Straight Talk From Steve: Our Broken Tax System
July 20, 2023
Nebraska’s tax system is broken and cannot be fixed. Whether it is the Nebraska State income tax, the State sales tax, the property tax, or the inheritance tax, each of these taxes is beyond repair.
The State individual income tax is too complex for the average citizen to understand. In order to show this, consider this instruction from the Nebraska Department of Revenue’s own website:
“Taxpayers whose federal adjusted gross income is larger than the threshold amount determined under section 68 of the Internal Revenue Code (IRC) will recalculate their tax on taxable income by multiplying the maximum tax rate by ten percent of the excess amount above the section 68 threshold and subtracting from the result the amount of tax from the tax table.”
Sound confusing? This statement was taken from the very first paragraph of the Department of Revenue’s instructions on calculating the individual income tax!
The State sales tax has outlived its effectiveness. Over the years, the Nebraska Legislature has given away too many exemptions. The Legislature has given away billions of dollars in taxable sales in the form of various sales tax exemptions. For example, in Nebraska we exempt such things as gold bullion, feminine hygiene products, and zoo fees. By exempting the sales of so many different kinds of products, the State sales tax has rendered itself ineffective.
Nebraska’s property tax system is overburdensome. A tax good tax system is one that is reliable from year to year without overburdening the people. Each year Nebraska’s property owners get a valuation notice in the mail indicating the new value of their real property. Those notices never seem to go down. Instead, each year property values go up and so do the property taxes. These property taxes go up regardless of the property owners’ ability to pay the tax and that is what makes it unbearable. According the Economic Research Service of the USDA, Nebraska now ranks behind Georgia and Wisconsin as the third highest state in the nation for farm bankruptcies and these bankruptcies are mostly due to high property taxes.
Inheritance taxes constitute double taxation and that is why only six states continue to impose inheritance taxes and Nebraska is one of them. Chief Justice John Marshall once wrote in the 1819 case of McCulloch v. State of Maryland that the power to tax is “the power to destroy,” and that is exactly what the inheritance tax is doing to our state. Anyone with an estate who wishes to pass it on to his or her heirs know that Nebraska is not a good place to die. Nebraska’s inheritance tax is an incentive for people to move to another state before they die and that is what many of them do.
Nebraska’s tax system is broken and cannot be fixed. We have experimented with these tax systems since 1967 and the situation has only grown worse. The solution is to replace the system with one that works and that is the EPIC Option Consumption Tax.