Nebraska tax package slowly taking shape, but senators split

LINCOLN, Neb. (AP) - A plan to lower income taxes and cap the growth rate of property taxes is taking shape in a legislative committee, but senators remained sharply divided as they argued over how it would affect state government and the economy.

Members of the Revenue Committee voted 5-2 on Thursday to add two tax proposals introduced on Gov. Pete Ricketts’ behalf to the overall package. Tempers flared as senators who opposed the bills repeatedly asked what specific goal the sponsors were trying to achieve.

Sens. Burke Harr of Omaha and Paul Schumacher of Columbus said the income tax proposal would tie the hands of future lawmakers. They also argued that it fails to account for outside factors such as inflation, an aging population or an emergency that would necessitate increased state spending. Capping the growth of taxable property value would distort the market, Schumacher said.

“We are deviating from reality,” Schumacher said.

Even if the package advances out of committee, it’s all but guaranteed to face a filibuster in the full Legislature. Asked after the meeting how he felt the discussion had gone, Sen. Jim Smith of Papillion smiled and held up a bottle of headache medicine.

“I’m just taking this day one a time,” said Smith, the committee’s chairman. “I’m hopeful, but we will see.”

The income tax measure would gradually lower Nebraska’s top income tax rate from 6.84 percent to 5.99 percent in years when projected state revenue increases by more than 3.5 percent. The property tax bill would change the way agricultural land is valued and cap aggregate statewide valuation growth at 3.5 percent.

The governor’s income tax proposal has drawn praise from business and conservative organizations but criticism from groups that represent teachers, farmers and the poor. The Nebraska Farm Bureau has argued that lawmakers should lower property taxes with a budget-neutral plan that would eliminate sales tax exemptions or raise the state sales tax.

Lawmakers also voted to include a measure that would eliminate the lowest personal income tax bracket and reduce the top corporate tax bracket. The legislation would cost the state between $50 million and $60 million, and lawmakers haven’t yet settled on a way to pay for it.

Senators have yet to decide whether to add other legislation to the bill. The options include a measure to increase the earned income tax credit, which benefits the poor, and cap the amount of revenue school districts could generate through property taxes. Capping the amount would generate an automatic increase in state aid to schools.

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