Photo by George Lauby
Gov. Dave Heineman
Gov. Dave Heineman's much ballyhooed plan to eliminate Nebraska's income taxes was killed in the Legislature, replaced by a long-term study.
Heineman's plans died after more than 12 hours of testimony Feb. 6-7 on his two bills that would have eliminated all or part of the state's income taxes and replaced the income with more sales taxes.
Most of the testimony was opposed to the Governor's ideas.
Officials complained about having to charge sales tax on such things as medical equipment, college dormitory rooms, fuel and farm equipment.
Heineman himself asked the Legislature's Revenue Committee to kill the bills, saying he wanted to heed concerns that the discussion was moving too quickly.
Now, the revenue committee is strongly considering a Tax Modernization Commission to review and recommend updates to Nebraska’s tax code.
The Legislature's Executive Board heard testimony Feb. 19 on two proposals for Nebraska’s tax system, both introduced by Columbus Sen. Paul Schumacher.
Schumacher said the state needs to engage in strategic planning to respond to changes in Nebraska’s economy.
“LB 613 creates a structure going forward … in order to develop tax policy in the state,” he said. “It gives us an opportunity for public input before – rather than after – the introduction of legislation.”
The modernization commission would be comprised of the Speaker of the Legislature and members of the appropriations, health and human services, revenue and legislature’s planning committees.
Ex-officio members would include the Legislature’s fiscal analyst, tax experts from the University of Nebraska and the tax commissioner and property tax administrator from state Department of Revenue.
The bill would direct the commission to consider fairness, competitiveness, simplicity and compliance, stability, adequacy and complementary tax systems as it evaluates Nebraska’s current tax code.
The commission would provide a preliminary report to the Legislature and the governor by Dec. 15 and a final report by Nov. 15, 2014.
The commission would continue to meet at least once per year to review and evaluate the tax code.
Kearney Sen. Galen Hadley, chairperson of the Revenue Committee, testified in support of the bill, saying it would help the state engage in equitable tax reform. The commission would provide valuable information to current senators developing bills for next session, he said.
“If we wait two years out, we are in a brand new Legislature and the learning curve starts all over,” Hadley said.
Renee Fry, executive director of the OpenSky Policy Institute, also testified in support of the bill, saying Nebraska’s tax structure has not kept up with changes in the state’s economy.
“Nebraska hasn’t had comprehensive tax reform since 1967,” she said.
Economic incentive oversight
Schumacher also introduced LB 612, requiring the state Department of Revenue to supplement required reports about economic development incentive programs.
According to a state study, Nebraska spends up to $235,000 per job in economic incentives — far more than expected.
“Quite frankly we need to have answers to that,” Schumacher told reporter Deena Winter at the Nebraska Watchdog news service.
LB 612 would have revenue department officials appear once every two years before a joint hearing of the Legislature’s appropriations and revenue committees to present reports and provide supplemental information.
Reports would be given on:
• Quality Jobs Act;
• Invest Nebraska Act;
• Nebraska Advantage Act;
• Employment and Investment Growth Act; and
• Nebraska Advantage Rural Development Act.
Schumacher said economic development programs currently do not undergo periodic review in the same way that programs receiving state appropriations do. Such programs should be discussed in an open forum in order to evaluate how well they are working, he said.
“Those are things that need the give and take of an open public hearing in order to determine,” Schumacher said.
The revenue committee took no immediate action on either bill.
Bulletin Editor George Lauby contributed to this report.