Nebraska is on the brink of a radical tax overhaul. The proposed EPIC Option, if passed, would eliminate all income, property, and inheritance taxes, replacing them with a statewide consumption tax of 7.5 percent. However, the Tax Foundation suggests that the actual required rate would be a staggering 21.6 percent or more. This could lead to substantial cross-border shopping, with Nebraskans close to a border with a lower sales tax state availing themselves of the lower rates, leaving taxpayers in the interior of the state to bear the brunt of the newly established consumption tax.
The EPIC Option, which stands for Eliminate Property, Income (and Inheritance), and Corporate Taxes, is an ambitious proposal. However, the anticipated economic benefits of this tax overhaul are unlikely to materialize under such a high consumption tax rate. Policymakers seeking to constrain property taxes have better-targeted ways to achieve these aims.
The EPIC Option does not prevent local governments from enacting consumption taxes, meaning the total rate could be much higher than advertised. This could result in an unprecedented fiscal crisis, with Nebraska state and local governments losing roughly two-thirds of their existing revenues.
While the EPIC Option is an exciting proposal, its promise withers under further analysis. The world of workable tax policy is rarely so swashbuckling. The EPIC Option is exciting, but its promise withers under further analysis. It is appropriate for policymakers to seek solutions, but things that seem too good to be true often are.
For more detailed analysis, visit Tax Foundation.