KHAS TV: Nebraska Tax Committee reviews policy

Original Post

Aug 6, 2013

by Tim McNicholas

The Nebraska Tax Committee continued their 6-month review of tax policy Tuesday. Some senators feel the state could be on the verge of major reform.

Early reports indicated that the 6-month review would not likely lead to widespread tax cuts, but the idea of cutting the state income tax altogether is now not out of the question.

There are currently seven states without an income tax, and if Senator Galen Hadley has his way Nebraska will join them.

“I think it’s more optimistic and I think people are going at it more systematically to make sure we do it the right way,” said Hadley.

Governor Heineman first proposed a bill to eliminate the state’s income tax last year. That bill fell short of legislation, in part because of concern over new taxes. Cutting the state income tax could leave a large revenue gap that needs to be filled. The bill won’t be without opposition this time around, either.

“We’d have to go out and find $2.5 billion in new taxable transactions. That’s a very large number for a state like Nebraska,” said Senator Birsch.

John Anderson of UNL supports a lower state income tax. But he says throwing it out altogether is too much.

“To do that you’d have to convert the sales tax into what we call a turnover tax. It would pyramid on itself and create very high and arbitrary tax rates across sectors of the economy.”

And Senator Birsch has concerns about taxes driving Americans away from Nebraska.

“We don’t have in Nebraska, beaches or mountains or terribly warm winter weather. We especially in Nebraska have to be very careful about our taxes and use them to draw people into the state rather then push and motivate people out of the state.”

But if the bill passes, out-of-state citizens could be the ones getting a tax break. A study from the Institute on Taxation and Economic Policy says that just dropping the tax to 5% would cost the state more than $80 million in taxes paid by out-of-state residents who work in Nebraska.

Not much can happen either way until further studies are concluded. Hadley hopes to have more extensive research on income tax by December 15th.

“Then we’ll take a look at whether or need we need specific legislation to enact some of the things that we might have found will help Nebraska in their tax picture.”

The tax committee met with two economics professors from Georgia State as well as Anderson. Some of the Senators’ followup questions for Anderson consisted of comparisons to other states, but Anderson pointed out there’s no one-size-fits-all for a state tax system, since every state is different.

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