Tax study buffeted by arguments over wind energy, city sales tax

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March 15, 2013 - 4:49pm

A proposal to study and reform Nebraska’s tax system ran into resistance Friday in the Legislature.

The proposed study is what’s left of Gov. Dave Heineman’s proposal earlier this year to abolish income taxes. That plan died amid opposition from business and agriculture interests upset it would be paid for by ending sales tax exemptions that benefit them.

Revenue Committee Chairman Sen. Galen Hadley of Kearney pledged the study would be neutral and nonpartisan. "Our goal is to find the entire picture. And I truly believe in the spirit of George Norris and this legislative body, being a nonpartisan body, this study commission has to be a nonpartisan body that tries to do the best for the people of the state of Nebraska," Hadley said.

Hadley’s invocation of Norris, the Republican-turned-independent promoter of causes including the Unicameral, public power, and the Tennessee Valley Authority, did not sit well with Sen. Bill Kintner of Papillion. "Chairman Hadley talked about the spirit of George Norris. Well, I don’t want to use too much of George Norris’s spirit. He was quite the taxer and quite the spender. I’d like a little Calvin Coolidge spirit in there, too. I think we’d be well-served by that," Kintner said.

Lincoln Sen. Danielle Conrad questioned why the Revenue Committee was advancing a series of bills calling for specific exemptions at the same time as its chairman was calling for a comprehensive tax study. "What is the logic in the advancement of these various and sundry pieces of legislation, which perpetuates a piecemeal approach to tax policy and which we agree has created inequities?" Conrad asked.

That line of criticism drew an angry response from Hadley, who ticked off a list of the tax breaks his committee has endorsed, and argued that each is needed. Among the proposals are increased tax credits for so-called "angel investors," college savings plans, and a sales tax exemption for ag equipment repair or replacement parts.

"If you want to say that I’m not doing my job that’s fine. But if you want to say the Revenue Committee is not doing their job, I strongly disagree with that," he said. And Hadley challenged senators who felt that way to reject individual proposals. "You’ll get your chance on every one of these bills to say ‘yes’ or ‘no.’ You can stand up and say ‘This is the worst piece of policy that any committee’s ever put out.’ And there’s a red light on your button there that you could press," he said.

Hadley also mentioned a proposed tax break for wind energy projects which could cost just under $8 million next year. He said that could bring a project worth more than $300 million to northeast Nebraska. Trade Wind Energy of Lenexa, Kansas has proposed a $300 million project for rural Dixon County in northeast Nebraska.

Heineman, who spearheaded creation of the tax incentive program to which the wind proposal would be added, has criticized the proposed new tax break. In a Friday afternoon news conference, he suggested legislative priorities are misplaced. "I would be shocked and appalled if we’re going to give tax breaks to out-of-state companies before we even decide that we’re going to give tax relief to our own citizens. That’s not fair and that’s not appropriate," Heineman said.

The Revenue Committee voted Friday not to advance proposed tax breaks on military and Social Security retirement benefits.

Meanwhile, Omaha Sen. Ernie Chambers threatened to filibuster against the tax study proposal. Chambers said he is upset because the committee has bottled up his proposal that would take back permission, granted last year, for cities to raise their share of the sales tax from the current limit of 1.5 percent to 2 percent, with voter approval.

One bill the Legislature did advance Friday would eventually institute a uniform reimbursement rate for foster families across the state. A study recommended substantial increases in reimbursements, currently among the lowest in the nation. But faced with a $2 million annual price tag, Sen. Annette Dubas of Fullerton amended her bill to put off the start of higher reimbursement rates until next year.

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