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(Lincoln, NE) Gov. Dave Heineman today announced his comprehensive proposal to provide tax relief for Nebraskans by seeking more than $400 million dollars in tax cuts and tax-relief investments over the next three years. The Governor’s proposal would reduce the tax burden on residents in three areas, calling for a reduction in state income taxes, the elimination of the sales tax on construction and home repair labor and an investment in property tax relief.
“It is my belief that any proposal with regard to tax relief must take into consideration our state’s current budget and future outlook,” Gov. Heineman said. “I based this proposal on three important principles: First, that it provide tax relief for individual Nebraskans and their families. Second, that it provide meaningful and sustainable relief, and third, that it must be fiscally responsible, allowing the state to maintain a healthy cash reserve fund.”
The first portion of the Governor’s plan proposes $148 million dollars in income tax reductions, rolling back rates to 1997 levels across all income brackets. The proposed tax cut would decrease current tax liabilities by approximately 3 percent, with a higher percentage of cut reaching those who need it most. The proposal would save a family of four earning $55,000 and using standard deductions about $120 in state income taxes over three years.
By repealing the sales tax on construction and home improvement contract labor, Nebraska taxpayers would save an estimated $99 million from fiscal year (FY) 2007 to FY 2009. The proposal would remove sales taxes from the costs of hiring skilled labor for certain common home repairs, as well as the tax on home and business renovations.
The final portion of the Governor’s proposal would accelerate property tax relief by a full two years, incrementally reducing the property tax lid for schools from $1.05 to $1.025 in FY 2006-07 and to $1.00 in FY 2007-08. The property tax lid is currently scheduled to decrease to $1.00 in FY 2008-09. On the average, estimates show that for every $100,000 of assessed property value, taxpayers would save $125 over a three-year period. To supplement lost school district revenue, the state would invest $174 million dollars in state aid to schools.
“Our economy has continued to improve, and this momentum provides an opportunity to help Nebraskans and their families to keep more of the money they earn,” Gov. Heineman said.
Additional financial details about the tax relief proposal will be introduced in January as part of the Governor's mid-biennium budget recommendations.
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