Sales, cigarette tax hikes to lower property taxes advanced

A proposal to increase sales and cigarette taxes in order to lower property taxes is headed to the Nebraska Legislature for debate.

Sales taxes could increase by up to a penny on the dollar. People would have to start paying sales taxes on pop, candy, and services ranging from dry cleaning to pet grooming. Cigarette taxes would go from 64 cents to a dollar a pack. And the money raised would go toward Gov. Jim Pillen’s goal of lowering property taxes by 40 percent.

Those are among changes proposed in a bill the Revenue Committee sent to the full Legislature Thursday.

A separate proposal in the Education Committee would send money that currently pays for an income tax credit for property taxes directly to schools instead, reducing how much they need from property taxes.

Sen. Lou Ann Linehan, chair of the Revenue Committee, hailed the overall idea.

“It’s huge. The state’s gonna pick up what it should be picking up to educate K-12 students. We have been behind for decades,’ Linehan said.

Linehan said she knows critics will condemn the move as simply a tax shift. And indeed, within an hour of the committee’s 7-0 vote to advance the tax bill, John Gage, state director of Americans for Prosperity, was out with a statement that said, in part “This bill does not solve our property tax problem and will result in a higher tax bill for hardworking families.”

Linehan anticipated such criticism.

“I know they're going to be saying that, but I think it's very important that we took sales tax off utilities, because we are not charging sales tax now on food, on rent or on utilities. And if you're a low-income family or person, you don't have much money left after you pay those three things,” she said.

Reacting to the plan, Rebecca Firestone of the Open Sky Policy Institute said exempting utility bills would do little to offset the sales tax increase, which she said would add to the cost of necessities like cars, clothes, and school supplies.

The bill would also impose caps on local government tax increases, in an effort to make sure property taxes actually go down.

And if state revenues exceed projections by more than 3.5 percent, that extra money would be used to cut the size of the sales tax increase. Linehan predicted instead of a one-cent increase, the sales tax hike might be only half a cent. But that wouldn’t be known until August.

Asked if the plan would meet Pillen’s goal of a 40 percent property tax cut, Linehan said she wasn’t going to guess until the numbers get crunched. But she counseled patience.

“I don't think the governor will be done until he gets to 40%. I don't think he has to get there this year,” she said.

In a written statement, Pillen did not mention his 40 percent goal. But he thanked the committee for delivering what he called a “once in a lifetime transformational property tax relief plan to all Nebraskans.”

Other senators reserved comment, saying they hadn’t yet seen the proposal.

In legislative floor action Thursday, senators gave first-round approval to an update on requirements for school districts to involve and inform parents or guardians about what’s going on in schools. Sen. Rita Sanders, sponsor of the bill, talked about what it would and would not do.

“This bill has no curriculum requirements. It does not tell the schools what to teach. It does not tell districts how they should be transparent. This bill only requires that school districts have a policy outlining how they will provide transparency (so) that public input can be given,” Sanders said.

Sen. Dave Murman, chair of the Education Committee, offered an amendment he said would keep parents better informed about the curriculum and books their children were getting from the school library. Murman pointed to a section of his amendment.

“Section seven simply ensures parents receive an email notification of the books their child is checking out. I consider this a very basic and important step to ensuring parental involvement,” Murman said.

However, Sanders objected that the amendment had not been worked out with the rest of the bill, and Murman withdrew it.

Lawmakers also gave first round approval to a bill that would require electricity generators to explain to the Power Review Board if they plan to discontinue operating conventional power plants, like those run on coal or natural gas. The Board could then recommend whether or not the plants should be taken off line, although the final decision would be up to the utilities.

Sen. Tony Vargas questioned a portion of the bill that said utilities’ meetings with the Power Review Board would not be open to the public.

“In what manner does the public or employees or entities have the ability to weigh in on such big decisions if it's not public?” Vargas asked.

Sen. Bruce Bostelman, lead sponsor of the bill, said plant closures are a business decision, and making deliberations public might scare away current employees.

“This is a third party review in a sense of ‘Should that facility be closed or not?’ And a recommendation on that, and then at some point time later, when it's announced, then it all becomes public. So no, I don't -- I think the challenge is, if you're looking at something five or 10 years out and you say ‘We're looking at closing in five or 10 years from now,’ and the people leave,” Bostelman said.

Senators gave the bill first round approval, after Vargas said an amendment for public involvement might be offered later. Lawmakers are now off for a three day weekend, and will return to work on Monday.

Correction: An earlier version of this story gave the incorrect name for the executive director of the Open Sky Policy Institute. It's Rebecca Firestone.