Nebraska’s system of taxation for residential drinking water is broken, outdated and poor public policy.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 LB242, which I introduced during the 2019 Legislature.
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 also have 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 ensure appropriate water quality for our state’s groundwater and river basins is crucial for the health, sanitation and welfare of Nebraskans. However, state and federal funds rarely are used for water and sewer projects.
LB242 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 Communities statewide need to re-invest in outdated water and sewer systems.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 re-examined by the full Legislature.