they are generally workable because each state mainly has a combination of income, sales, and property taxes. This relative uniformity helps the national economy function with some degree of efficiency. The wholesale and complete swap of Nebraska’s income, sales, and property tax system for an entirely new, unique, broad, and vague EPIC Option is highly likely to wreak havoc on the lives of Nebraska’s citizens and companies (and cause Nebraska employers to just leave or not come). Who Pays and on What Event. Section 15 says the state is to “impose” the stated tax “on” the stated goods and services, but it doesn’t say who it is to be imposed on or what event (such as a sale or use or mere ownership) it is to be imposed on (unless one can conclude these answers are to be determined by the nature of the “retail consumption tax” or the “excise tax” itself). What Is “New.” Section 15 requires the taxation of all “new” goods and services. “New” is not defined. Generally, the word “new” refers to something recently made, grown, or built, or recently found, invented, or discovered. Just this concept alone will generate years of litigation to address, for example, when something is, isn’t, or no longer is new. An illustration would be an ongoing software license or real estate rental (which are either a good or service, “all” of which must be taxed if “new”). Those in effect at the effective date of EPIC would not be “new,” so they should not be taxed. Likewise, the ongoing renewal of these would arguably not be “new” goods or services. So, this means much of the existing tax base would either disappear or never come into existence. This likely impacts the EPIC fiscal (and tax rate) assumptions. It also means a challenge under the U.S. Constitution Equal Protection Clause would be likely and possibly successful. (See cases cited above.) Free Goods and Services. EPIC does not distinguish between services that impose a price or which are free. Instead, “all” “new” services must be taxed. The Legislature is not given the prerogative to tax some and not others. Typically, all tax laws will express the base on which the tax rate is to be applied and will also express the unit of measuring the base (i.e., the price paid for a sales tax). For those goods and services that are “free” (e.g., Google searches and various government services or charitable goods), the present Nebraska sales tax system would normally not impose a tax. However, under EPIC, Nebraska “shall impose” a tax on “all.” So, to avoid such a nontax situation being considered a prohibited “exemption,” the state of Nebraska will apparently need to come up with a system to determine the tax base (i.e., some artificial deemed price or value) on which the tax rate will now be imposed on this vast array of free services. The History of Taxes The EPIC sponsors chose their name well. We believe EPIC will become a disaster of truly epic proportions. In Charles Adams’ book “For Good and Evil: The Impact of Taxes on the Course of Civilization,” the author offers several historical lessons on government taxation and spending. Near the end of his book, he leaves us with this observation: “Taxes have often been the fuse that ignites the powder of human discontent, but once the explosion occurs, we seldom take notice of the fuse. Even with the civilizations lost from history, of which we know so little—if their silent temples and ruins could speak, what tax tales would they tell? The ancient Mayan civilization, according to one scholar, ended when taxpaying citizens simply disappeared into the jungle instead of paying taxes.” The EPIC Option Destiny The Tax Man in Popeye continued throughout the movie to impose various taxes on all kinds of things. He imposed a “bathtub tax,” a “refrigerator tax,” and a “household and appurtenances maintenance tax” on a family totaling $121,212.12. He imposed a “going-to-anillegal-sporting-event tax” of 62 cents, an “up-to-no-good tax” of 50 cents, a “hamburger tax” of 5 cents, an “unlicensed-baby tax” of 89 cents, and an “embarrassing-the-tax-man tax” of one sunflower. Ultimately, Popeye had had enough. When the Tax Man sought to impose on Popeye a “movin’ in tax” of $5.25 and a “movin’ out tax” of $4.25, Popeye pushed the Tax Man down a long loading shoot into the water, prompting a celebration by the townspeople. The debate of the EPIC Option can be expected to become even more intense over the next few months, both within the Legislature (as state senators look to address various tax proposals) as well as in public forums, meeting places, and cafés across Nebraska. Let’s hope Nebraskans and our elected officials choose the right course in these major tax policy debates we now face. Let’s not become Sweethaven and let’s not prompt a response like that of the Mayans. Nick Niemann and Matt Ottemann are partners with McGrath North Law Firm. As state and local tax and incentives attorneys, they collaborate with CPAs to help clients and companies evaluate, defend, and resolve tax matters and obtain various business expansion incentives. For more information, go to www.NebraskaStateTax.com and www.NebraskaIncentives.com. For a copy of their full publication, “The Anatomy of Resolving State Tax Matters” or their “Nebraska Business Expansion Decision Guide,” please visit their websites or contact Niemann or Ottemann at (402) 341-3070 or at nniemann@mcgrathnorth.com or mottemann@mcgrathnorth.com. CONTINUED FROM PAGE 21 22 Nebraska CPA
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