Supporters tout EPIC consumption tax benefits while few opponents testify

State Sen. Steve Erdman of Bayard testifies on behalf of Legislative Bill 16 and a pair of constitutional amendments to create and codify the EPIC option consumption tax Wednesday, July 31, 2024, in Lincoln. (Aaron Sanderford/Nebraska Examiner)

LINCOLN — State Sen. Steve Erdman of Bayard followed through on his pledge to propose a last-ditch way to enable Nebraska voters to weigh in this fall on the EPIC Option consumption tax.

His latest legislative effort to reach the ballot was the subject of a public hearing Wednesday, weeks after a group fell short of gathering enough petition signatures to place the measure on the November ballot.

Legislative Bill 16 and two related proposals for constitutional amendments likely face an insurmountable path to passage, despite support from the Nebraska Republican Party.

Many EPIC supporters seemed heartened to see a hearing room at the Capitol overwhelmingly filled with rural and urban Nebraskans who primarily support eliminating property taxes.

Little organized in-person opposition

Only two testifiers spoke against the measure, fewer opponents than other EPIC hearings have drawn. One speaker represented insurance interests and the other was from OpenSky Policy Institute, a progressive think tank based in Lincoln.

Two people turned in letters opposing LB 16, and one person each wrote a letter objecting to the constitutional amendments. By contrast, 70 supporters sent letters in favor of LB 16, with 54 letters sent in support of one constitutional amendment and 41 in favor of the other.

Political observers who know the Legislature saw the drop-off in organized opposition as an indication of the measure’s dimming prospects this summer.

Previously, public opponents of the measure have included Gov. Jim Pillen, the state’s chambers of commerce, advocates for public schools, nonprofit organizations and local governments.

The lack of opponents attending the hearing was pointed out by State Sen. Lou Ann Linehan of Omaha, chair of the Revenue Committee. She introduced LB 1, the governor’s competing proposal, which some have called “EPIC light.”

Linehan said the lack of opponents testifying seemed disrespectful to Erdman and to the committee. Typically, more people oppose a bill if they believe it has a chance to pass.

“They didn’t bother to show up,” said Linehan. “They left it to us.”

One of the letters against EPIC was read during the hearing. It was submitted on behalf of 22 organizations opposing the idea, including the League of Nebraska Municipalities. Lynn Rex, that group’s executive director, reached Thursday, said the groups chose not to testify as a way of respecting the committee’s time after a long hearing on a competing proposal.

“U nder the EPIC plan, each political subdivision would have to hope that there is enough revenue, and that the Legislature will honor their request when compared to hundreds of other political subdivision requests,” the letter wrote. “ Hope isn’t a viable management practice.”

The Revenue Committee will decide in the coming days whether to advance the EPIC tax proposal to the full Legislature.

EPIC would eliminate state and local property tax, income tax, corporate tax and inheritance taxes, replacing them with a broader sales or consumption tax that would apply to more goods and services than are currently taxed.

Questions about the stool

Erdman said Nebraska’s shift in the late 1960s to a three-legged stool of taxation — dividing the load between income, sales and property taxes — has not worked.

“I’ve never tried to do anything that’s been more difficult than this,” Erdman said. “This system has been broken ever since it was instituted back in 1967. … It hasn’t worked.”

He and supporters argue that shifting Nebraska’s taxation system toward sales or consumption taxes would better protect people’s property rights and freedoms.

Longtime backers of the EPIC tax and a number of state and county GOP leaders attended the hearing. Others described themselves as farmers, ranchers and homeowners upset about the status quo.

One testifier, Travis Buel, said most people’s incomes aren’t “growing at the rate that taxes are,” and that means the tax system is “not going to work long term.”

Craig Bolz, a farmer from the Palmyra area, said the consumption tax would be fairer than property taxes and income taxes because the amount people pay is based on what they choose to buy.

He and others said doing nothing is putting people’s family property at risk. He said it would be a “sad day” if he had to sell his grandfather’s farm because of rising taxes.

Former State Sen. Al Davis of the Independent Cattlemen of Nebraska said Nebraskans might soon follow voters in Colorado and California and address property taxes through ballot initiatives.

Sheridan County rancher Kay Schroder said the cost of property taxes and insurance eats up three and a half months’ worth of her six months of summer income.

“I think it’s important that we keep the small farmer-rancher operations in Nebraska,” she told the committee. “The tax situation is making it very difficult.”

David Wright, a rancher near Ewing who said he previously owned weekly newspapers and served on a school board, blamed population growth patterns for why it’s been so hard to fix property taxes.

Too many people live in Douglas, Sarpy and Lancaster Counties, he said, which has consolidated too many legislative seats in areas farther from the majority of farms and ranches.

“If we’re going to have a one man, one vote system, the only way it’s going to work is one man, one tax,” Wright said.

Scott Bush, a Saunders County homeowner and business owner, said he hates paying personal property taxes on the tools he uses to make a living.

“I’m paying you rent on the tools I use to do the job that I make a living on,” he said.

Questions about EPIC tax rate needed

Erdman and Joel Hunt, one of Erdman’s legislative staffers, who helped write the EPIC proposals, took shots at the research that business groups and nonprofits have used to oppose EPIC.

Hunt said any insinuation that paying for state and local services would require an effective sales or consumption tax rate of 22% is ludicrous. Hunt has said it can be done with a 7.5% rate.

Rebecca Firestone of OpenSky, whose research concluded a 22% tax would be needed, defended her group’s work and said it had addressed Hunt’s criticisms, including adding in an estimate of new revenue from the elimination of sales tax exemptions.

“We stand by our analysis,” she said.

The other in-person opponent, Robert Bell of the Insurance Federation of Nebraska, said the tax changes being proposed might put parts of the state’s insurance industry at risk.

He said Nebraska insurers benefit from tax laws on out-of-state policies that might be impacted by some of the proposed constitutional changes, which would restrict what taxes can be levied.

Erdman asked the Revenue Committee to advance his proposal for debate on the legislative floor.

In order for the EPIC tax to make the November ballot, the Legislature would also have to pass companion legislation allowing a constitutional amendment to be turned in to the Secretary of State’s office 60 days before the general election. Current law requires such a measure to be turned in at least four months before the general election.

In response to a question from State Sen. Joni Albrecht of Thurston, Erdman said six states are mulling similar proposals. No state has passed such a plan.

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