By Governor Pete Ricketts
March 5, 2016
Official photo here.
Tax policy is a big area of focus for Senators this legislative session for a good reason: It is key to building a pro-growth climate in our state.
Right now, Nebraska’s tax system is in need of an overhaul. According to the Tax Foundation, Nebraska has the 11th highest property taxes in the United States and the 26th highest income taxes. When you look at it another way on a per capita basis, we do not do any better. Local property tax collections rank 12th highest at $1757 per capita and state income tax collections rank 16th highest at $1128 per capita. This makes us uncompetitive with surrounding states.
This legislative session there has been a lot of discussion on tax policy. While some Senators have been putting forward proposals that would raise taxes on some Nebraskans to cut taxes for others, I have worked with Revenue Committee Chairman Jim Smith on a proposal that focuses on property tax relief without raising taxes. Other bills would help address the impact of federal tax reform on our state tax code. The flurry of proposals can be very confusing, so here’s a brief guide to tax policy before the Legislature right now:
>> LB1090 (Federal tax reform adjustments) – Like many other states, Nebraska’s tax code has many references and ties to the federal tax code. In December, President Trump signed the Tax Cuts and Jobs Act. When the federal tax code changes, many states have to adjust their tax code to avoid unintended consequences. That is why Senator Jim Smith, numerous other Senators, and I are working together to get LB 1090 passed. This bill preserves our state’s personal exemption, which was tied to a now obsolete provision in the federal tax code. Without LB 1090, a family of four will potentially pay $536 more in state taxes this year. If the Legislature does not enact this bill this year, Nebraskans will incur a state income tax increase of over $200 million. LB 1090 is a must-pass bill.
>> LB 947 (Property Tax Cuts and Opportunities Act) – This is the major tax relief proposal that I am working with Senators on to deliver. This proposal delivers major property tax relief over 10 years along with modest income tax rate reductions to make Nebraska more competitive. Because tax relief in LB 947 grows as our economy grows, taxpayers will see true relief. Some other tax plans proposed this year simply shift taxes around or actually raise taxes to facilitate lots of new government spending. Neither of these approaches deliver tax relief, and I oppose efforts to raise taxes on Nebraska’s hardworking families.
>> LB 44 (Out-of-state online sales tax collection) – This week, Senators will do a second round of debate on LB 44, which seeks to collect sales tax on internet purchases made from businesses located outside of Nebraska. Enforcing the collection of sales tax on out-of-state internet purchases will help level the playing field for Main Street Nebraska. LB 44, however, is based upon a South Dakota law, which was just declared unconstitutional last year. Right now, there is a case pending before the Supreme Court on the South Dakota law. Nebraska has joined the case to understand the state’s ability to enforce our tax laws.
Senators should wait for guidance from the Supreme Court before enacting a Nebraska law. This will allow them to make sure they get it right and not pass something that is unconstitutional. A Supreme Court decision can give clarity to the state’s ability to enforce collection of out-of-state online sales tax. The Legislature should not pass LB 44, and should wait until the Supreme Court acts.
>> Tax hikes and tax shifts – Senators have proposed a number of bills that would raise taxes on Nebraska families. There are a couple of proposals that directly raise taxes or have the effect of raising taxes to purportedly achieve property tax relief. In actuality, they do not lower taxes. You cannot raise taxes to lower taxes. This would be a step back for Nebraska families who are already taxed too high. There is one proposal, LB 1022 (Irrigation Tax Act), which is particularly egregious. This proposes to tax water used for irrigation, which would set a terrible precedent for our state. I strongly oppose the bill.
If you want to make your voice heard on taxes, I hope you’ll take time to reach out to your Senator. You can find their contact information at www.NebraskaLegislature.gov. If you’d like to contact my office, we can be reached at email@example.com or 402-471-2244.