Today, the Center for Rural Affairs provided testimony to the Revenue Committee of the Nebraska Legislature in opposition to LB 405 - a proposal to eliminate the state income tax and shift revenue burdens to additional sales taxes.
"LB 405 is harmful to rural Nebraska," said Jon Bailey, Director of Rural Research and Analysis at the Center for Rural Affairs. "It is estimated LB 405 will cause 80 percent of Nebraskans to pay higher taxes, especially those earning incomes less than $60,000 annually. With average incomes significantly lower in rural Nebraska, many of those paying higher taxes as a result of LB 405 will be residents of rural Nebraska."
According to Bailey's testimony, LB 405 will also directly hit the pocketbooks of Nebraska's farmers and ranchers, who would pay taxes on seed, machinery, chemicals, water for irrigation and energy – items that have been exempt from sales tax for decades. From Nebraska Department of Revenue data, placing a sales tax on those items would result in nearly $300 million taken in increased taxes from our agricultural operations and our farm and ranch families.
"LB 405 will also harm healthcare in rural Nebraska," he said. "Over $140 million will be taken from Nebraskans in new sales taxes for prescription drugs, medical equipment and hospital rooms. As a result, the elderly, the middle class, those without health insurance or with inadequate health insurance and people with disabilities will be hit with a new 'sick tax' that is imposed only because someone needs medical care."
Bailey explained further that rural healthcare facilities that are facing economic pressure will be damaged by having to pay increased sales taxes and from patients struggling to pay increased healthcare costs.
"The consequences and added taxes of LB 405 lead to the conclusion that LB 405 is simply a tax shift to selected sectors of our state's economy and to lower- and middle-income Nebraskans," Bailey said. "Nebraskans do not need a new 'sick tax,' nor will they benefit from higher property taxes. And the potential damage to farming, ranching, rural health care facilities, students, the elderly, the disabled and hard-working, middle-class families make this proposal a bad deal for rural Nebraska."
To view or download a complete copy of Mr. Bailey's testimony go to http://files.cfra.org/pdf/LB405-testimony.pdf.