Public Weighs in on Major Tax Overhaul

A proposed major overhaul of Nebraska’s tax system drew a long parade of supporters, and opponents, to a public hearing in the Legislature Thursday.

The hearing by the Legislature’s Revenue Committee was held to consider proposals to reduce property taxes. First up for consideration was Sen. Tom Briese’s proposal, backed by a coalition of farm, education and other groups. It aims to lower property taxes by raising a variety of other taxes. Those include a half-cent sales tax increase, an income tax surcharge on high income households, a $1.50 a pack cigarette tax increase, and a tax increase on alcohol. The bill would also end sales tax exemptions on a wide range of products and services, including candy, soft drinks, bottled water, and motor vehicle repairs. The money raised would be used to increase aid to schools, the largest consumer of property taxes, and to increase an existing property tax credit fund that benefits all property owners.

Briese described the problem he’s trying to solve. “Property taxes are choking off economic growth in our state. With the sixth- to seventh-highest residential property taxes in the nation, property taxes are impeding the dream of home ownership for young couples across our state. Comprising 30-40 percent of a house payment, they are forcing young couples out of the housing market. The third- to fifth-highest agricultural property taxes in the nation are impeding economic growth in our rural areas. Ag bankruptcies are climbing precipitously,” Briese said.

Al Juhnke of the Nebraska Pork Producers supported the bill, and the tax increases it contains. “We know we need money. Property tax buydowns cost money,” he said.

Jack Moles of the Nebraska Rural Community Schools Association acknowledged the proposal faces an uphill struggle, but said it’s worth it. “This bill is a heavy lift. We do get that. However, the fact is that we have 175 out of 244 public school districts receiving no equalization aid,” he said. “This means districts have had to put more and more revenue demands on the backs of local property owners, especially our ag land owners, and that in itself is a heavy lift – one that we need to lighten,” Moles said.

Opponents to the proposal came out in force, as well. First up was Bryan Slone of the Nebraska Chamber of Commerce and Industry, who objected to raising taxes as a starting point. “The problem with leading with revenues is that we’ve been essentially doing that since 1968 since we introduced the sales tax,” Slone said. Since 1975, he said, state aid to schools has increased from less than $50 million to more than $1 billion, and yet the property tax issue is “as difficult as it’s ever been.”

Another opponent, Joe Murray, said there was no guarantee in the bill, LB314, that people would pay less in taxes overall. “The Legislature needs to slam on the brakes. LB314 is not a solution to the real problem in this state, which is overspending, (at) both the state and the local level,” he said.

Other opponents objected to specific provisions in the bill. Kathy Siefken of the Nebraska Grocery Industry Association said taxing candy, pop and bottled water would require small rural grocery stores to buy new software for their cash registers. “Software costs money. A new point-of-sale system is between $6,000 to $8,000 per lane. And so that’s what you would be requiring grocers to upgrade to, if they don’t have a point-of-sale system that can break this stuff out,” she said.

Craft beer brewers also objected to increased alcohol taxes, even though Briese said he’d offer an amendment cutting the proposed increase roughly in half. Gov. Pete Ricketts has scheduled a series of “Raise Glasses, Not Taxes” events with the brewers to protest that aspect of the bill.

Ricketts also opposes any effort to lower property taxes by raising other taxes. He has proposed his own approach, combining increased property tax credits and limitations on local government tax collections. The Revenue Committee is expected to consider these proposals, along with bills to rework school aid, before coming out with a recommendation.

Meanwhile, state tax collections continue to lag behind projections. The Department of Revenue reported Thursday net tax collections in January were 7.6 percent less than projections, falling short by $32 million.

And in other news Thursday, the Judiciary Committee voted to send a proposal to outlaw employment discrimination based on sexual orientation or gender identity to the full Legislature for debate.