LINCOLN — Amid a growing chorus to kill Gov. Dave Heineman's tax cut bills, an Omaha senator has floated yet another plan to keep the debate alive.
State Sen. Brad Ashford on Friday pitched a $400 million tax-shift proposal that he said would cut personal income tax collections in half and provide a break for 90 percent of Nebraska families. The biggest savings would be for those earning less than $58,000 in taxable income, he said.
The newest plan is a significant departure from the governor's two initial proposals, of which Ashford was a co-sponsor. It's also a less ambitious alternative to a plan he floated earlier this week.
Ashford, who is a candidate for Omaha mayor, said that while the other plans haven't gained traction, his newest idea makes more sense because it avoids eliminating tax breaks on pharmaceutical drugs and manufacturing inputs.
“This would give the average Nebraska taxpayer a significant tax cut,” he said. “This will make Nebraska a more attractive state to do business.”
The proposal comes as a number of groups, from the Nebraska Chamber of Commerce and Industry to the Nonprofit Association of the Midlands, call on the Legislature to kill Heineman's two proposals, Legislative Bills 405 and 406.
The first, LB 405, would eliminate all state income taxes on individuals and corporations and instead raise about $2.4 billion worth of tax revenue through previously tax-exempt purchases. New sales taxes would apply to the equipment, raw materials and energy purchased by manufacturers; the seed, fertilizer and tractors bought by farmers; and the purchases made by hospitals, churches and other nonprofit groups.
A less-ambitious version of Heineman's plan, LB 406 would shift about $400 million in taxes. Corporate income taxes would be eliminated, and the taxation of retirement pensions would be reduced. Instead, a handful of sales tax exemptions, including those on agricultural chemicals and seed, and energy and molds used by industry, would go away.
Both bills were criticized last week as “job killers” that would force manufacturers to move operations out of state and put the brakes on already planned business expansions in the state.
Barry Kennedy of the state chamber said the governor's bills need to be killed so that more realistic and less drastic options can be considered.
“These two bills have generated a lot of uncertainty,” Kennedy said. “Businesses want to know what tax laws will be there for a number of years, so they can plan and increase employment.”
While he said the state chamber is willing to discuss other options to cut taxes this year, a representative of about 250 nonprofit groups in Nebraska said the whole process ought to be slowed down for more study.
“It's too big of a deal to rush like this,” said Anne Hindery of the Nonprofit Association of the Midlands. “It's not even a Nebraska-based deal.”
Hindery said a “false sense of urgency” has been created because other states, including Oklahoma, North Carolina and Kansas, are looking at income tax cuts. In Kansas, she noted, the rush to pass such a bill, and the failure to adequately fund it, has created a $267 million budget gap.
The nonprofit group is among those backing a year-long study of the state's tax system, as proposed in LB 613, which was introduced by Columbus Sen. Paul Schumacher. The measure now has nine co-sponsors.
A public hearing on LB 613 is scheduled for Tuesday. On Wednesday, the Revenue Committee, which oversees tax policy, will hold its first discussion about what to do with the governor's bills.
Those two events will lend some clarity to where the tax debate is headed.
Veteran lobbyist Walt Radcliffe said Friday that he doesn't see “the political desire” right now to radically change the state tax system.
“There's 49 different people in the Legislature and 49 different ideas to change the tax system,” he said. “There's not a consensus, not even close.”
Kennedy, of the state chamber, as well as Joseph Young, a representative of the Greater Omaha Chamber of Commerce, said Friday that they hadn't see the details of Sen. Ashford's newest plan so they could not comment.
Ditto for Omaha Sen. Beau McCoy, another co-sponsor of the governor's proposals.
Heineman was in meetings Friday and unavailable for comment, a spokeswoman said.
Ashford said his newest plan would reduce the top personal income tax rate to 6.5 percent, from the current 6.84 percent, on taxable incomes of $58,000 or more for a family of four. For taxpayers below that income mark, the tax rate would be cut to 2.46 percent. The current rates for those taxpayers range from 2.56 percent to 5.12 percent.
The proposal would not eliminate corporate income taxes nor cut or end taxes on Social Security income and other pension checks, which were features in both of the governor's proposals. Ashford said that if corporations or senior citizens want to pursue those changes, they'll have to propose ways to accomplish that.
The senator said he was still finalizing how to finance his latest tax plan. But he said he plans to target some now-tax exempt services that are luxuries, such as country club memberships and a trip to a spa.
Ashford rejected the notion that he was pushing the tax plan to gain political points in his run for mayor.
He said he has favored similar tax changes for years and isn't sure he's scoring political points by taking a lead in the tax debate.
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