The Nebraska Legislature is expected to have a debate on tax policy this session, but at present it appears as if the debate will focus on piecemeal proposals that merely tweak current policy or focus in an unbalanced way on property taxes alone.
What Nebraska needs instead is strong, determined leadership by Gov. Pete Ricketts and legislative leaders to build consensus on wide-ranging reform that revamps the tax structure strategically, including a re-examination of tax rates and a long overdue overhaul of sales tax exemptions.
Such a change would broaden the tax base, increase the chances for long-term revenue stability and adjust tax policy to the 21st-century economy.
Calls for such an approach regularly surface at the State Capitol. Legislative staff dutifully assemble interim studies. Committees hold hearings. Testifiers discuss the state’s need for a major, thoughtful policy revamp. This pattern has been going on for years.
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Yet little of substance is actually done.
Instead, governors and lawmakers too often have settled on minor changes, without establishing an overall strategic vision. The result: Nebraska’s overly complicated and unreformed tax system remains stuffed with countless provisions enacted less through a clear policy vision than through short-term, special-interest-focused decision-making.
And this, at a time when states are locked in intense economic competition, with higher-population states frequently having competitive advantages over small-population states such as Nebraska.
This policy failure by Nebraska leaders lamentably is very old news in our state government.
In 2002, World-Herald news coverage examined precisely this issue. Something needed to be done, state officials rightly told World-Herald reporter Henry Cordes. Tax decisions were made too often merely by “whatever you can get 25 votes for,” then-State Sen. Nancy Thompson noted.
Speaker Kermit Brashear, to his credit, successfully pushed in 2002 for floor debate on a strategic tax policy revamp. But in the end, a majority of lawmakers voted to stick with the status quo.
And so, 16 years later, Nebraska tax policy remains stuck in the mud.
This session, lawmakers are expected to debate Legislative Bill 947, sponsored by State Sen. Jim Smith of Papillion and backed by the governor. Unfortunately, LB 947 essentially just tweaks current policy. It fails to provide the kind of broader, strategic revamp Nebraska needs.
Another major tax proposal this year is Legislative Bill 829 by State Sen. Steve Erdman of Bayard. That bill would give income tax credits to Nebraskans equal to 50 percent of the school property taxes they pay.
The measure is focused solely on the property tax question and raises significant concern over the large hole it would blast in the state budget by reducing annual revenues by about $1.1 billion.
It remains to be seen whether another tax proposal this year — Legislative Bill 1084 by State Sen. Tom Briese of Albion — will get any traction to spur the type of strategic tax policy discussion Nebraska should be pursuing. Briese’s bill would enact various tax increases and changes to cover the cost of additional property tax credits and increased public school funding.
Nebraska leaders have a choice this year. They can continue to devote their energy to tax proposals that fail to tackle key problems with the status quo.
Or they can push the debate in the proper direction, building support for the kind of overarching change Nebraska needs for a stronger future.