Paul Hammel
LINCOLN — Nebraska’s broadcasters are mounting an 11th-hour advertising blitz in hopes of overturning a proposed new tax on “digital ads” by Gov. Jim Pillen to finance his property tax relief plan.
The ads, which started running over the weekend on Nebraska radio and television stations, say the 7.5% excise tax on ads that run on some state broadcasting outlets, as well as on social media giants Facebook and Google, would “destroy many small businesses,” by reducing sales and forcing layoffs.
The ads urge listeners to contact their senator: “Nebraska needs to create jobs, not tax businesses to death.”
Legislative Bill 388, Pillen’s tax plan, comes up for final approval on Thursday — the final day of the 2024 session — and there’s little hope of a last-minute amendment, according to Jim Timm, president and executive director of the Nebraska Broadcasters Association.
But Timm said state legislators could, at the last second, defeat LB 388 and leave the tax debate for later, during a much-threatened special session this summer.
“I’d like to think maybe there’s some room for that,” Timm said. “We’re hoping to have some more time to negotiate something that wouldn’t be so harmful.”
The tax on digital ads applies only to companies with “combined gross advertising revenue” of more than $1 billion, which would aim squarely at platforms like Google and Facebook that run advertising.
Tax hits Nebraska stations
But Timm said the “$1 billion” standard also applies to a handful of Nebraska broadcasting outlets that are owned by large, national chains. Think Omaha’s KFAB, which is owned by iHeart Radio Network, or Gray Television, which owns stations in 114 markets, including Omaha, Lincoln, Hastings, North Platte and Scottsbluff.
Even some stations that aren’t part of a national chain sell digital products that are purchased from Google and Facebook, he said, which means an added 7.5% cost for businesses to market their products.
In a recent commentary in the Examiner, the co-founder of the popular eCreamery ice cream parlor in Omaha said that 90% of its revenue comes from online sales.
“Most people don’t know it, but it’s our online business that keeps our neighborhood shop doors open,” wrote Abby Jordan, the co-owner.
The tax on digital ads was one of several options laid out by the Pillen administration to raise $1 billion in new state revenue to allow a corresponding decrease in local property taxes. The goal of the tax shift was to reduce property taxes by another 20%, which combined with past tax laws, meant a total cut of 40%.
The 7.5% excise tax on such ads was projected to bring in about $54 million in new revenue. It was a major portion of an effort to broaden the sales tax base to include new taxes on pop and candy, ag repair parts and business legal services, as well as increased taxes on cigarettes, vaping products and CBD gummies.
But in last-minute amendments last week, several of the new taxes were cut out of LB 388 or severely reduced, such as the proposed increase in taxes on a pack of cigarettes which fell from the original $2-a-pack increase to 36 cents.
Bill amended, not a 22% reduction
The end result is that LB 388 is projected to cut local property taxes by 22%, not 40%, fueling speculation, and outright threats by the governor, of a special session to finish the job this summer.
The tax on digital ads remained in the bill, which Timm said ran contrary to “an understanding” that it would be removed, as had print advertising sold by the state’s newspapers.
“We were shocked and disappointed that we were not cut out of it,” Timm said.
State Sen. Lou Ann Linehan of Elkhorn, the main sponsor of LB 388 on behalf of the governor, said she was unaware of any deals. “No one talked to me,” Linehan said, though she admitted that “a lot was going on” last week concerning the proposal.
However, Thurston Sen. Joni Albrecht, who introduced the digital ad bill on behalf of Pillen, said she was aware of an effort to remove the tax from Nebraska broadcasters, which she had been advised by Nebraska Attorney General Mike Hilgers would have made the bill unconstitutional.
During debate a week ago, Dunbar Sen. Julie Slama introduced an amendment to remove digital ads entirely from LB 388.
Slama, a lawyer, argued that the only other state that had tried to tax digital ads, Maryland, has been tied up in court by multiple lawsuits and that it made no sense for Nebraska to pass a similar bill that was constitutionally suspect.
Not a cent will be collected
“I don’t think we’ll collect any dollars from this tax before a (court) injunction is filed,” Slama told fellow lawmakers last week.
But her amendment fell short, on a 18-18 vote, seven short of the “yes” votes needed.
Later, LB 388 advanced to final-round debate on a 28-14 vote, which, while enough to pass, is five votes short of what would be needed to shut off a filibuster.
Albrecht, during floor debate last week, argued that Nebraska’s digital tax was different from Maryland’s and that the attorney general had advised her that it was constitutional — as long as an amendment to exempt Nebraska digital advertisers wasn’t adopted.
She said that a tax on digital ads was among a list of proposed tax changes handed out by the Pillen administration and that she unaware it might impact some Nebraska outlets, such as KFAB.
The governor was seeking $1 billion in new revenue to lower property taxes, Albrecht said, and the money has to come from somewhere.
“Everyone says everything’s going to hurt their business,” she said. “You can’t win.”