Senators ready for landmark action on taxes

After haggling over spending cuts and tax increases throughout the 2002 legislative session, it's now beginning to look like Nebraska's state senators are ready to take landmark action on the state's tax system in 2003.

"We have to have a major broadening of the sales tax," says State Sen. Tom Baker, who is back at his farm in Trenton following adjournment of the legislature on Friday.

Baker, who is running unopposed for reelection in District 44, sees broadening of the sales tax base as a necessity in order to achieve property tax relief. "In my personal opinion, every new dollar we get from sales tax should be matched by a dollar-for-dollar decrease in property tax," he said.

There are now more than 300 exemptions from the sales tax, according to Sen. Baker. If all the exemptions were repealed, the state would realize an additional $300 million to $400 million per year in revenues, he said.

The senators won't go quite that far, but they may make major changes, including putting sales tax on snack food, which would result in $28 million in additional tax revenues each year.

A bigger step -- also within the realm of possibility -- is charging sales tax on all food items, a change which would generate a whopping $130 million to $140 million per year. "If we go that way, we would resume the income tax refund," Baker said. "It used to be $40, but it might be raised to $60 if we put the tax back on food," he added. The refund is viewed as a necessity to prevent an undue burden on low income families.

While the tax on food would be controversial, charging sales tax on services could be an even more fiery debate. Among the possibilities are taxing the fees of attorneys and accountants. "That's another big one," Baker said, pointing out that sales taxes on legal and accounting services could generate in excess of $40 million per year.

Because we're not used to being taxed for food and services, the added sales taxes will be a bitter pill to swallow. But -- in the long run -- it is fairer to broaden the sales tax base than it is to force farm, home and business property owners to carry a disproportionate share of the tax burden.

This morning, Gov. Mike Johanns went on record in the Omaha World-Herald in support of property tax relief. If elected for a second term, Johanns said he wants to enact another property tax relief plan and "might consider broadening the sale tax base."

Agreeing with Baker, Johanns is quoted by Leslie Reed of the World-Herald as saying he would expand the sales tax base only if it would lead to lower property taxes.

In this year's legislative session, the state senators were in a crisis mode. They had to cut spending and raise taxes to keep the state out of the red.

But next year is a different story. A major tax shift is possible, with expansion of the sales tax and lowering of property tax a strong possibility. That would be a move in the right direction, as heavy property taxes have been hamstringing Nebraska for years.