Legislative Testimony for LB445: Require a city of the metropolitan class to provide an annual budget report relating to use of any occupation tax levied and collected

Good afternoon Chairman Wayne and members of the Urban Affairs Committee.

The Platte Institute supports Sen. McDonnell’s efforts to provide additional information on the use of occupation taxes. This is a common-sense bill. If we could make any criticism of LB445, it would simply be that the bill should ask even more municipalities for the same information. 

Calls for local government transparency are sometimes taken as a personal affront to policymakers. There’s always the sense that if you’re asking for more reporting, you must think someone is hiding something improper. We don’t see government financial transparency that way at the Platte Institute.

We think that making this data available and understandable to anyone can help the public and policymakers have the information they need to make better decisions about local priorities.
Taxes are confusing for most people, and occupation taxes are particularly poorly understood. In legal theory, these taxes are imposed on businesses, but in practice, the costs are passed onto consumers, and many taxpayers want more information about how these revenues are used.

This is understandable, since occupation taxes are an add-on to all the other significant taxes we pay in Nebraska. Once added to state and local sales tax and other charges, the resulting tax rates paid on many purchases subject to occupation tax in Nebraska can be among the country’s highest.

Combined cell phone taxes, which include local occupation tax, are fourth highest in Nebraska according to the Tax Foundation. Restaurant and other occupation taxes can result in Nebraskans paying over ten percent tax on a meal in some of our communities. In 2012, the 9.5 percent combined tax paid in Omaha at large was ranked the nation’s sixth highest among the country’s fifty largest cities.

Nebraskans deserve to know in plain language how these taxes are being used.

It’s especially important that taxpayers and policymakers have this data because occupation taxes are increasingly being used for special projects that benefit private developers at taxpayer expense. In many cases, the occupation tax is just one of the state or local revenue sources being accessed for the development.  

State policymakers also need this information to help inform whether the Legislature should change policies relating to how occupation taxes are levied.

Thank you for the opportunity to testify today and I would be happy to answer any questions the committee may have.  

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