LINCOLN — Gov. Dave Heineman's call for a tax study could be bad news for wind energy interests.
The governor and State Sen. Brad Ashford of Omaha on Monday urged state lawmakers to hold off on passing new tax exemptions while they work on overhauling the whole tax system.
If the Legislature's Revenue Committee heeds their calls, two bills that would add wind farms to the state's business tax incentive programs would be sunk.
Advocates for wind energy are pushing the bills as a way to give sales tax exemptions for wind turbines and other wind-farm equipment.
Brice Barton, development manager for TradeWind Energy of Lenexa, Kan., said Nebraska needs to make the tax change while the federal government still offers production tax credits for wind energy projects.
“If it's next year, it will be too late for wind in Nebraska,” Barton said.
He said the cost of sales taxes has stalled the company's plans for a 118-turbine wind farm near Allen, in northeast Nebraska.
Because of those taxes, Nebraska cannot compete with Kansas, Oklahoma or Iowa, which offer sales tax exemptions for wind farms, he said.
But Ashford argued that adding sales tax exemptions, even for wind energy, would worsen the state's tax problem.
He believes Nebraska should broaden, rather than narrow, its sales tax base and use the additional revenue to reduce income and property taxes.
Sen. Galen Hadley of Kearney, the Revenue Committee chairman, said it makes “some sense” to not pass an exemption this year, instead of passing it and then take it away next year as part of broader tax reform. He said that approach likely should be applied to the wind energy tax bills, one of which he introduced.
But Hadley also said he wants to consider proposals on a “bill-by-bill” basis.
Omaha Sen. Beau McCoy, the other co-sponsor of the governor's tax bills and a member of the Revenue Committee, said he wants to reserve judgment about passing new tax legislation until he hears all of the proposals.
Among the measures referred to the Revenue Committee are proposals to exempt from sales taxes repair and replacement parts for agricultural machinery, and to exempt car washes. Income tax bills include proposals to exempt Social Security and military retirement income and to give tax credits for private school tuition, adoption costs and extracurricular activities.
Heineman threw in the towel on his tax proposals Saturday, calling instead for a comprehensive study that would lead to new legislation. On Monday, he said he was listening to Nebraskans and the Legislature but wasn't giving up.
“Personally, I prefer to get it done in the session — it's about having the courage to act — but they want to take a little bit longer,” he said of state lawmakers. “I'll respect that, but we're just entering round two in the tax reform debate.”
Heineman said he expects a new tax overhaul proposal later this year.
The Revenue Committee is expected to kill Legislative Bills 405 and 406 on Wednesday. The measures would have eliminated or cut state income taxes by ending selected sales tax exemptions.
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