WASHINGTON, D.C. 07/26/2024 - Under the guidance of Governor Jim Pillen, the new property tax proposal in front of Nebraska’s state legislature (LB 1) aims to provide property tax relief by increasing excise taxes on a list of 100 everyday goods and services, including a 287% increase on distilled spirits.
Under the proposal, the tax on distilled spirits would increase from $3.75 per gallon to $14.50 per gallon, the second highest tax rate in the country. As a result, the cost of Nebraskans’ favorite adult beverages would increase by between $3.50 to $7.00 per bottle, depending on the size.
According to the Governor’s office, taxes on distilled spirits, consumable hemp, cigarettes, vaping, and keno are expected to raise over $216 million in the first year.
LB 1 affects more than 9,000 licensed spirits retailers who rely on consumers purchasing alcoholic beverages to survive. In the wake of inflationary measures at bars and restaurants (+3.2% in the Midwest region), Nebraskans may be less likely to continue spending on eating out and enjoying an adult beverage should the plan pass. This could impact the profit margins of Nebraska’s family-owned restaurants, bars, nightclubs, and mom-and-pop liquor stores.
Recent economic analysis by John Dunhum and Associates suggests that the increased tax burden on distilled spirits alone could result in more than 3,000 Nebraskans losing their jobs and a potential loss of $141 million in wages.
The proposal does not address the root cause of high property taxes in Nebraska: the state’s reliance on property taxes to fund public education. Instead of providing a sustainable solution, the plan shifts the burden of funding Nebraska’s public schools from property tax revenue to the income generated from these taxed goods. If Nebraskans cannot afford higher-priced commodities, it could lead to decreased school funding for their local district. Governor Pillen has confirmed that school boards could raise local property taxes to adjust, potentially resulting in raised sales taxes and negligible decreases in property taxes for residents.
LB 1 aims to provide property tax relief but shifts the burden onto consumers, particularly those who purchase wine and spirits, while benefiting land-owning individuals. Lawmakers need to work towards a more equitable solution that addresses the root causes of Nebraska’s high property taxes without disproportionately impacting ordinary citizens.
WSWA’s Vice President of State Affairs Chelsea Crucitti commented “While LB 1 claims to reduce taxes, in reality it's a redistribution, and a harmful one at that. Crucitti added that “the bill as it currently reads endangers thousands of Nebraskan jobs across several industries, raises taxes on virtually all Nebraskans and leaves locality’s revenue base in an extremely precarious spot.”