LINCOLN — A state senator wants Nebraska to adopt a “Buffett Rule” and raise income taxes on the wealthy.
The proposal, introduced Wednesday by State Sen. Danielle Conrad of Lincoln, is a political counterpunch to the goals of Gov. Dave Heineman, who wants to move the state in the opposite direction. The governor has proposed eliminating all state income taxes.
Conrad called that “radical and dangerous.”
The Buffett Rule proposal, contained in Legislative Bill 532, was among a blizzard of bills brought forth during the last day to introduce proposals during the 2013 Legislature's 90-day session.
A total of 655 bills and six proposed constitutional amendments will be considered by lawmakers this year. That is the fewest number introduced in the first year of a two-year legislative session since 1983, when 632 new laws were proposed.
Fewer bills are a good thing, said Sen. Greg Adams of York, the recently elected speaker of the Legislature.
“It gives us more time to focus on the bills we have, to weed through them, and filter them, and bring to the floor the best policy options,” Adams said.
He speculated that the large number of new chairs for the Legislature's 14 standing committees — seven — might have contributed to fewer proposals being put forth.
Others have said the return this year of Omaha Sen. Ernie Chambers, known for his skill in blocking bills he doesn't like, may also have led to fewer bills.
Reforming the state's tax system, a chief goal of the governor's, continued to gain attention from lawmakers.
Conrad, a Democrat, introduced a proposal to create a new tax bracket — and a higher tax rate — for individuals making more than $400,000 a year in taxable income, and couples making $450,000.
Those are the same benchmarks used in recent federal tax law changes inspired, in part, by comments made by Omaha billionaire investor Warren Buffett. He has said that it's wrong that he pays a lower effective tax rate than his secretary and that the rich should pay more. It became known as the Buffett Rule.
Conrad said she rejects the premise of Heineman's plan: that it would spur economic growth and create higher-paying jobs. The plan, the senator said, would shift more taxes onto working families and reduce taxes for the wealthy.
“I think we have a good (tax) system now, and his plan is radical and dangerous,” she said.
The Republican governor, through a spokesman, declined to comment Wednesday.
But one of the co-sponsors of the governor's tax plans, Omaha Sen. Brad Ashford, said the “real danger” is if the state does nothing to address the exodus of retirees — and the money they could invest in Nebraska — and young people from the state.
“We're losing people and economic vitality,” Ashford said. “The adjustments that we're making in this bill are absolutely appropriate. It will encourage people to stay in the state and invest here.”
Under Conrad's proposal, an estimated 4,000 high-wage earners would pay more taxes, approximately $35 million to $45 million a year. Their state income-tax rate would rise from 6.84 percent to 7.74 percent.
The senator said the extra money would benefit the state and could be used for a variety of needs, including education, health care and economic development.
The plan offered by Conrad is similar to proposals discussed in some other states with Democratic statehouse majorities to raise taxes on the wealthy.
Eliminating or reducing state income taxes, meanwhile, is an idea being proposed this year in several GOP-dominated states, including nearby Kansas and Missouri.
Two plans have been introduced on behalf of the governor, who says Nebraska is lagging behind its neighboring states.
The more ambitious bill, LB 405, would eliminate all Nebraska corporate and individual income taxes, including those levied on retirees, and shift $2.4 billion of taxes onto sales of items that are now tax-exempt, including purchases by farmers, businesses, churches and other nonprofits.
A second plan, LB 406, would eliminate the state's corporate income tax, and lower — not eliminate — income taxes on Social Security checks and other pension income. It would require a $395 million tax swap.
Conrad and groups that advocate for the poor maintain that it's preferable to have a “balanced” state tax system that includes income taxes as well as sales taxes because revenues are more predictable.
Switching to a tax system based mostly on sales taxes means revenues swing up and down, and it makes cuts in state aid to education and other programs more likely, they say.
Sales taxes, Conrad said, are “regressive” because everyone pays the same rate and because poor people pay a higher percentage of their income for sales taxes. Income taxes, meanwhile, are preferable, she said, because they are “progressive” — you pay a higher percentage if you make more money.
About 39 percent of Nebraskans, mostly the working poor, don't pay income taxes, according to the Lincoln think tank, the OpenSky Policy Institute, so they would not see any benefit by eliminating state income taxes.
Ashford said the governor's plan is less regressive because the state would retain the sales tax exemption on groceries. Higher income people, he said, also spend more, so they will pay more sales taxes.
World-Herald staff writer Martha Stoddard contributed to this report.
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