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Nebraska’s unicameral Legislature is currently debating a proposal to raise the state’s sales tax by one percent. Among the bill’s provisions are new taxes on candy and soda, as well as a 100% tax on hemp and CBD products. A vote is expected on whether to advance the bill to a second round of debate. If passed, this bill would make Nebraska’s sales tax rate one of the highest in the country, at 6.5% on every taxable dollar spent. In addition to the sales tax increase, the bill also aims to expand the tax to include more services and advertising costs.

Supporters of the bill argue that it does not unfairly burden lower income populations, as grocery food items would still be exempt from sales tax in Nebraska. They note that the bill is targeted at higher income residents with more disposable income, rather than those living in poverty. However, Sen. Lou Ann Linehan has struggled to find enough votes to advance the bill due to opposition from critics on both ends of the political spectrum. Left-leaning lawmakers argue that a sales tax disproportionately impacts lower income populations, while far-right conservative lawmakers oppose any increase in taxes.

Critics of the bill, including the taxation watchdog group Open Sky Policy Institute, have raised concerns about the impact of the sales tax increase on Nebraskans. They point out that while higher income residents may pay less as a result of the changes, the sales tax increase will on average be greater than any property tax cut for 8 in 10 Nebraskans. The bill is seen as a key component of Republican Gov. Jim Pillen’s plan to address soaring property taxes in the state, which reached $5.3 billion in 2023 due to rising housing prices. Pillen has warned that some residents, particularly the elderly on fixed incomes, are being priced out of their homes due to rising property taxes.

If the bill is not passed before the end of the current legislative session on April 18, Pillen has said he will call lawmakers back for a special session to address property tax relief efforts. The bill, if passed, would not only increase the state’s sales tax rate but also add new taxes to candies, sodas, hemp, and CBD products. While supporters argue that the bill targets higher income residents, critics on both sides of the political spectrum have raised concerns about the impact on lower income populations. The discussion around the bill reflects larger debates about tax policy and property tax relief in Nebraska.

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