Nebraska’s system of taxation for residential drinking water is broken, outdated, and poor public policy.
In most states, residential drinking water is not taxed. In Nebraska, your drinking water is taxed twice: First, through your water rates, as residents pay sales tax on almost all aspects of drinking water infrastructure. Second, residents pay sales tax on their overall water bill.
The double taxation of residential drinking water is especially indefensible when compared to bottled drinking water, which is exempt from sales tax. This policy of excessive taxation is regressive, and is disproportionately harming households on fixed incomes. It also hinders the economic development of our industrial and agricultural manufacturers. Fixing this broken system is at the heart of Legislative Bill 242, which I introduced during this year’s legislative session.
This has been a difficult year for Nebraska’s infrastructure. Traveling the state, one can see progress as we use local, state and federal funds to repair and replace our roads and bridges that were damaged or destroyed by spring and summer flooding. These weather events have also brought to light Nebraska’s ongoing struggle to finance drinking water and sewer infrastructure repair and replacement.
Delivering clean water and managing waste water to assure appropriate water quality for our state’s groundwater and river basins is crucial for the health, sanitation and welfare of Nebraska. However, state and federal funds are rarely used for water and sewer projects.
LB 242 would return a portion of our state’s excessive sales taxes on water and sewer services back to the communities that these revenues were derived from, to help offset escalating water and sewer bills. Communities statewide need to re-invest in outdated water and sewer systems. It is time for Nebraska’s water tax policy to be reexamined by the full Legislature.
By Brett Lindstrom, District 18 state legislator