Tax Neutrality

Nebraskans are now receiving their new property valuation notices in the mail. As a result, many Nebraskans are suffering from sticker shock once they see how much the value of their property has increased since last year. Mine, for example, went up forty percent! Other property owners are seeing their valuations increase by as much as fifty percent.

What these property valuation notices demonstrate is how broken Nebraska's tax system is. To be sure, you can bet your last dollar that the tax levies won't decrease by the same percentage as your valuation increase in order to keep the property taxes the same as last year. Instead, this trend in rising property values and rising property taxes will continue, forcing Nebraskans to sell their properties and move to more tax-friendly states. Not only is Nebraska's tax system broken, but it cannot be repaired.

Nebraska's tax system unfairly targets landowners. In order to help you see this, consider where the State of Nebraska and its political subdivisions derive their revenue. According to the Beacon Hill Institute, 47 percent of all tax revenues in Nebraska are derived from property taxes, compared to 28 percent from individual income taxes, 19 percent from sales taxes, 6 percent from corporate income taxes, and 6 percent from excise taxes, fees, and other miscellaneous taxes. As you can see, property owners carry the heaviest load of Nebraska's tax burden.

Nebraska's tax system is not neutral. Daniel J. Pilla is a tax expert who will be speaking in the East Campus Union at the University of Nebraska - Lincoln at 2:00 p.m. on Friday, June 21. Dan Pilla advocates for what he calls "the ten principles of good tax policy." Principle number 6 is the principle of neutrality. According to Pilla, "Taxes should not fall more heavily on one industry or class of individuals than on others." Whenever taxes target a particular industry or class of people, people stop purchasing the item that is subject to the tax, and that is exactly what has been happening in Nebraska. For example, because Nebraska's tax system unfairly targets property owners, the old Cabela's campus in Sidney continues to sit empty year after year without a new owner.

Neutral taxation used to be a core principle of American tax policy. Our American forefathers understood the need for tax neutrality. In fact, the U.S. Supreme Court condemned the practice of unfairly targeting a particular class of people with taxes back in 1874 in a case known as Citizens Savings & Loan v. Topeka. The high court said in that case about the power of taxation that "This power can as readily be employed against one class of individuals and in favor of another, so as to ruin the one class and give unlimited wealth and prosperity to the other..." Is that not what is happening in Nebraska?

Nebraska will continue to see more people leaving our state. According to the World Population Review more people are leaving Nebraska than are moving into Nebraska. 55.7 percent of all moves now belong to residents who are moving to other states. Nebraska has one of the highest percentages in the country. Nebraska has the tenth highest percentage of folks leaving the state. We are now in the same league with Massachusetts (57.6 percent), Michigan (57.7 percent), and California (59.3 percent). Nebraska has a higher percentage of people leaving our state than any of our neighboring states, and this is not a statistic we should be proud of.

State Senators will continue to beat their heads against the brick wall of tax neutrality until they come to the realization that the EPIC Option Consumption Tax is the only fair way to tax the people. If the members of the Legislature believe the solution is to simply eliminate certain sales tax exemptions, then the result will be the same for those industries and classes of people who become the targets of their new tax policy after a special session of the Legislature. The only way to make taxes fair, is to put the people in charge of how much money they pay in taxes every year, and that is exactly what the EPIC Option Consumption Tax does. As Alexander Hamilton explained in Federalist Paper Number 21, the consumption tax is the only tax which is fair and can never over tax the people.