Backers of ‘consumption’ tax ballot initiative seek funds to finance paid circulators

LINCOLN, Neb. (Nebraska Examiner) — Backers of a novel state “consumption” tax predicted Monday that a ballot initiative to adopt it would pass if it gathers enough signatures to qualify for the 2024 ballot.

But getting it on the ballot is the big “if” faced by the so-called EPIC Option Consumption Tax initiative, though one political consultant figures they have commitments for campaign funding and will qualify for the ballot.

Such signature drives typically require more than $1 million in funds to finance paid circulators able to collect the required, tens of thousands of valid signatures of registered voters. So far this year, backers of the EPIC Option Consumption tax have reported raising just under $89,000 as of October.

‘We need all kinds of funds’

“We need all kinds of funds,” said State Sen. Steve Erdman of Bayard, following a press conference on Monday.

In January, backers of the consumption tax — which would replace local property taxes and state sales, inheritance and income taxes — launched their signature drive amid criticism it was “too good to be true” and “dangerous.”

At the press conference Monday, backers said that so far, they had gathered sufficient signatures in at least three rural counties and suspect they have qualified in “several” others, but the petitions have not yet been turned in.

Erdman, who has made the consumption tax his top issue during seven years in the State Legislature, acknowledged that the EPIC tax group will likely have to raise more than $1 million to pay petition circulators to gather enough signatures to qualify for the ballot.

But the veteran senator also predicted that voters would approve the consumption tax, if it makes the ballot.

Nebraskans, Erdman said, are tired of seeing “property tax relief” bills pass that only reduce increases in the tax. He predicted that they are ready to take a risk with a radically different tax system.

Unicameral was a similar risk

“We took a risk in 1937 and passed a (one-house) Unicameral,” Erdman said. “If we don’t fix our broken tax system, we’re going to continue to lose people to other states.”

While the EPIC group has some work to do, Barry Rubin, a political consultant with experience in such petition drives, said the group likely has sufficient funding lined up because a ‘reputable,’ signature-gathering organization like Trailblazing Canvassers would not sign a contract unless that was the case.

Rubin predicted that hiring professional circulators, plus active work by volunteers over the summer, will put the issue on the ’24 ballot, even though he opposes the idea.

“There are a lot of unknowns, and it’s a very aggressive way to change our tax system,” he said.

In its most recent financial report to the Nebraska Accountability and Disclosure Commission, the EPIC Option group reported raising nearly $89,000 for its petition drive so far this year. That compares to the $1.7 million the committee Support Our Schools Nebraska raised to qualify a ballot initiative to overturn a school choice bill passed by state lawmakers this year.

The EPIC Option committee also reported a $20,000 expenditure last month to a Florida firm that will deploy paid circulators in the state’s urban areas — the group’s first spending on paid circulators.

Erdman said consumption tax backers realized back in January that they would need to pay circulators to gather signatures.

Steve Jessen of Norfolk, who is heading up the group’s volunteer circulators, said at least 130 volunteers are already gathering signatures.

He and Erdman said that volunteers will concentrate on petition circulating in rural areas, while Trailblazing Canvassers will hire paid circulators, who have more expertise going door-to-door, to focus on urban communities.

Erdman said his group has been asking Nebraskans who feel that taxes are too high to contribute one month’s worth of a mortgage payment, or 10% of their total tax bill, to their campaign.

He said, for example, that the group got a check for $1,435 just recently.

But Erdman added that consumption tax backers are also looking for large donors — as have boosted other Nebraska initiative petition drives like those for and against school choice — to back their effort.

Nebraska would be the first state in the nation to adopt a consumption tax. Their effort’s main goal is eliminating the state’s much grumbled-about property taxes, which they maintain is forcing farmers and ranchers to move to other states that have lower taxes.

“We need a fundamental change or the future does not look bright for Nebraska,” said Gordon Sen. Tom Brewer, one of four senators in attendance on Monday.

The so-called EPIC Option Consumption tax (which stands for “elimination of property, income, and corporate taxes”) would place a tax on the initial purchases of items and services, conceivably generating enough tax revenue to do away with property taxes, as well as state sales, income, motor vehicle and inheritance taxes.

A 7.5% consumption tax, if approved by voters, would go into effect on Jan. 1, 2026, just after the other taxes were repealed.

Groceries would remain tax-exempt as a concession to low-income taxpayers, and some excise taxes (liquor and tobacco) would remain, as would some government fees. Purchases of farm and business equipment would remain exempt, and excise taxes on gas would remain.

New cars would be subject to consumption tax, but used cars wouldn’t; purchases of a new home would be taxed, but purchases of pre-owned homes wouldn’t; churches, universities, governments and nonprofits would pay taxes on purchases for the first time; and many services now tax exempt would be subject to taxes.

Renters would not pay the tax, according to Erdman.

The plan is laid out in Amendment 314 of Legislative Bill 79, Erdman’s latest attempt at getting a consumption tax approved by state lawmakers. That has failed, forcing backers to turn to an initiative petition.

State chamber, others oppose it

State business and watchdog groups have labeled the consumption tax dangerous, and predicted that a much higher consumption tax, in the range of  12-20%, would be necessary to raise the same amount of tax revenue as traditional taxes do now.

For instance, in March, the Open Sky Policy Institute of Nebraska estimated that a consumption tax rate of 22.1% — three times higher than projected by EPIC Option backers — would be necessary to match the tax revenue now provided by the traditional property, sales and income taxes.

Erdman disputed that on Monday, saying that the 7.5% rate was validated in a study by the Massachusetts-based Beacon Hill Institute. the elimination of current tax exemptions would bring in an addition $75 billion in the first year of the consumption tax.

A consumption tax, he and others said, would eliminate the “winners and losers” that now exist in the current tax system.

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