Former U.S. Sen. Russell Long of Louisiana was an expert on tax law who summed up “tax reform” pretty simply: “Don’t tax you, don’t tax me, tax that fellow behind the tree.”
And there’s the rub.
Any two people can easily agree that raising taxes on someone else is a good idea if it means lower taxes for themselves. It’s that third person who’s going to see things differently.
So it is with Gov. Dave Heineman’s push to eliminate personal and corporate income taxes — and pay for it by expanding the sales tax to $2.4 billion in items not now taxed.
Heineman argues that by joining the small list of states without an income tax, working Nebraskans and small businesses would be helped and the state would be better positioned to compete for new jobs.
But as lengthy hearings in the Legislature last week showed, all those folks behind the tree — manufacturers, farmers, hospitals and more — see things differently.
Manufacturers, for example, raise a good point when they say that taxing purchases of “inputs,” such as the steel needed to produce auto parts, would make Nebraska-made goods more expensive and put them at a competitive disadvantage with companies located in states that don’t tax such inputs. Farmers say the same about taxing purchases of the seed and fertilizer needed to grow crops.
Then there are state lawmakers with tax ideas of their own. Proposals include lowering the personal and corporate income tax rates to a maximum of 3 percent, and replacing lost income tax revenue by extending the sales tax to new services, such as haircuts and auto repairs.
Any action that ultimately is taken needs to be fair to all and strengthen, not erode, Nebraska’s economic competitiveness.
But these are not easy issues. The multitude of possible responses and the long-range ramifications of any major tax change has brought a call for a “working group” that would bring interested parties together to examine the tax overhaul proposals and reshape them by April 1 into something that could win passage.
It’s an idea that has worked before. During the 2011 Legislature, such a working group was pulled together and successfully found a compromise on another difficult problem — collective bargaining by public employee unions.
On a subject as big as overhauling the state’s tax system, this approach could work — if all voices are heard.
Such a working group needs to include representatives of all those who would feel the impact, including the state’s manufacturers, agricultural producers, small businesses, working Nebraskans, churches, hospitals and others who would pay for the eventual changes.
On an issue this wide-ranging, it is essential for a legislative working group’s discussions to be as inclusive as possible — and not leave any taxpayer behind the tree.