Straight Talk from Steve

As you may know, for the past several weeks I have been telling my readers about the Nebraska Taxpayer’s Bill of Rights. This Bill of Rights will be included in legislation for the consumption tax that I plan to introduce in the Nebraska Legislature in January. This week I will highlight the ninth right contained in the Nebraska Taxpayer’s Bill of Rights.

The ninth right says, “The State of Nebraska shall never impose or collect a tax on services or materials used to manufacture products, including agricultural products, for sale to the general public or to enhance services for sale to the general public.” This ninth right is necessary because it eliminates double taxation.

The ninth right will also make Nebraska more competitive than other states who do not use the consumption tax model. By eliminating taxes on business to business transactions, services and new goods sold to the general public in Nebraska will end up being cheaper than those sold in other states. Let me explain.

For the sake of argument, imagine a can of motor oil with a current price tag of $1.00 at the auto parts store. The current state sales tax means that the consumer would buy that can of motor oil for $1.06. Moreover, buried within that price tag of the can of motor oil are several other taxes.

Both the manufacturer as well as the store owner have included within the price tag of the can of motor oil revenues to pay for their corporate income taxes, property taxes, sales taxes, and even taxes on their utilities. This means that the true cost of the can of motor oil without all of these other taxes might fall somewhere around 90 cents per can.

Under the consumption tax there would be no taxes imposed on business to business transactions and corporate income taxes, property taxes, sales taxes, and inheritance taxes would all be repealed. This means that the store owner would not have to include within his price for the can of motor oil revenues to pay for his and the manufacturer’s corporate income taxes, property taxes, sales taxes, and even utility taxes. Consequently, he would be able to sell that same can of motor oil with a retail price tag of only 90 cents, instead of $1.

However, once the consumer pays the consumption tax on the can of motor oil, the final cost to the consumer would end up being about $1.00, which is still six cents cheaper without the current state sales tax.

One of the complaints that I often here about the consumption tax is that people would do their shopping in other states in order to avoid paying Nebraska’s consumption tax. But, why would you spend the time and gas to drive to Cheyenne when the merchandise costs less in Nebraska? Once all of these hidden taxes are removed from the price, services and new goods will actually be cheaper in Nebraska than in other states.

Not only will services and new goods be cheaper in Nebraska than in other states, but Nebraskans would never again be burdened with having to pay personal income taxes, property taxes, state sales taxes, and inheritance taxes. This is no small matter, because the consumption tax is the one tax that is fair and it is the only tax that the consumer can control.

The consumption tax is also known as the fair tax precisely because it is the one tax that the consumer can control. As Alexander Hamilton said in Federalist Paper #21 about the consumption tax, “The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources.”

By way of contrast, Hamilton viewed the property tax as the most unfair tax of all due to the arbitrariness of valuing land. For instance, in that same essay Hamilton said, “In every country it is a herculean task to obtain a valuation of the land,” and “…the difficulties [of valuating land] are increased almost to impracticability.” By implementing the consumption tax and exempting business to business transactions, I believe we can make Nebraska great again.