recent years, Nebraska has become a high sales tax state. In
fact in 2004, for the first time, Nebraska ranked higher in
sales tax burden than property tax burden. When the Legislature
raised taxes to balance the enacted budget in 2002 and 2003,
it both expanded the base by eliminating exemptions and adding
a few services, and increased the rate from 5% to 5.5%. Except
for a repeal of the tax on construction
labor, these tax increases have remained intact.
information from the first two columns is taken from 2006
data. The state and local rate in the largest city tends
to show the rate that the most residents pay while the average
rate combines experiences from across each state. Sometimes the
highest local rates are collected in tourist areas where much
of the burden
to outsiders, and the effects on most residents are small.
was ranked 10th in the number of services taxed
according to a survey conducted by the Federation of Tax
2004. The passage of LB 1085 (2002) and LB 759 (2003) added
27 services, increasing our number from 49 to 76 in two years.
These changes increased Nebraska's
rank by 15 places.
It is worthwhile to note that recent fiscal difficulties for
states caused a few states to expand the number of services
subject to the sales tax. However, far more responded by increasing
the sales tax rate.
The last column shows
another way to represent the breadth of the Nebraska sales tax
base. The measure takes total state sales tax
receipts and divides it by the rate to determine the yield of the
tax per one percent. This result is then divided by 1% of the state's
personal income. In this way the measure produces a rough estimate
of the percentage or share of the state's economy that the
sales tax reaches. By this measure, Nebraska's sales tax is
the 9th broadest of the 50 states and the District of Columbia.
with Iowa is interesting. According to the 2004 FTA survey, Iowa
taxes more services than Nebraska, yet according to
the breadth of base measure, the base is much narrower. Apparently,
Iowa exempts more goods from tax, for example food and business
inputs, while taxing more services.