Income Tax "Right-Sizing" Discussed; Ricketts Appoints Jacobson

The Nebraska Legislature slogged toward a possible compromise on income tax cuts Wednesday, and Governor Pete Ricketts appointed North Platte banker Mike Jacobson to replace Sen. Mike Groene, who resigned.

Senators have been debating a proposal to reduce personal and corporate income taxes, and as debate resumed Wednesday, Sen. Rob Clements renewed one of the main arguments being used by supporters. Clements said Nebraska’s top personal rate of 6.84 percent is higher than all of its neighboring states except Iowa.

"Nebraska’s income tax is out of line with our competitors. And I would really hope that we could do something finally, since we have good revenues, and a revenue report looks favorable, I think now is the time for us to become competitive and keep up with our neighbors," Clements said.

Sen. Lou Ann Linehan, chief sponsor of the bill, picked up on that argument, saying Nebraska’s high rates risk chasing upper-income people from the state.

“They could move. They don’t have to live here. And if the last two days of weather haven’t convinced me of anything else, (it is) that we should not tax people a premium to live in Nebraska. It’s not gonna work. Colorado, our neighbor, where half the people I went to college with now live, has a 4 percent flat tax,” Linehan said.

Sen. Megan Hunt pointed to a long series of differences between Nebraska and Colorado on social and economic policies, suggesting other factors are much more important than income tax rates.

“While we’re copying what Colorado’s doing, while we look at all the income and all of the revenue, and all of the huge population that Colorado has, and we think that we’re going to do what they’re doing by lowering taxes on millionaires, why don’t we copy some of the other things Colorado is doing? Why don’t we legalize weed for one thing?” Hunt asked.

Sen. John Cavanaugh complained about the annual cost of the bill to the state treasury once it’s fully implemented, as well as who would benefit.

“This cut is $400 million, most of which are for the top income earners. So if we can’t afford to cut taxes for middle class and working people and those people below $200,000, how can we afford to cut it for the people over $200,000?” Cavanaugh said.

Actually, the top rate that would be cut starts to apply to incomes above about $31,000 for single people, and incomes above about $63,000 for married couples. But the dollar tax reduction would be higher for people at higher income levels.

With opponents stretching out first-round, or general file debate, Sen. John McCollister asked Linehan about possibly changing the size and distribution of the tax cut at the second-round, or select file.

“We’re in the midst of a filibuster, as you well know. And we’ll resolve that issue tomorrow sometime. It’s your plan I understand – tell me if this is incorrect – that this bill move to select, and then we “right –size” the bill. Is that what your thought is?” McCollister asked.

“Yes,” replied Linehan.

A first-round vote on the bill is expected Thursday, and then, Linehan indicated, it will wait until a new revenue forecast comes out Monday and other budget decisions are firmed up before a decision is made on how to proceed.

Also Wednesday, Gov. Pete Ricketts named North Platte banker Mike Jacobson to replace former Sen. Mike Groene, who resigned over the weekend following a complaint that he took photos of a female employee without her knowledge. Ricketts said he was impressed by Jacobson’s starting a successful bank from scratch.

“One of the things I love about the senator here is that he has experienced the American Dream. He’s worked hard all his life, he believes in entrepreneurship. And he’s demonstrated that through the creation of Nebraskaland Bank, which not only creates opportunities in the communities that community bankers do, but creates those job opportunities, and he’s going to reflect that conservative voice for the people of District 42,” Ricketts said.

Asked to compare his political philosophy with Groene’s, Jacobson stressed their similarity.

“I think Sen. Groene was a very strong conservative and I would say that I am too. I’ve probably got a little bit different style, but I would tell you that I am a conservative. I will continue to be bringing conservative values. I’ve known the governor for a long time and I think I knew he knew when I applied that he would be getting a strong conservative if he appointed me,” Jacobson said.

Jacobson said he’s against tax increases, is pro-life, and opposes recreational marijuana. He will serve the remainder of Groene’s term, and said he will run for election. There are three candidates already in the race.