LINCOLN — Gov. Dave Heineman continued to push Wednesday for a plan to reduce state taxes while the head of a legislative study of the tax system said the study is focused more on “equity” than cuts.
The differing opinions came as the Tax Modernization Commission formed by the Nebraska Legislature wrapped up a second round of working sessions at the State Capitol.
The 14-senator commission discussed some possible tax changes but decided to finalize a short list of proposals for public comment at the end of the month. It faces a Dec. 15 deadline to deliver any recommended tax changes.
Meanwhile, Heineman made it clear he wants changes in Nebraska tax codes that result in a smaller tax bill.
“Lower taxes on middle-class families, that's what we should be doing,” Heineman told reporters at a morning press conference.
“You can call it bold, you can call it a minor overhaul, I don't really care what you call it,” he said. “I know what the objective is here.”
Later in the day, the leader of the tax study, State Sen. Galen Hadley of Kearney, said tax experts heard by the commission advised that if tax cuts are the goal, a state needs to decide first how to reduce government spending, then revamp taxes to finance a slimmed-down slate of services.
“If the goal is to reduce taxes, we're starting at the wrong place,” Hadley said of the Tax Modernization Commission.
How those two goals get reconciled — tax changes versus tax reductions — remains to be seen. It promises to be a key issue that could carry over into the 2014 legislative session.
Heineman said that the state now enjoys the largest cash reserve in history and that lawmakers should return some of that in the form of tax relief during the next session.
Wednesday morning, Hadley and other members of the commission began discussing what they should include on a short list of potential tax changes.
Most focused on reducing property taxes rather than cutting income taxes. The latter has been a major goal of the governor, who earlier this year called for eliminating state income taxes altogether.
Totally eliminating income taxes wasn't brought up Wednesday, and tax authorities who testified on Tuesday said it wasn't clear if not levying an income tax, as done in states such as Texas and Florida, leads to increased economic prosperity.
Hadley said citizens most often complain about property taxes, and the goal of the commission should be tax “equity.”
Among the proposals discussed by commission members was revamping the current property tax rebate program to aid only resident, and not nonresident, landowners.
The rebate program, launched by Heineman, has been criticized over the years because nonresident landowners — including billionaire Ted Turner, the state's largest individual property owner — get a big portion of the $115 million-a-year payments.
Sen. Heath Mello of Omaha said the state should get “more bang for our buck” by aiming those payments to those who live in Nebraska.
This year, the rebate program delivered a $71 credit to the owner of a $100,000 home.
One idea that seemed to lose momentum was providing an income tax break to retirees; many states have adopted that tactic to keep and attract senior citizens.
Such tax breaks are expensive and promise to become more expensive due to the aging baby boom segment of the population and the projected growth in the elderly population, lawmakers said.
Two alternatives discussed Wednesday were increasing the homestead property tax credit now offered to elderly homeowners, or providing a tax credit on utility bills.
Tax Modernization Commission members agreed to meet again Aug. 30 to finalize a short list of potential tax changes.
Hadley said providing specific proposals would make upcoming public hearings across the state more productive, because the public could respond to them rather than comment generally on state tax policy.
Hearings begin Sept. 23 in Scottsbluff. They end with hearings Oct. 17 at 1:30 p.m. at Metropolitan Community College, South Omaha Campus, and Oct. 18 at 10 a.m. at the State Capitol.
Heineman said he was “very encouraged” by the work of the legislative tax committee so far.
Based on his conversations with lawmakers, Heineman said, “you can begin to see already the very strong possibility of a broad-based, big-picture tax relief package.”
He said the package would include “significant income tax relief and direct property tax relief.”
The modernization commission was formed by the Legislature after it killed proposals by the governor last spring to eliminate or greatly reduce state income taxes.
Business and farm groups harshly criticized Heineman's plan, which would have balanced the loss of revenue in income taxes by doing away with a slate of sales tax exemptions that benefit them and nonprofit groups.
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