How in the world can a single tax replace a "three legged stool" of taxes? The answer lies in the Principles of Taxation, specifically that "Broad tax bases allow rates to be kept low, which in turn encourages voluntary compliance." In Nebraska's case that broad base can eliminate the need to have taxes levied directly on property you already own (property, state income, and inheritance taxes) while keeping the rate reasonably low. Our plan more than doubles the existing sales tax base. How do we do that? By eliminating current sales tax exemptions and increasing the incentive to comply, as documented with the Bar Chart below, specifically in the Fourth Bar citing the Beacon Hill dynamic study.
How can we say we increase the incentive to comply? Lower rates mean that the incentive to evade compliance is reduced. It simply isn't worth it in most cases to take measures not to comply if the rate is low enough. Did we make that up? No. Please read on:
In depth, "If states opted for one form of taxation, say a retail sales tax [or consumption tax], then instituted a broad base so that all consumption goods and services were subject to the tax while repealing other taxes, the state could raise the revenue necessary to fund legitimate government functions simply and efficiently, with the least cost of collection and lowest burden on taxpayers. More importantly, every resident of the state would have a vested interest in keeping taxes low because they all would be taxpayers."
— From Principle #8 in the "Ten Principles of Federal Tax Policy", written by Daniel J. Pilla for The Heartland Institute.
Currently three types of taxes feed into our state and local coffers. Businesses pay two of these types of taxes, too — Property and Income Taxes. Businesses pass those costs to their customers and clients. This happens at every level of the suipply chain until those costs are paid at the retail cash register. When those costs are paid there, we call them "hidden taxes". You pay those taxes without realizing they are taxes.
Sinces businesses no longer pay Property or state Income taxes, you no longer foot the bill for those taxes unknowingly at the retail cash register. The higher nominal rate does not raise the cost of your goods or services one penny; it just makes those hidden taxes visible.
All numbers stated here are projected to January 1, 2026, the date EPIC Option takes effect. Currently Nebraska raises $11.7B represented by Bar A in the chart. The sales tax base in this system is $60B (Bar B). By removing all exemptions except groceries, our plan adds $75B to the base (Bar C). Because shoppers have more money in their packets, their buying habits change, adding another $27B to the base. These three base components add to $162B, Dividing $11.7B by $162B yields a consumpiton tax rate of under 7.5%.
The key is eliminating exemptions. Today, Nebraska carves out more exemptions ($75B) at the retail cash register than the value of goods and services it taxes ($30B). Giving breaks to special interests, as good as they may sound, makes everyone pay more — especially those having low and moderate incomes. Eliminating exemptions spreads the burden making everyone's share light.