Legislative proposal would end sales taxes on residential utilities in Nebraska

By Brian Beach , Reporter Nebraska Public Media

31 de Enero de 2025 a las 17:30 ·

Sen. Rick Holdcroft introduces LB117 — Sen. Rick Holdcroft introduces his bill, LB117, to the Revenue Committee Friday afternoon. (Photo by Brian Beach/Nebraska Public Media News)

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Nebraskans would no longer have their utilities taxed by the state under a bill heard in the Legislature’s Revenue Committee Friday afternoon.

Sen. Rick Holdcroft’s bill, LB117, would get rid of state sales taxes on electricity, natural gas, propane and sewer service for residential use. He said he introduced the bill because utilities are a necessity, not a luxury, and therefore shouldn't be subject to taxation. Nebraska currently has sales tax exemptions on fuel used for manufacturing and other industries.

"You might ask yourself, 'Why does a business get a utility exemption in Nebraska, but a family does not?'" Holdcroft said.

Holdcroft said 44 other states, including Nebraska's neighbors of South Dakota, Iowa, Kansas, Missouri and Colorado, have utility sales tax exemptions.

Revenue Committee member Sen. Mike Jacobson expressed skepticism toward the proposal.

"I'll be real honest, I'm focused on property tax relief, and I think that's what people are going to see the most," he said. "If this were a big deal to consumers, we'd have heard from them before now. I think most consumers don't even know that they're being charged the sales tax on their electricity."

Jacobson said now isn't the right time to be pursuing additional tax cuts as the state faces a $432 million budget shortfall.

"This is more of a timing issue, and it needs to be coupled with, how do we do revenue replacement, but not just replacement, but generate significantly more revenue?" he said.

It was estimated the tax exemptions would result in a loss of around $140 million in annual state revenue.

Former Sen. Lou Ann Linehan, who chaired the Revenue Committee between 2019 and 2024, testified in favor of the bill. Linehan said she hadn't realized utilities are taxed until she missed a payment during one of her first months in the Legislature.

"When it came the next month, I noticed it was a lot. It was double and I was like, what's the deal? We pay sales tax on utilities? It's the only reason I knew," she said.

During her time in the Legislature, Linehan was a staunch proponent of expanding the sales tax base through eliminating exemptions on junk food.

"I think we should tax pop and candy," she said. "I think we should tax pool cleaning. I think we should tax lawn services. But if we're not taxing any of those things, we certainly shouldn't be taxing utilities. It's just not okay."

John Lindsay, a lobbyist with Black Hills Energy, also spoke in support of Holdcroft's bill.

"The core issue is, are utilities a necessity or a luxury? And I don't think anybody who's survived a Nebraska winter would call utilities a luxury," he said.

Lindsay agreed with Jacobson's point that Nebraskans care most about property tax statements, but said the method of payment keeps people from realizing how much they are actually paying.

"I think if they had to physically write out a check to pay sales tax on energy and were notified of that every year, I think they might have a little different position," he said.

The committee received 11 written testimonies in favor of the bill, seven against and one neutral.