Krusin' the Capitol
By Nebraska State Senator Lowen Kruse
Vol. 2 #11
March 31, 2002
Hi--
Apparently the "sales tax" crunch comes this week.
To broaden the base or raise the rate?
If broaden, which neighbor's habits to tax? (Not mine!)
'Twill get very interesting.
We have accepted a small "roll back" of the '98 income tax cut -- the 2%
raises about one third of what is needed. Several attempts to cut more on
agencies. All failed. There is little to cut in that area. The biggest
item in our budget is school aid but I find no will to cut that.
So with all those options apparently closed, the stage is set for the fun
part: how do we broaden the sales tax base? We now receive $1 billion in
sales tax and there is another billion available. We need only 1/20th of
that, so you can see it is easy for everyone to say, "It surely does not have
to be me."
Repair: a combine, or a lawn mower, or a car?
Install: a furnace, or a roof vent, or a camper top?
Professional service: a lawyer, or an accountant, or a dentist?
Construction: remodel or new, corporate or personal?
Senator Brashear has worked up a shopping list, with a "price" on each.
As Senator Redfield held up items on the floor this week she illustrated our
inconsistencies. Tax a sheet of paper? Yes. Which is made into a
newspaper? No. Made into a book? Yes. Into a monthly magazine? No.
Into a magazine-type journal? Yes.
Philosophies which have been used to bring consistency:
If the cost is a large portion of low income household expense, like food or
car repair -- no.
If identified with a small group of people, like golf lessons -- no.
If inescapable by nearly everyone, like clothing -- yes. (Also, nicely, this
cost varies with the income level, so is more fairly applied.)
Do not tax raw materials but go as close as possible to the final product.
As, Nebr. does not tax potatoes but does tax french fries in a restaurant.
A major drive in our decisions this week will be if neighboring states tax
it. Prevents "border bleed."
Another factor, with the list not yet decided, is Internet sales. We are in
heavy negotiations with other states to come up with a standard list
nationally, so Internet sales will be taxed with only the state's rate to be
varied. We will have to broaden our base a lot then.
Frustration: if Internet sales were now in place, as we are trying to do, we
would not have a deficit.
A friend asked his shift, on break at a manufacturing plant, how the state
should solve its problem. Unanimous: raise income tax. He found it amazing
and so do I. It would apply to them. They understood that if a business
chooses not to cut services it has to raise the rates.
Summary: I find this a most intriguing competition of self-centered
interests -- of personal benefits and personal pains. The bottom-line
question: how to be fair?
Lowen
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