Nebraska Tax Reform Brewing
- Jan 21, 2014 | Gail Cole
In his 2014 State of the State Address, Nebraska Governor Dave Heineman (R) admitted that “taxes are one of the toughest and most difficult issues to resolve.” But as a leader, he said, it’s his job to solve complex challenges. And now it’s time to act.
“We don’t need more time to study this issue. We already know that taxes are too high and high taxes are detrimental to economic growth.” Therefore, Gov. Heineman is calling for property tax relief and for lowering Nebraska’s income tax rates.
In his January 2013 call for tax reform, Governor Heineman strongly supported legislation that sought to reduce income tax in part by eliminating “approximately $2.4 billion in sales tax exemptions:”
- LB 405 sought to eliminate numerous business inputs and the “total elimination of both the individual income tax and the corporate income tax.”
- LB 406 sought to“eliminate approximately $395 million in sales tax exemptions.” It also sought to “eliminate the corporate income tax and exempt the first $12,000 of retirement income for married couples and $6,000 for single individuals.”
According to Governor Heineman, Nebraska “exempts more in sales taxes than it collects," collecting $1.5 billion in sales tax annually and exempting $5 billion. Yet after speaking in favor of the above bills in early 2013, Governor Heineman pulled back from tax reform and asked that the bills be killed.
So what happened?
The governor's move to broaden the sales tax base caused a stir. Manufacturers stepped forward to say that "losing sales tax exemptions ... would drive up their costs and force them to consider their companies--and jobs--out of Nebraska." And the governor decided his plans to eliminate so many sales tax exemptions were "a bit too bold for now."
Taking up the baton
Governor Heineman will conclude his tenure as governor at the end of this year. He still wants to lower income tax rates. Yet if his 2014 State of the State address is any indication, he will not again try to eliminate sales tax exemptions. Instead, he is focusing on property tax reform.
The two State Senators who will vie to be his successor-- Charlie Janssen and Beau McCoy--have both have indicated they'll carry on with the current governor's plans to lower income tax. They too will push to reduce high property taxes.
Only Sen. McCoy has called for the elimination of certain sales tax exemptions in his plan.
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