AARP opposes shifting tax burden to sales tax, supports more reliance on income tax

 

AARP supports tax reform that treats all Nebraska residents fairly and ensures adequate revenue to support government services.

Mark Intermill, advocacy director for AARP Nebraska, testified today on LR 155 before the Tax Modernization Committee, outlining AARP’s principles on taxation.

“We must assure that the burden of state and local taxation doesn’t fall disproportionately on those Nebraska households that can least afford it,” he said. “Since income tax is the progressive form of taxation, more equal distribution of the tax burden between income levels will require greater reliance on the income tax.”

Intermill urged lawmakers to develop a tax structure that will maintain a reasonable level of revenue growth by tracking growth in the state’s economy.

“While we must identify and eliminate inefficient state and local government services, we need to be careful about being overzealous in cutting state and local spending and thereby undermining the effectiveness of government services and in some cases incurring larger future costs than are necessary,” he said.

Further, AARP believes there is a need for property tax relief, “but not by replacing a regressive tax with a more regressive tax.” AARP supports broadening the sales tax base if sales tax rates are adjusted to make the policy change revenue neutral.

Intermill said exemptions should be limited to business inputs and goods and services that are essential to meeting basic human needs such as the existing sales tax exemption on food, prescription drugs and health care costs.  AARP also supports easing sales tax on home energy expenses.

However, Intermill noted that he hears the greatest concern about residential property taxes from older Nebraskans.  “AARP strongly supports the existing Homestead Exemption.  We support the establishment of a circuit breaker for residential property, as long as the existing Homestead Exemption is retained and taxpayers who are eligible for both are given the choice of which one they use,” he said.

In addition, Intermill said that AARP supports adjusting state taxation of Social Security and pension benefits so that it applies to the income levels that were originally taxed.

“The federal government established taxation of Social Security benefits for people above a certain income level, but it didn’t include an inflation adjustment.  So every year more people with lower incomes have a portion of their benefits taxed,” he said.  “We support the option that the committee included to exempt Social Security benefits from income taxation for married couples with incomes below $62,000 and single persons with incomes below $57,000.”