The consumption tax should help all income earners, the commissioners said
MADISON — One concern voiced by some critics of the proposed EPIC option tax is that it would lead to the loss of local control.
This point was also brought up this week when it was explained during the Madison County Board of Commissioners meeting.
The concerns are that if all local government entities, from public school districts to county councils, are limited to 2% budget increases, how much authority will they really have?
Norfolk’s Steve Jessen spoke to County Council in favor of the EPIC option, which would replace all property, income, inheritance, corporation and sales taxes with a consumption tax of less than 8%. It would remove all exemptions and require a one-time consumption tax on everything except food and inputs.
Jessen said he heard concern about losing local control but disagreed.
Local governing bodies still set their own budgets, and representatives from each of the state’s five areas that serve on an equalization and review committee would not be able to change those budgets.
“It won’t be rejected (as long as it’s no more than a 2% hike),” Jessen said. “If it’s out of bounds from that, they don’t change it. They come back to you and say, ‘You guys need to fix this.’ “
Commissioner Eric Stinson asked whether each of the governing bodies, such as schools, counties, cities and educational services units, would still have separate budgets.
Jessen said that’s correct.
Stinson said that means each of the five representatives from the regions, each made up of 18 or 19 counties, will have to review an average of about nine budgets for each county. That means they’ll have to look at about 900 budgets, Stinson said.
“And we’re paying them to do it,” Jessen said, noting that they’ll have staff to assist them.
Jessen said that even with five elected regional representatives and their staffs, the cost of state government would go down. For one thing, there will no longer be a need for real estate appraisals, so each of the county assessor’s offices can be eliminated.
“The income tax offices will be eliminated. The estate tax department will be eliminated. All those departments, some of which I’m not thinking about here, will be eliminated,” Jessen said.
But there will also be new jobs, such as that of the consumption tax.
It’s worth noting that right now in Nebraska state taxes are increasing by $775 million a year, according to a study by the Beacon Hill Institute. That will continue to happen, so there’s room for growth with this proposition, he said.
The excise tax will increase spending because people will no longer have to spend the thousands of dollars on property and income taxes that they do now.
Stinson asked what would have happened if revenue had been lower.
Jessen said if that were to happen, the consumption tax rate would go up. That’s unlikely to happen because the Beacon Hill study actually shows it should be 7.23% as a dynamic or growth rate, but a static rate would be 8.6%, she said.
Another study, from the Open Sky Institute, found a rate of between about 11% and 11.5%. That study was in 2019 and included $42 billion worth of items on which the state was collecting sales tax, Jessen said.
“And then we exempted $61 billion worth of items from the sales tax,” Jessen said. “So we were exempting more than we were collecting. That’s how we’re expanding the base because we’re getting rid of all these (exemptions).”
With the consumption tax, all non-profit organizations, government agencies, and churches would pay the consumption tax. All new goods and services will be subject to the consumption tax, Jessen said.
For lower incomes, there are no taxes on used goods. Used cars and houses that are already inhabited are not subject to consumption tax.
“They (lower income earners) can control their taxes by buying used goods,” Jessen said. “They buy a used car; they pay no taxes. They buy a used house; they don’t pay taxes.”
Those who rent are expected to save $300 to $400 a month. The landlord no longer has to factor property taxes into the rent because he no longer pays them, Jessen said.
Local budgets will be drawn up on the basis of a five-year average.
“We know there are going to be high years and low years,” Jessen said. “It’s part of the (formula that determines what is acceptable).”
Individual counties will also be able to propose their own surcharge on consumption of up to 1.5% in case of need.
“But it’s going to take a vote of the people to do that,” Jessen said.
Towns, villages, schools and other entities will also be able to incorporate an additional consumption tax, but that will require a popular vote.
“What it does is it prevents government agencies from spending our money and then sending us the bill,” Jessen said.
The full Beacon Hill study can be found at and there will be meetings to discuss it. The Norfolk meeting will be held on Saturday, March 25, from 1:00 pm to 4:00 pm at the Norfolk VFW, 316 Braasch Ave. State Sens. Steve Erdman, Steve Halloran and Mike McDonnell will present information on LB 79. There will also be a Town Hall meeting on Wednesday March 22nd at Big John’s Restaurant in Ainsworth at 9am
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