LINCOLN — State senators expressed sharp differences Wednesday about whether Nebraska’s business tax incentives help or hurt the state, with some lawmakers vowing to oppose incentives until the Legislature delivers property tax relief to citizens.

“Nebraskans need property tax relief a whole lot more than we need this incentive package for business,” said State Sen. Tom Briese of Albion, who proposed that the two issues become a “package deal.”

Briese and other rural senators are pushing for property tax relief during the waning days of the 2019 legislative session. Meanwhile, the state’s business community is seeking a replacement for the Nebraska Advantage Act, a 14-year-old law that grants tax credits and exemptions for businesses that expand and create jobs in the state.

The proposed replacement, the ImagiNE Act, got mixed reviews during a three-hour debate Wednesday.

Supporters praised it as a vast improvement over the Advantage Act because its tax incentives require higher-paying jobs, additional reporting on the incentives’ fiscal impact and a stronger focus on workforce development, which the State Chamber of Commerce has described as a “crisis” in Nebraska.

Nebraska needs to update and improve its incentives to remain competitive with other states, said backers of the ImagiNE Act.

“It’s critical that we send a strong message that Nebraska is a great place to do business,” said Seward Sen. Mark Kolterman, the main sponsor of the act, contained in Legislative Bill 720.

But critics of the proposal labeled it “Advantage Act 2.0” and said it failed to correct the problems of the current incentive programs, which they claimed gave generous tax breaks for jobs that would have been created anyway.

Bayard Sen. Steve Erdman, who tried unsuccessfully to kill LB 720 on Wednesday, complained that the Advantage Act was too expensive, granting between $7,400 and $208,000 in tax breaks for every job created, and that such programs wouldn’t be necessary if Nebraska’s overall tax rates were lower.

“We continue to treat the symptoms, we never treat the disease ... our taxes are too high,” Erdman said.

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Lincoln Sen. Kate Bolz said the ImagiNE Act wouldn’t solve the fiscal uncertainty of when companies claim their tax credits under the Advantage Act. The cost of the Advantage Act, she said, has varied between $150 million and $290 million in excused state and local taxes a year in recent years.

“We need some fiscal guide rails,” Bolz said.

She proposed an amendment that would limit ImagiNE Act tax breaks to $80 million a year and require a peer-review board to preapprove applications for tax benefits. Such controls are used by several states, including Iowa, and have been suggested in past studies of Nebraska’s incentive programs. The controls would be a substantial change for Nebraska, where incentive programs have had no preapproval process and provide tax breaks when companies reach certain benchmarks in investment and job creation.

Bellevue Sen. Sue Crawford, who led a legislative study of business incentives last year, said that such “caps” would be difficult under Nebraska’s current “performance-based” incentive programs because it isn’t clear until later how much tax credits a company will qualify for.

Omaha Sen. John McCollister said the ImagiNE Act — unlike the Advantage Act — will require annual reports, and an annual review by state legislators, which could lead to adjustments in the program by the Legislature if costs grow out of control.

The leading senator on the property tax issue, Elkhorn Sen. Lou Ann Linehan, said she agrees that both an incentives bill and property tax relief should be passed this year, because they provide balance between primarily urban-based incentives and mostly rural-based property tax relief. Linehan was still working Wednesday to get 33 senators to agree to bring her property tax proposal, LB 289, back up for debate.

Kolterman said he supports property tax relief, too, but disagreed that the ImagiNE Act should be blocked because LB 289 has stalled, at least for now.

He said he’s already amended LB 720 several times to address concerns of other lawmakers and is willing to consider more. Postponing action on the bill until next year would create uncertainty that would harm business recruitment in the state, Kolterman said.

Debate on LB 720 was halted after three hours on Wednesday without a vote on first-round advancement. But Kolterman said he has the support of 33 of the Legislature’s 49 senators to bring the bill back up for debate next week.

Reporter - Regional/state issues

Paul covers state government and affiliated issues. He specializes in tax and transportation issues, following the governor and the state prison system. Follow him on Twitter @PaulHammelOWH. Phone: 402-473-9584.

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