs, according to Nebraska City News on-line.
In testimony before the Nebraska's Legislative Revenue Committee, the Center for Rural Affairs explained the drastic effect LB 405 would have in rural Nebraska. With significantly lower average incomes, many rural Nebraskans will ultimately be paying higher taxes under LB 405. Nebraska farmers and ranchers would be taxed on seed, machinery, chemicals, irrigation water, and energy for the first time in decades. According to the Nebraska City News article, LB 405 sales taxes would cost farmers and ranchers nearly $300 million more, based on data from the Nebraska Department of Revenue. Further, if farmers fold under the weight of these increases, what will we eat? Property taxes will also increase, says Nebraska City News.
A drastic increase will also stem from LB 405 increases in healthcare costs. More than $140 million will come from taxes on prescription drugs, medical equipment, and hospital stays, the Nebraska City News points out. As such, elderly and middle class residents, along with those with inadequate or no health insurance and people with disabilities will foot the bill for LB 405 through what Bailey called the new "sick tax." Healthcare facilities in rural areas will also be impacted by increased sales taxes and the impeded ability of patients to pay the higher healthcare costs.
According to an article by Nebraska Watchdog, which appears to support the bill, Ernie Chambers has said he will block the bill from leaving the senate. In typical fashion, Ernie Chambers is looking out for the 'little guy' and Ernie's efforts, as usual, are much appreciated. Nebraska Watchdog states that veterans are speaking out in favor of the bill, but the report here does not provide the rest of the information, in terms of negative repercussions from LB 405.
Under LB 405, taxes shift to "selected sectors" and to "lower- and middle-income Nebraskans," Bailey said. "Nebraskans do not need a new 'sick tax,' nor will they benefit from higher property taxes. And the potential damage to farming, ranching, rural health care facilities, students, the elderly, the disabled and hard-working, middle-class families make[s] this proposal a bad deal for rural Nebraska."