Gov. Jim Pillen urged lawmakers on Thursday to ignore the "noise" and "drama" from lobbyists and have the courage to support bills that would raise sales taxes as a means to cut property taxes.Â
The governor led off testimony on eight proposals to subject more goods and services to the state sales tax. The measures would increase state tax revenues by an estimated $265 million when fully implemented in the fiscal year starting July 1, 2025.
Pillen supported all eight bills as part of his effort to cut property taxes by 40% in Nebraska. He has proposed to use state sales tax revenues to replace some property taxes levied by local governments.Â
Although he has said all options are on the table, he has floated plans to hike the state sales tax rate and broaden the tax.Â
"The consensus of everybody in Nebraska is fix our property tax problem and fix it now," he told members of the Revenue Committee. "It's crystal clear we've just got to have the courage to do what's right."
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But virtually everyone else who testified came to oppose one or more of the bills. Some said they agreed with the need to address property taxes but argued that goal should be reached some other way.
Carter Thiele, representing the Lincoln Independent Business Association, objected to the idea of a tax shift. He said increasing sales taxes would harm businesses and low-income residents, who have to pay a larger portion of their income for sales taxes than people with higher incomes.
"Shifting the tax burden from property taxes to sales taxes is not sound tax policy," he said.
Others objected to specific proposals.Â
Goods and services that would be newly taxed under the bills include soft drinks, candy, laundromats, clothing repair, zoo and aquarium admissions, veterinary services, pet grooming done with veterinary treatment, storage facilities, moving services, accounting, business legal services, agricultural machinery repair and replacement parts, and data centers.Â
One measure would apply a new 7.5-cent tax on advertising services offered by companies that bring in more than $1 billion in gross advertising revenue. An amended version of another measure would levy a 20% tax on lottery tickets and skill games.Â
Among the testifiers were business groups, advertisers and broadcasters, who opposed the advertising tax, saying the cost would be passed down to smaller businesses buying advertising from the large companies. Jim Timm, president and executive director of the Nebraska Broadcasters Association, said such a tax would send a message that Nebraska is a high tax state.Â
Small business owners involved with distributing skill games said a 20% tax on the popular video machines, often found in bars, could drive them out of business.Â
Veterinarians and Pam Wiese-Bundy, interim president and CEO of the Nebraska Humane Society, said taxing veterinary services would make it harder for people to care for their pets and could force some to surrender them to overcrowded shelters.Â
Self-storage company owners argued that they are renting space, which is not subject to sales tax, rather than providing a service, which could be. They also said many people rent storage space during major life events, such as military members being deployed or low-income people losing their housing.
Luis Padilla, president and CEO of Omaha's Henry Doorly Zoo and Aquarium, objected to a proposal to charge sales tax on zoo and aquarium admission. He said the tax would make the zoo less accessible to the 60% of visitors who are from Nebraska.Â
Agriculture groups and ag equipment dealers opposed the idea of charging sales tax on repair parts for ag equipment, saying it would lead to border bleed. Owen Palm, president and CEO of 21st Century Equipment, said farmers would go to other states to save 5.5% or more on parts that could cost thousands.
Business groups, accountants and attorneys argued against taxing business accounting and business legal services, saying those costs should be considered business inputs and therefore remain exempt from sales taxes.Â
Pillen has said he wants to reduce property taxes to about $3 billion annually, down from the $5.023 billion that Nebraskans paid last year. His plan calls for boosting state sales tax revenues and creating new programs to distribute that money to schools and other local governments.
The plan also would impose new and tighter restrictions on local governments, requiring them to roll back property tax levies when valuations increase and when they get more state dollars.