This session is prime time for tax reform

Friday, January 7, 2005

Because of Nebraska's term limits law, more than two-thirds of Nebraska's state senators are "lame ducks," which means that they are serving their last terms.

Some -- like State Sen. Tom Baker of Trenton -- have only two years left on their terms. Others, who were elected in November to their second terms, have four years to go.

The legislative turnover is critical because time is growing short for an overhaul of Nebraska's tax system. In 2006 and 2008, a number of first-time senators will take office, making it doubtful that they could be brought up to speed fast enough to enact effective tax legislation.

Because of that, there is no issue in Nebraska of greater importance in the next two years than how taxes are collected and spent.

Action is needed now. Legislators need to start the process of looking at all forms of taxation in Nebraska, with special attention paid to the amounts raised by property, sales and income levies.

There is hope that this may happen. In a pre-session interview with the Gazette, Sen. Baker said that a respected member of the legislature, who he did not name, is planning to lead an effort to launch a comprehensive study of all forms of taxation in Nebraska.

The tax study, if approved, will be a huge undertaking. This is apparent when you consider all the taxes that exist. There's the biggie -- local property tax -- as well as state and local sales tax, individual and corporate income tax, state motor fuel tax, motor vehicle registration fees and compensating use taxes.

The biggest problem for Nebraska, especially in rural sections of the state, is the heavy reliance on property taxes. For the 2003-04 taxing period, taxes on property accounted for 35.1 percent of tax collections in Nebraska. Sales tax brought in 26.3 percent of the total, and income taxes raised 25.1 percent. That left 13.5 percent from other state taxing sources.

Before leaving the legislature, the current members need to take advantage of their lawmaking experience to study the tax system and then follow up with needed changes. Time is short. Tax reform needs to start in this session of the legislature.

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