Income tax cuts argued; budget stalled by dispute over judges

Supporters say the state should cut income taxes to help small business and middle class Nebraskans, while critics say the proposed cuts help mostly the wealthy. And objections to a plan to change how judges are picked delayed dealing with the state’s budget shortfall.

Gov. Pete Ricketts is trying to build support for the plan, introduced by Sen. Jim Smith, to lower the state’s top income tax rate from just under seven to just under six percent. Monday, he brought a number of small business people to a news conference to support the plan. Among them was Mike Mapes, president of an Omaha small business.

Mapes said high taxes are hurting Nebraska’s growth. "In the United States, you’re allowed to vote with your feet. And you go to where you believe you have the highest opportunity – economic opportunity for yourself," Mapes said. "So the best and the brightest graduate from our universities and they end up going elsewhere. I think taxes are a major reason they decide to go elsewhere."

The Ricketts-Smith plan, LB337, would cut the income tax rate, but only for the highest bracket. That’s led critics like Renee Fry of the Open Sky Policy Institute to complain that almost 90 percent of the tax cut would go to the wealthiest Nebraskans.

Tax Commisioner Tony Fulton doesn’t dispute Fry’s figure. "That figure is about right. About 90 percent of all of the income taxes paid in Nebraska were paid by Nebraskans who are in that top tax bracket," Fulton said.

But Fulton does disputes Fry’s characterization of who’s in that top tax bracket. "Ask someone who’s making $35,000 who’s single in Nebraska, ask them if they think they’re wealthy," he said. "I don’t think that’s wealthy. A family who’s making $70,000 a year in Nebraska -- is that a wealthy family? I don’t know. There are a lot of Nebraskans who fall into that category, and I don’t think they consider themselves wealthy."

Fry said that’s not what she’s saying. But she is talking about who, within the top tax bracket, will get the biggest tax cut. "Families making between $64,000 and $95,000 a year will see an average tax cut of $81. Whereas the wealthiest one percent who make over $500,000 will see on average a tax cut of $5,800," Fry said.

The tax cut proposal has been scheduled for a public hearing on Feb. 8, a week from Wednesday.

Also on Monday, senators were scheduled to begin debating proposed cuts to the state budget. But Sen. Ernie Chambers delayed that debate. Chambers is upset about a proposal by Sen. John Murante that would let the governor appoint only members of his political party – in this case, Republicans -- to a commission that nominates judges. Currently, the law requires the appointment of people from different political parties. Murante’s bill has been referred to the Government Military and Veterans Affairs Committee, which he chairs, for a public hearing. Chambers argues that because it deals primarily with judges, it should be heard by the Judiciary Committee, where he’s a member.

Chambers linked the referencing fight back to the first day of the Legislature, when a coalition of conservative Republicans dominated chairmanship elections and committee assignments in the officially nonpartisan Legislature. "That first day was done by the skuldugging Republicans. And they even turned on some of their own. And some of you reaped rewards by being a part of that unholy alliance. And now you’re going to have to pay. When you bring your bills on the floor, you’d better know what’s in those bills. You’d better have read them," Chambers said, adding "We’ll match wits for the good of the state. For the benefit of the commonweal."

Sen. Jim Scheer, speaker of the Legislature, said lawmakers need to get to the budget debate soon. "The two bills before you today are budget-related bills that I do think take precedence over others. If we do pass these, they do affect our agencies now, not next year, not the following, but now," Scheer said. "If we’re going to give those agencies the time to react to those, we have to do this sooner, not later."

The budget debate is now scheduled to start Tuesday.