LIBA Opposes Increasing State Sales Tax Collections
The Lincoln Independent Business Association (LIBA) opposes LB507. We do not believe imposing new sales taxes and eliminating sales tax exemptions will provide the meaningful property tax relief that Nebraskans are seeking.
We are most concerned that this bill will impose sales taxes on a number of service industries that are predominantly comprised of small businesses. These include small businesses that provide moving and storage services, lawn care, transportation services, personal care services, home repair, parking services, and music and dance lessons for children, among others. Every customer of these businesses will have to pay more for these services, which may cause some customers to cut back or eliminate these services altogether as they become more costly.
Many recognize that small businesses are the driving force of local economies. In Nebraska, more than 400,000 employees are employed by small businesses. However, the success of small businesses can often be fleeting. According to the U.S. Bureau of Labor Statistics, about 20% of small businesses fail by the end of their first year. By the end of their fifth year, 50% go under; and by the tenth year, the number of failures rises to 80%.
We need to be looking into policies that encourage the growth of small businesses and make it easier for them to remain open, instead of making the goods and services they provide costlier for consumers. A thriving small business community will generate higher levels of revenue in local property taxes and lower the property tax burden on the rest of the community.
This bill also singles out non-profits that provide vital community services, including charitable and religious organizations. For example, LB507 imposes sales taxes on legal and accounting services provided to non-profits, and removes the tax exemption on fees that non-profits charge to cover the costs of youth development, healthy living, and athletic programs.
Under LB507, even school lunches are not spared. This bill would remove the sales tax exemption for prepared food served by public or private schools, which will directly increase the costs of school lunches for children.
LB507 also picks winners and losers by arbitrarily deciding which industries and services get to keep their sales tax exemptions, and which do not. For example, newspaper deliveries are spared, but flower deliveries are not. Food for hospital patients remain exempt, but not food for students.
Most importantly, LB507 fails to provide a lasting solution for property tax relief. This bill does not take any steps to control escalating property taxes or control spending at the local level by the political subdivisions that levy property taxes.
Another bill, LB710 would raise the tax on cigars from the current 20% to a new high of 65%. If you take a $5 cigar purchased from a wholesaler and add a 65% tobacco tax, that cigar is now $8.25. And that is before any retail mark-up or the 7% sales tax is added.
And of course there is LB314 that would raise the tax on beer from .31 cents to $1.38 per gallon. LB314 makes Nebraska #1 in a way we don’t want—we would have the highest beer tax in the United States.
I encourage you to contact your State Senator and ask them to oppose the new ½ cent sales tax that is being discussed as part of the Property Tax relief plan and all these other tax increases too. You don’t lower taxes by increasing taxes.
LIBA studies and promotes these types of issues that are important to businesses and our community. If you have an interest in joining LIBA, please call me at (402) 466-3419. LIBA membership is not restricted to just businesses. We also have “individual” memberships for those who want to help influence our local government decisions.
For more information on LIBA, visit Liba.org.