Plan to replace all taxes with consumption tax falls short in Nebraska Legislature

LINCOLN — State lawmakers balked Wednesday at a proposal to scrap Nebraska’s existing taxes and replace them with a first-in-the-nation consumption tax.

Legislative Resolution 11CA, introduced by State Sen. Steve Erdman of Bayard, fell two votes short after the first round of debate. The proposed constitutional amendment got 23 votes in support but needed 25 to advance. Nineteen senators voted against the measure, five abstained and two were absent.

Some of those voting for the measure acknowledged that they were “intrigued” by Erdman’s “big vision” but not necessarily convinced that it was the direction Nebraska should go. They argued for debate to continue.

“Let’s look at what could be,” said Sen. Robert Hilkemann of Omaha. “Let’s think outside the box.”

If passed by the Legislature and approved by voters, LR 11CA would eliminate virtually all state and local taxes in Nebraska and instead apply a consumption tax on all services and new goods. The measure would allow local governments to impose their own consumption taxes in addition to the state tax.

Erdman, who introduced the consumption tax idea last year, touted it as a solution to Nebraska’s “high tax” problems. He said people and businesses would be drawn to the state because they would not have to pay income, sales, property or inheritance taxes.

Instead, they would be paying what he called a simple and fair tax that would be based on what they buy.

“With the consumption tax, you can never, ever be overtaxed because you control how much you pay,” he said. “When it’s all done and it’s all put in place, the winners will be the people of Nebraska.”

Opponents focused on the many unknowns of making a wholesale change in taxing, including who would end up as losers under the measure and whether it would produce enough revenue to maintain schools, build roads and take care of other government functions.

Sen. Carol Blood of Bellevue, whose election opponent last year supported a consumption tax, said most voters she talked with did not like the idea.

“The vast majority of Nebraskans will pay more,” she said.