Why the EPIC Consumption Tax?
Broad reform, not narrow fixes, is needed
Why the EPIC Consumption Tax?
A consumption tax provides a uniform flat tax on every new retail purchase you make. The advantage of such tax is it encourages savings and frugality and helps maintain a balanced and steady tax system which saves everyone money in the long term. At the same time, the productivity of the economy is unleashed to create more prosperity for more people.
Sounds good on paper but many people frown when they consider their tax situation without understanding just how bad Nebraska’s current tax system is and why broad reform is needed. Others think merely a few fixes will work, but Nebraska has been doing such fixes for decades and the result only shifted the problems around. So here is an outline of the main flaws of the current tax system.
The income tax brackets in Nebraska are tricky as most individuals are in all three tax brackets at the same time and end up paying some taxes on the highest bracket 6.84 percent. So on average, Nebraskans pay about 5 percent, but this is before the many vast exemptions are applied. Many rich people benefit from high tax rates, because they have the option of many lucrative deductions most people do not have access to. In addition, many businesses demand exemptions and will expend lots of money to get such exemptions and maintain them. The result is the average taxpayer carries the weight of processing and paying taxes and businesses feel betrayed by the tax system.
The property tax system is obviously bad and creates instability issues with taxation and funding of schools. But the worst aspect is the many property tax exemptions. This goes beyond religious buildings such as churches and monasteries and cemeteries. Schools, hospitals, non-profits, and government entertainment such as arenas and convention centers are exempted. The result forces other property owners to pay more in property taxes. Also, renters never really know how much of their rent is going to cover property taxes of the landlord. There are other
problems as well. Many businesses ask for Tax Incremental Finance or TIF which results in another exemption from the property tax system.
The sales tax is full of idiotic tax deductions. Years ago, Senator Ernie Chambers pushed to exempt food from the sales tax, which “liberated” people of 3 cents of tax on potatoes and beans while the wealthy were “liberated’ of 20 cents of tax on lobster, shrimp, and steak. Over decades, the Unicameral has added many more exemptions. State Senators could have taxed soda pop and cookies and lowered the sales tax but it was never even suggested. Senator Rich Pahls, years ago, showed if Nebraska could just get rid of a third of the exemptions, it could lower the sales tax or even get rid of the income tax system. This has been a catalyst for changing the entire tax system including getting rid of the inheritance tax.
The EPIC Consumption tax could eliminate all these problems. But what about the poor? EPIC Consumption tax has a prebate mechanism to cover the consumption tax and it nullifies the impact of the tax on the poor. My only concern is some of the recipients may see this as free money and not change their habits. However, this prebate may help reform the welfare system by looking at what people actually need. I suspect some businesses will create discounts for EBT (electronic benefit transfers) users so this may do much more to help the poor.
To learn more, see the EPIC Consumption Tax website at link below: