Consumption Tax Proposal

[ita]

I am interested in everyone's thoughts about the constitutional amendment proposal to totally restructure the state's tax system by utilizing a consumption tax. Recent articles on this subject are found here:

https://www.omaha.com/news/state_and_re ... d78a7.html

and here:

https://www.omaha.com/news/state_and_re ... 6945b.html

Essentially, we would be taxed about 11% on everything we buy, including food, medicine, and new construction homes, and services, such as auto repair and legal services. As proposed, while so far extremely broad in application, however, does not apply to goods purchased for business use, like shears for a barber. If implemented in its current state, it allegedly eliminates all SALT's, ie. Personal and corporate income and property taxes.

Opponents of the measure claim that middle income families will be most negatively affected because low income families will receive prebate checks and high income families spend less of their income on consumption, relatively. Additionally, they claim that counties would have to "beg" for funding from the state and would be at heir mercy.

I am pretty middle of the road for household income, home owner with a mortgage, and can almost 100% say that this will be a net positive for our family. I think the calculas differs from other states when we have unusually high property taxes, particularly since we residential owners are assessed for 100% of market value. I would imagine for most middle income earners, this would be a net positive, unless they are buying new cars or homes every year, or use attorneys a lot (the article states that medical services may be taxed but it is unclear if that is conjecture from an opponent or part of the proposal).

Proponents believe that it not only resolve our property tax works, but increase population growth through better retention and make it an attractive place to move, from a financial perspective. I believe there is merit to this, as states with no income tax, and particularly large metros in those states, have enjoyed much greater growth that the national average and represent many of the fastest growing metros. Even a place like Sioux falls SD, has grown at a faster clip than either Omaha and Lincoln per current estimates this last decade. Also see the tables in this census article: https://www.census.gov/newsroom/press-r ... metro.html. Top 10 growth metros in sheer numbers and and percentage are dominated by no state income tax states, Florida, Texas, Nevada, and north Dakota.

From many of my friends my age, early 30's, no state income tax is a strong consideration in determining where to work/live. Additionally, eliminating income taxes on retirees would help keep parents of kids here who could end up boomeranging back to the state because of family ties and favorable tax structure.

There are some changes I would like to see and would want to know how it affects the overall consumption tax rate. For instance, only two states eliminate all corporate income tax. I do not believe that should be eliminated under this plan. Additionally, I know the proponents of the measure are trying to cater to business growth (and possibly the farmers onboard with this), but business purchases should not be excepted from the tax. I think it would create the possibility for loopholes in the tax that would be burdensome for the state to verify. Additionally I do have concerns about how the state would dole out the funds to counties and cities and school districts.

Anyway, the plan is to fleshed out yet, but what do you all think about this proposal?

[Original]

This jumped out at me from the OWH article-

Used cars and homes that have been previously lived in would not be taxed.

A decent way to mitigate the effect on lower income households.

Overall, I think I don't like this because I think the tax rate is too low, it seems like it will disproportionately benefit higher-income individuals, I don't like elimination of corporate income taxes as a growth strategy (if we get businesses that 'relocate' for the tax regime, we may just end up with a bunch of Nebraska corporations instead of Delaware corporations, and the only people who benefit from that are the lawyers... Study I saw once was that Delaware estimates that the practices of businesses registering in Delaware is revenue neutral for the state, and only beneficial for the legal professionals, and since a lot of the process around registration is being automated out, even they don't benefit), and after the debacle that Kansas has had with funding in the last 10 years or so, I'm disinclined think this is going to have all the positive benefits that the authors hope.

Also feel like Nebraska is a place where, unlike dense east coast states, we need the county system to ensure functioning rural government, and making the counties dependent on state appropriations feels like a bad way to add a new level of political jockeying into that process. (But I have just been reading Robert Caro's The Power Broker, so maybe that overly biases my thinking in this area)

[Omababe]

I seriously doubt if this will come to fruition, but it would certainly be a windfall for businesses in Council Bluffs if it did!

[Original]

I had an additional thought that I would want to apply here, a proposal that would make this get my support a lot more easily -

I would support a bracketed consumption tax proposal, something like (numbers rounded to make it easier)

$0.01-$500 at 10%
$500-$2500 at 15%
$2500-$10k at 20%
$10k-50k at 25%
> $50k at 30%

Since it's bracketed, if you bought something for $2600, you would pay $50 on the first 500, $300 on the 500-2500, and $20 on the $2500-$2600, leading to a total tax bill of $370. Versus a straight 11% tax, that would lead to a tax bill of $286. (I think, if I've done the math right)

Would make the lower dollar purchases less expensive, while increasing the tax on consumption of high dollar purchases, trying to even out the % of impact a consumption tax would have on low versus high incomes.

[nebugeater]

I had an additional thought that I would want to apply here, a proposal that would make this get my support a lot more easily -

I would support a bracketed consumption tax proposal, something like (numbers rounded to make it easier)

$0.01-$500 at 10%
$500-$2500 at 15%
$2500-$10k at 20%
$10k-50k at 25%
> $50k at 30%

Since it's bracketed, if you bought something for $2600, you would pay $50 on the first 500, $300 on the 500-2500, and $20 on the $2500-$2600, leading to a total tax bill of $370. Versus a straight 11% tax, that would lead to a tax bill of $286. (I think, if I've done the math right)

Would make the lower dollar purchases less expensive, while increasing the tax on consumption of high dollar purchases, trying to even out the % of impact a consumption tax would have on low versus high incomes.

There goes the new housing market

[Original]

Would it? I mean that seriously, almost no one is buying new houses cash. I would guess for most people it doesn't change that much if they are mortgaging, as my understanding is that most mortgages have the bank paying the property tax yearly, so if you were to calculate out the cost of the tax versus the cost of the consumption tax, it might not make that much of a difference to the average mortgage payer. Or maybe brackets would need some slight adjustment on new housing, I'm not sure. I lack either the initiative or the incentive to go through the exercise of actually calculating it out.

[nebugeater]

It will increase the cost of a new home sales by well over 30% your formulate will essentially put it int he 30% bracket for the entire purchase and the tax increase for the builder will add another serious % to the cost to build, thus sell the house. Not many of the component purchases will be int he 10% bracket. The tax portion of the materials will more than double if you use a current base of 7%

I don't dislike the idea but I think it has a greater chance on a federal tax level of working. Unless all states do it the bleed at the boarders would be crazy on a state by state plan.

[ita]

Would it? I mean that seriously, almost no one is buying new houses cash. I would guess for most people it doesn't change that much if they are mortgaging, as my understanding is that most mortgages have the bank paying the property tax yearly, so if you were to calculate out the cost of the tax versus the cost of the consumption tax, it might not make that much of a difference to the average mortgage payer. Or maybe brackets would need some slight adjustment on new housing, I'm not sure. I lack either the initiative or the incentive to go through the exercise of actually calculating it out.

I really like the tiered proposal for a consumption tax. If the state were to seriously consider this as an all encompassing tax reform, I think a tiered system would, as you said, reduce the impact on middle and low income households. I think some things, like new homes, would need to be tiered differently. Additionally, if they exempted business purchases, I would like to have some cap on it or maybe exempt certain business purchases such as materials purchased for a new home or multifamily residential building with for sale units, to encourage those types of developments. After having thought about it more, exempting taxes on business purchases would avoid increasing the cost of producing a product that is than sold to consumers or a service provided to people in the State; consumers would have the burden on both the consumption tax and passed down cost of the manufacturer/service provided in having to pay the consumption tax.

Obviously, the consumption tax as proposed is extreme and it needs to be fleshed out. However, I think it brings to light that the State needs to consider that maybe the system, and not just property taxes, needs reformation, especially if one of the biggest issues in the State is retention and recruitment. The kind of workers the State and businesses claim they need to continue to grow are usually very savvy when it comes to considering every aspect of moving or staying here, including looking at tax burdens.

[Original]

It will increase the cost of a new home sales by well over 30% your formulate will essentially put it int he 30% bracket for the entire purchase and the tax increase for the builder will add another serious % to the cost to build, thus sell the house. Not many of the component purchases will be int he 10% bracket. The tax portion of the materials will more than double if you use a current base of 7%

I don't dislike the idea but I think it has a greater chance on a federal tax level of working. Unless all states do it the bleed at the boarders would be crazy on a state by state plan.

Ok, I just did the numbers - obviously these are very rough, someone with actual experience in this would have to do some more investigation.

A 200,000 home under this plan would present a bill of 256850, but no ongoing property tax. I plugged this number into https://www.mortgagecalculator.org/ (which was the first hit on google), and picked a 30 year repayment with 20k down on a 3.8% interest. That comes to 1286 a month for the mortgage. Total of all payments is $435,017.92

Same home/mortgage with the current regime of property taxes (which I ball-parked at 4k/yr) comes to 1330/month, total of all payments is $456,890.36.

If you go for something aggressive like a 15 year repayment, bracketed tax is $1,910.41/month and $329,069.24, current regime is $1,805.14/month and $313,299.59


Summary - New plan is progressive tax, no property tax

30 yr, new - $1,286/month, total $435,017
30 yr, current $1,330/month, total $456,890
15 yr, new $1,910/month, total $329,069
15 yr, current $1,805/month and $313,299

So it obviously depends on what your terms are if this is adventageous or not, but that's what any system of taxation is/should be - determining which tradeoffs we want to live with. I'm not immediately convinced that a consumption tax would introduce a wide swath of negative consequences outweighing the wide swath of negative consequences our current tax system features.

Personally as the kind of cheap/frugal/whatever person who cannot see themselves buying a new home or new car, I like the idea of eliminating taxes on those purchases, and I think a consumption tax could have some net overall benefits for the family-based/smaller farm agricultural sector in Nebraska, whose prosperity and independence I strongly support.

[ScrattyB]

Ok, I just did the numbers - obviously these are very rough,

For easy number's lets say 0$ down. So it's either a loan for 257k or 200k. Let's say my lender pre-approves me for 200k. I can no longer buy the same house under the new system.

There would be a run of house buying before it takes effect, and then nobody would ever buy a new house. Then it would turn into California, and you have to define what a "new" house is, so people would demolish 3 walls of the house to build a brand new house around that one wall.

Actually, sounds like a great way to end the sprawl. Let's do it!

[ita]

Ok, I just did the numbers - obviously these are very rough,

For easy number's lets say 0$ down. So it's either a loan for 257k or 200k. Let's say my lender pre-approves me for 200k. I can no longer buy the same house under the new system.

There would be a run of house buying before it takes effect, and then nobody would ever buy a new house. Then it would turn into California, and you have to define what a "new" house is, so people would demolish 3 walls of the house to build a brand new house around that one wall.

Actually, sounds like a great way to end the sprawl. Let's do it!

Under a Original's suggested tier system, yes, that would be an issue. I really think a tiered system like Original's for most new purchases would balance out the burden of a consumption tax, however, I think new home purchases should have its own tiered or a flat rate like the one currently proposed to the unicameral. At 11.08%, the person can 'make back' the upfront cost in about 5 years, compared to what we currently pay in property taxes. Thereafter, there is a yearly 'savings' on their property the longer they hold it. Relatedly, new homeowners would have an incentive to stay longer. Would it limit new home purchases and suburban sprawl? Maybe, but I assume that if there is an exemption for business purchases, some of the cost savings that contractors and builders avoid in sales tax for their materials could be passed to the purchaser, reducing the impact of the tax on the final price of the home. I still do not like exemption of all business purchases, but I could see that type of policy being the motivation for exempting business purchases.

The other aspect I was thinking about is how this would work with the federal tax return. I assume it would be treated as a sales tax, so that people could possibly itemize. The issue is the recent tax reform limits SALT tax itemized deduction to $10,000, So, if someone bought a home in one year, they would not enjoy the full benefit of being able to use the full amount for a deduction in their federal income tax. The tax structure could accommodate this by allowing a prolonged payment of the consumption tax on new homes or other large purchases, say over 5 years and have the remainder of unpaid taxes due if a new homeowner sells the property within that same period of time.

[Original]

Ok, I just did the numbers - obviously these are very rough,

For easy number's lets say 0$ down. So it's either a loan for 257k or 200k. Let's say my lender pre-approves me for 200k. I can no longer buy the same house under the new system.

There would be a run of house buying before it takes effect, and then nobody would ever buy a new house. Then it would turn into California, and you have to define what a "new" house is, so people would demolish 3 walls of the house to build a brand new house around that one wall.

Actually, sounds like a great way to end the sprawl. Let's do it!

While again I do not specialize in practice or policy in real estate, mortgage initiation, or taxation, I wonder if perhaps this change would change much, and think maybe what you have outlined is a semi-simplistic way of looking at the loan process? I think the preapproval numbers would actually go up a little bit, because the amount of capital that is going out when a loan is agreed to is only part of the equation that the bank looks at - they are also going to look at yearly cost of servicing the loan, expected return on the overall loan, etc. I am speculating that it is possible that, since after the initial loan, the bank has a lower yearly capital expenditure, they might be willing increase the upfront amount of the loan.

I also did not previously consider, in part because I do not have a mortgage, what the ramifications of this proposal would be to existing mortgage holders and banks. It is clear they would be non-trivial, and thus would need more study or expert consultation to consider, which is outside the scope of my duties as a random person on an internet forum.

Nevertheless, while I am not saying this proposal is perfect or well thought out, I do think that the objections to changing the status quo are based on thinking about the side-effects the current status quo has.

[ita]

Ok, I just did the numbers - obviously these are very rough,

For easy number's lets say 0$ down. So it's either a loan for 257k or 200k. Let's say my lender pre-approves me for 200k. I can no longer buy the same house under the new system.

There would be a run of house buying before it takes effect, and then nobody would ever buy a new house. Then it would turn into California, and you have to define what a "new" house is, so people would demolish 3 walls of the house to build a brand new house around that one wall.

Actually, sounds like a great way to end the sprawl. Let's do it!

I also did not previously consider, in part because I do not have a mortgage, what the ramifications of this proposal would be to existing mortgage holders and banks. It is clear they would be non-trivial, and thus would need more study or expert consultation to consider, which is outside the scope of my duties as a random person on an internet forum.

Nevertheless, while I am not saying this proposal is perfect or well thought out, I do think that the objections to changing the status quo are based on thinking about the side-effects the current status quo has.

If the consumption tax truly extinguished the need for property taxes, that would really only affect the cost of administration of existing mortgages, for the better. Property taxes are usually paid out of escrow and does not affect the mortgage principal or balance. I don't know how much it costs banks to pay escrow to pay property taxes, but I am sure there is a costs saving there, if minimal.

I agree with you totally, that this proposal may not realistically be adopted, but it sheds additionally light on the need for more broad base tax reformation, while senators and Nebraskans have been so fixed only on property tax relief.

[bigredmed1]

What is really needed is broad based spending reform. The roads and the university are both incredibly burdensome. The inability to get things off the general fund even though they could generate their own income is something that I have never understood. Lots of people |expletive| about the current gov, but this goes back to Exon, Rs and Ds both.

About time the legislature looks really hard at the reality of the NU system. Do we really need 3 campii in the time of online classes?

[Original]

If the consumption tax truly extinguished the need for property taxes, that would really only affect the cost of administration of existing mortgages, for the better. Property taxes are usually paid out of escrow and does not affect the mortgage principal or balance. I don't know how much it costs banks to pay escrow to pay property taxes, but I am sure there is a costs saving there, if minimal.

Again, I don't fully understand how the process works, but I would assume that the removal of those administrative costs would reduce cost for mortgage administration, and since ?I think? escrow is calculated into the amount of a monthly mortgage payment, that would alter the bank's calculation in what they would preapprove for.

All to say, again, not a mortgage or tax professional, but I think the realities of such a tax, especially around new home sales, does not automatically mean that large purchases will be considered prohibitively expensive, especially if such a tax is revenue neutral, just have some considerations to be looked at differently.

I agree with you totally, that this proposal may not realistically be adopted, but it sheds additionally light on the need for more broad base tax reformation, while senators and Nebraskans have been so fixed only on property tax relief.

In thinking about this more, I can think of some other side-effects with more questions about positives/negatives that would have to be considered -

- Removal of property tax would reduce carrying costs of unoccupied structures, which could lead to a temporary shortage of available commercial property, as developers of new properties adjust capitalization to account for the increase in initial outlay on taxes, while on the other hand, existing properties could sit vacant for longer as their run rate decreased.

- Removal of sales tax on used vehicle sales could not change the actual purchase price of the vehicles, as the used car dealers currently that their price umbrella means that their prices are listed lower to account for the tax that the purchasers will pay on top of the purchase price, they would likely attempt to capture some of that willingness to pay by raising their listed price, and the consumer thinks, "Oh, well, I'm paying less than I was with property taxes"

Lots of people |expletive| about the current gov, but this goes back to Exon, Rs and Ds both.

I'm too new to Nebraska to have a clue what you mean by this.

About time the legislature looks really hard at the reality of the NU system. Do we really need 3 campii in the time of online classes?

I ask this in a manner that could be seen as sarcastic, but is actually not - Have you taken any online classes as part of the core of a degree program? It is a fundamentally different experience, and I would argue that the NU system could actually benefit from going from 3 to 30 campuses, with a 1 year general ed program at the (greatly reduced) existing campuses, and then the other 27 or so each distinctly focused on the academic specialty a student is in, and greatly diminishing the amenities offered students as part of their 'college experience' (Don't offer dorms, cafeteria, etc), instead of just saying, "Go to online classes!" which way lies student isolation, disconnection, and madness.

[bigredmed1]

So the university system could condensed into specialized campii. UNK: Teaching. UNL: Ag and Engineering. UNO: Business and IT.

The point of this is that remote classes work for nursing, Physician Assistant, and other allied health programs. I simply reject the notion that our engineering and IT programs are such technological luddites that they can’t keep up with our nursing program or our PA program.

The idea of programs that are income generating not being allowed to be self sufficient just adds to the budget. I helped write the law and regulations for the newborn screening program. Given our stable birth rate,and the multi year contract for the testing lab with a fixed price for two years, it seems ridiculous that a cost accountant couldn’t determine the total cost of running the program and then divided that by the number of babies born to determine a cost per baby that would allow that program to not take general fund revenue and leave more for those DHHS programs that can’t do that.

Every damn time we bring this up, we get the governor’s policy cabinet blocking us because they think it’s a tax increase. Every year, that’s about 500k of general fund money. Yes that isn’t much, but the program has existed since 1997. Over 22 years, that turns into some real money.

[Original]

The point of this is that remote classes work for nursing, Physician Assistant, and other allied health programs. I simply reject the notion that our engineering and IT programs are such technological luddites that they can’t keep up with our nursing program or our PA program.

There is some difference in the degree of independent work expected in some engineering and IT disciplines than nursing and PA, and is part of a larger debate/discussion on the values of a liberal-arts education versus professional training/licensure, what people in what field really need university liberal arts education versus technical school, etc. (I would wonder, for example, if studies have been done on showing the relative value of nurses who have completed a 2 year Associates versus nurses who have completed a 4 year bachelor's degree). Some engineering disciplines greatly benefit from the liberal arts approach, some engineering disciplines have enough hands-on training needs (mechanical or civil engineering, for example) with expensive physical equipment that they simply can't be replaced by online classes.

But we are getting off track.

What points you are making about broad-based spending reform are very valid, but your comment about general fund also makes this into a question of where the tail is wagging the dog - maybe a move to a consumption tax could also be accompanied by changes in accounting practice that could more accurately assign revenues to spending in a manner less connected to a purely political process. I'm thinking, for example, of budget structures that would mandate that 35% of revenues collected in a certain market segment (roads, healthcare, etc) could be devoted to a general fund, while 65% of revenues collected in that segment must be devoted to maintenance of government services in said segment. (these percentages are wild numbers plucked randomly out of the air) Perhaps that would allow programs in certain areas to be paid for by taxes in those areas. The problem there is that such percentages would have to be dictated by market, and could create feedback loops that reinforce the growth of spending in a market where such spending is not desireable.

Maybe we could just all have fun and pass a constitutional amendment saying that the percentage of consumption tax will be determined for the next year every year on December 15th by using the ones and tens column from number of total yards that the Huskers gained from scrimmage as the significant decimal digits after the integer. (So if they gain 10256 yards, the brackets in my proposed consumption tax all have .56% added to them.

[bigredmed1]

Nope you are not getting it. There are two kinds of programs, The ones that cost money and have no way of getting it back (ie: Medicaid) and the ones that generate money and could generate enough to be self sufficient (ie: Newborn Screening Program and the Game and Parks program). A third is the program that generates money and for the long term social good of the state needs to stay at a discount (University/State Colleges).

We don't benefit as a society when programs that could generate enough money separate from the tax based general fund are tapping into the general fund. This money should be saved for the programs that we need to spend money on and will never get it back.

The University is a situation where the admin bloat of three campii and the med center is getting crazy expensive and we need to consider how we can cut this down. I maintain that one college of education with one dean and one admin staff could run the whole NU system with a balance of online and live classes with one core admin staff, and one set of graduation requirements. If we did this with Teaching and Business (and Engineering), we could save millions in bloat cost and still provide quality programs for our students. This is why we need to get radical in our thinking about the current NU structure and how modern technology can improve the cost factor and lower the tuition costs for our students and taxes for our citizens.

[Original]

I believe I absolutely do understand what you are saying about programs that could generate their own revenue (although it is unclear to me from the outside how a newborn health screen generates that revenue?) could be separated from a general fund. That was what I was trying to underscore in my comments about different departments being legistlatively obligated to allocate part of their comsumption tax proceeds back to the general fund. I also believe that I understand what you are saying about the current university system.

We don't benefit as a society when programs that could generate enough money separate from the tax based general fund are tapping into the general fund. This money should be saved for the programs that we need to spend money on and will never get it back.

We fundamentally agree here. My apologies for not stating this more clearly.

This is why we need to get radical in our thinking about the current NU structure and how modern technology can improve the cost factor and lower the tuition costs for our students and taxes for our citizens.

My thought about many smaller campuses providing fewer services would be that the university does many things which are not related to education or research, and by nature of a large monolithic system, power accretes via centralization and standardization. Most educational research that I am was aware of when I worked around education suggested that short term, there was no significant difference between online and 'traditional' classroom learning, but there had not been enough long-term studies done to really analyze the effects. My own personal observations are that technical knowledge can be transferred using online learning, but online classes regular seems to be a tool for universities to offer more classes, and are often isolating to the students and promote disconnection from in-person relationships. But this also cuts to the core of what college should be and again, that is far off the original topic.

[Omahacritic]

Interesting stuff, though you guys seemed to have gotten bogged down.

Regressive nature of Consumption tax? Not necessarily. The top earners tend to spend more, and foolishly, spend on more expensive cars, etc...

For certain, the Nebraska Tax system sucks. Especially for retirees. Myself? I’m deferring all my pensions and such because of Nebraska income taxes. Nebraska is one of the few states that taxes Social Security from first dollar. So, that too will be deferred. Even everybody’s top punching bag, California, does not tax Social Security.

Real Estate taxes? No thanks. Paying property taxes indirectly ( Rent) is a better investment.

[Uffda]

For certain, the Nebraska Tax system sucks. Especially for retirees. Myself? I’m deferring all my pensions and such because of Nebraska income taxes. Nebraska is one of the few states that taxes Social Security from first dollar. So, that too will be deferred. Even everybody’s top punching bag, California, does not tax Social Security.

One of the reasons I moved to FL and waited to make some financial changes until I got here.

[ita]

For certain, the Nebraska Tax system sucks. Especially for retirees. Myself? I’m deferring all my pensions and such because of Nebraska income taxes. Nebraska is one of the few states that taxes Social Security from first dollar. So, that too will be deferred. Even everybody’s top punching bag, California, does not tax Social Security.

One of the reasons I moved to FL and waited to make some financial changes until I got here.

Elimination of the income tax, particularly for retirees, is one of the reasons I would even consider advocating for a consumption tax. I don't think we need to take the ultimate step to eliminate all SALT taxes, but even if we kept property taxes, eliminate personal income taxes and 'shifted' (sorry for using this dreaded word) taxes and the state's revenue sources by increasing the sales tax or just making it broader to include food and services, I think we would see more people staying and coming to the State. I know it's not as easy as that, but there needs to be a change if the State is seriously wanting to step up its game in retaining and recruiting talent and workforce, and not just millennials and Gen Z, or whatever the next group of workers is called.

[Omahacritic]

A retiree can sell a house here, move to a income tax free state and buy a house (establish residency) and still have enough money to rent an apartment in Omaha for visiting grandchildren 170 days per year.

[Uffda]

A retiree can sell a house here, move to a income tax free state and buy a house (establish residency) and still have enough money to rent an apartment in Omaha for visiting grandchildren 170 days per year.

Eh.... I sold my Omaha house, moved to income tax free state, bought a house, get a homestead Deduction and live 15 min from the grandkids.....not sure why I would want to rent an apt in Omaha.

I also know a couple more retirement friends that will be moving out of NE in the next couple of months for the tax reason.

[Omahacritic]

A retiree can sell a house here, move to a income tax free state and buy a house (establish residency) and still have enough money to rent an apartment in Omaha for visiting grandchildren 170 days per year.

Eh.... I sold my Omaha house, moved to income tax free state, bought a house, get a homestead Deduction and live 15 min from the grandkids.....not sure why I would want to rent an apt in Omaha.

I also know a couple more retirement friends that will be moving out of NE in the next couple of months for the tax reason.

Only way to stay close to family and lower my income taxes is to live in Iowa. And well, it’s Iowa. Nuff said.

[ita]

I know we haven't touched this topic in a while, but I came across an article about Nebraska's tax system and why we should broaden and stream line it.

Tax Modernization: A Key to Economic Recovery and Growth in Nebraska

Key Findings
An ideal tax code is one that is simple, transparent, neutral, and stable, but many states, including Nebraska, have certain tax provisions that depart from these principles of sound tax policy.

The COVID-19 pandemic and associated economic fallout have shed light on structural deficiencies in states’ tax codes, including narrow-based sales taxes and taxes that penalize in-state investment.

States with modern, well-structured tax codes are expected to recover better from the current recession than states with outdated, poorly structured tax codes.

To promote short-term economic recovery and long-term economic growth, Nebraska policymakers ought to reexamine the uncompetitive and burdensome provisions that currently exist in Nebraska’s tax code and prioritize those areas for reform.

Any tax reform plan that is developed in Nebraska ought to prioritize lower corporate and individual income tax rates, more competitive treatment of in-state investment, and reduced property tax burdens—reforms that can be paid for in part by modernization of the sales tax base.

[Omahacritic]

My personal story.

I sold my house. Property taxes are so high it made no sense. Inflation of Market Value really doesn’t exceed the pace of tax increases.

Far better to be Debt Free and free to move ... because ...

Income taxes ... A bit high. But worse, Nebraska is one of the few states that tax Social Security. So when retirement rolls around, it’s adios ... headed out.

[ita]

My personal story.

I sold my house. Property taxes are so high it made no sense. Inflation of Market Value really doesn’t exceed the pace of tax increases.

Far better to be Debt Free and free to move ... because ...

Income taxes ... A bit high. But worse, Nebraska is one of the few states that tax Social Security. So when retirement rolls around, it’s adios ... headed out.

I don't think your experience is atypical, unfortunately, across varied age groups. We need reform.

[Dundeemaha]

What situation are people in that property taxes are a significant part of their housing cost? Have you paid off your mortgage? I have a 2.625% 15yr loan and pay more on interest than property taxes in a year, let alone principal.

If you've paid off your mortgage, and live in a $200k house you're talking what, 4k/yr in property taxes? 8k for $400k house? So if you're going for housing being < 30% of your expenses is your income under $13k?

[NUub]

Retirees with house paid off.

[GetUrban]

True, Property Taxes are a lot like a house payment that never goes away, especially if it is a high-value property. On the other hand, shouldn’t you expect to help pay for the infrastructure and public amenities that you use and enjoy? I suppose we could only have toll roads, streets, sewers, parks, schools, etc. and pay as you go, and see how convenient that would be.

[NUub]

True, Property Taxes are a lot like a house payment that never goes away, especially if it is a high-value property. On the other hand, shouldn’t you expect to help pay for the infrastructure and public amenities that you use and enjoy? I suppose we could only have toll roads, streets, sewers, parks, schools, etc. and pay as you go, and see how convenient that would be.

Toll roads a definite NO though they are supposedly looking into that for Lincoln's beltway. As for sewers-- I know I get to pay a lot for that every month on my MUD bill!

[GrandpaaSmucker]

What situation are people in that property taxes are a significant part of their housing cost? Have you paid off your mortgage? I have a 2.625% 15yr loan and pay more on interest than property taxes in a year, let alone principal.

If you've paid off your mortgage, and live in a $200k house you're talking what, 4k/yr in property taxes? 8k for $400k house? So if you're going for housing being < 30% of your expenses is your income under $13k?

Anyone that is worried about property taxes and the insignificant $500 of state income tax on their Social Security earnings better not get any bright ideas about selling their house and moving into an apartment. That plan is guaranteed to cost them by far more then property taxes.

[GetUrban]

True, Property Taxes are a lot like a house payment that never goes away, especially if it is a high-value property. On the other hand, shouldn’t you expect to help pay for the infrastructure and public amenities that you use and enjoy? I suppose we could only have toll roads, streets, sewers, parks, schools, etc. and pay as you go, and see how convenient that would be.

Toll roads a definite NO though they are supposedly looking into that for Lincoln's beltway. As for sewers-- I know I get to pay a lot for that every month on my MUD bill!

I was thinking more about the Storm sewers that carry storm water away and the flood control features tied into those systems. But you’re right about paying for MUD water and sanitary service every month. I seem to remember the sewer charge is prorated to your water use, but I could be wrong.

[S.O.Boy]

I seem to remember the sewer charge is prorated to your water use, but I could be wrong.

Your sewer bill is based on water usage for December - March, I believe.

[Omahacritic]

True, Property Taxes are a lot like a house payment that never goes away, especially if it is a high-value property. On the other hand, shouldn’t you expect to help pay for the infrastructure and public amenities that you use and enjoy? I suppose we could only have toll roads, streets, sewers, parks, schools, etc. and pay as you go, and see how convenient that would be.

I think you miss the overall point. It isn’t about reluctance to pay for infrastructure and the lot. It’s really a matter of overall tax burden.

Nebraska is one of the worst places for taxes. It rivals California. That’s bad!

Rent or buy is unique to each person. Renters don’t really avoid a property tax burden, they assume a shift from a landlord in the form of rent.

So is the Consumption Tax a better idea? Listen to the Economists.

[Dundeemaha]

Retirees with house paid off.

I think in Douglas County if you're over 65, make less than 30k in retirement and your house is under 300k you pay nothing in property taxes due to the homestead act.

[GetUrban]

True, Property Taxes are a lot like a house payment that never goes away, especially if it is a high-value property. On the other hand, shouldn’t you expect to help pay for the infrastructure and public amenities that you use and enjoy? I suppose we could only have toll roads, streets, sewers, parks, schools, etc. and pay as you go, and see how convenient that would be.

I think you miss the overall point. It isn’t about reluctance to pay for infrastructure and the lot. It’s really a matter of overall tax burden.

Nebraska is one of the worst places for taxes. It rivals California. That’s bad!

Rent or buy is unique to each person. Renters don’t really avoid a property tax burden, they assume a shift from a landlord in the form of rent.

So is the Consumption Tax a better idea? Listen to the Economists.

No, I do understand that you are still paying a share of the landlord’s property tax through your rent. But the amount you pay is likely lower than It would be on a larger house on it’s own piece of property, depending on how much profit your landlord is making off of you and how large your apartment is.

I’m unconvinced a consumption tax is a better alternative. It shifts more of the tax burden to those those less able to pay, and discourages consumption in general, hurting the economy. There would also be a constant on-going argument about what items or services would be exempt. But, there is also a constant argument about what expenses are deductible from income taxes too.

[Omahacritic]

Dude, of course it’s all relative.

Using your argument, a person who can afford a $600,000 house but lives in a $150,000 home is choosing to avoid taxes.

As a landlord, I factor in interest, repairs reserve, expenses and taxes ... then add a profit margin.

Consumption Taxes is a big debate. Regressive ... yes. But if other taxes are reduced is there a net savings? But to say it discourages consumption... I don’t think so. Again, depends on if the overall “keep” is positive.
I haven’t read much of the discussion as pertains specifically to Nebraska.

[GetUrban]

Using your argument, a person who can afford a $600,000 house but lives in a $150,000 home is choosing to avoid taxes.

It wasn’t an argument. Many people do choose to down-size at retirement age if they no longer need the space and don’t want to continue paying the taxes on a higher-valued property. To be honest, from your earlier post, I thought that’s what you had done. Not looking to get into another pi$$ing match with you, so I’ll respectfully bow-out from the topic for now.