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Nebraska Seeks Local Level Sales Tax Increase

  • Feb 20, 2012 | Susan McLain

The state of Nebraska imposes a 5.5% state sales tax and allows local jurisdictions to impose up to 1.5% in addition to the state rate for local services. Food and prescription drugs are exempt. This session, Legislative Bill 956 (LB956), has been introduced to allow “[a]ny incorporated municipality by ordinance of its governing body…[to] impose a sales and use tax…” of up to 2%.

Any increase would have to be approved by voters during a primary or general election. Per the bill, “[a]ny such tax or increase shall terminate no more than ten years after its effective date.” In addition to this restriction, “[a]t least some of the revenue would have to go toward long-term development projects, in partnership with a county or school district.”

It’s been reported that many of the 530 Nebraska cities are urging the Legislature to advance this measure to allow them to increase local sales tax rates up to 2%. “Supporters said it would allow cities to offset property taxes and collect revenue from out-of-town residents who benefit from city roads, businesses and other amenities.” Previous bills such as this one have not gained sufficient majority approval of the Legislature to override any Governor veto. “Republican Gov. Dave Heineman has said he would veto a bill that could lead to tax increases, and called on cities to trim their budgets.”

City leaders have commented that cuts have already been made. In Lincoln, “…Mayor Chris Beutler pointed to cuts that his city has made in library hours, senior center services, and a retirement match for municipal employees. But…cuts to state aid last year have created pressure to raise property taxes….” In addition to state aid cuts, “Lincoln is also scheduled to lose $1.5 million in federal funding this year for its popular Community Learning Centers.” However, “[i]ncreasing Lincoln’s sales tax to 2 percent, up from its current 1.5 percent limit, would generate an estimated $19 million for the city.”

Not all cities are ready to jump on the tax increase bandwagon yet. West Point, in northeast Nebraska has not imposed the maximum limit of 1.5% sales tax rate yet. Mayor Marlene Johnson says, “I don’t know at this point in time if the city would ever go after a half-cent sales tax. But thought is, if it is there, and we’re in desperate times, it would be a nice thing to present to voters.”

Of the 194 cities that currently impose local sales tax, 86 have reached the 1.5% maximum. Not all cities that are struggling are doing so because of poor budgeting. Omaha’s Chief of Staff, Steve Oltmans says “…his city is still struggling with $22 million in expenses from last year’s Missouri River flooding.”

When all is said and done, Lincoln Mayor Chris Beutler expresses that having this bill pass gives “…the most flexibility to let the community decide the fairest combination” of sales tax rates and residential tax burdens.

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Avalara Author
Susan McLain
Avalara Author Susan McLain
Susan McLain began her career as a technical writer in technology industries such as satellite networking and medical devices. Her skills encompass technical and marketing writing, usability engineering, verification and validation testing and protocol writing, requirements development, business analysis, technical illustration/graphic design and marketing. She has owned her own business providing service to small to medium sized business and in other positions, she has been in project management, documentation and marketing. She is currently the content specialist for Avalara helping to “make sales tax less taxing.”