McCOOK, Nebraska -- When asked what his feel was pertaining to support or opposition of Gov. Dave Heineman's proposal to eliminate state income taxes, Sen. Mark Christensen told members of the McCook Area Chamber of Commerce this morning that too many legislators were quiet on the topic.
"Those objecting are vocal, but not a lot of Lincoln and Omaha Senators are speaking about it," said Christensen. Sen. Christensen alluded that, based on the number of legislators that were not making their stance clear, the Governor could have more support for his proposal than some would think.
Sen. Christensen said it could also be that there is a lot to consider and everyone is still reviewing the proposal.
As part of his proposed biennium budget for fiscal years 2013-15, Gov. Heineman has proposed eliminating state individual income tax, as well as small business, Social Security, military retirement and corporate income taxes. The revenue is proposed to be replaced by sales tax increases resulting from removing many of the sales tax exemptions currently in place.
Concern with the governor's proposed elimination of state income taxes dominated much of the conversation during this morning's legislative conference call at the Keystone Business Center.
Community Hospital president and CEO Jim Ulrich said it was difficult to argue with the economic benefits of removing state individual and corporate income taxes, but added the scenario warranted taking the proper time to evaluate the overall impact. Ulrich said consequences on the other side of the equation were not yet fully understood, "there may be some [of the tax exemptions] that it is smart to get rid of, to pay for a reduction in income taxes, but we need to be careful."
Ulrich said that under the initial proposal items such as energy use would be taxed, as well as supplies and costly healthcare equipment. Ulrich said there are so many unanswered questions that the overall impact is hard to assess, what amount of the expense would be passed on and how much the hospital itself would shoulder, adding that shouldering all of it would mean hundreds of thousands of dollars in additional expense for the McCook hospital.
"It can be alarming," said Ulrich, who explained that it could mean some hospitals would look at cutting services, while the added expense may completely eliminate funding for future growth in other smaller hospitals.
Ulrich said he was not against the proposal, but it needed to be evaluated thoroughly and "we need to take our time." Ulrich said he was glad to see hearings on the bills proposed by the governor to remove the income taxes, LB 405 and LB 406, coming up on the legislative schedule already, as opposed to being delayed until the end of the session in a political move to push them through.
Ulrich also identified LB 613 as a bill introduced that he thought warranted support, explaining that it laid the framework for requiring changes to the state tax philosophy be thoroughly investigated before implemented.
Sen. Christensen said he too was concerned with how the addition of sales tax on input items in the agriculture industry would impact the business. Sen. Christensen said he estimated the additional sales tax would increase his expense by $50 per acre, just pertaining to inputs. The Senator also said he believed it would increase insurance costs.
Ulrich reiterated that the hospital industry was not taking an official stance against the governor's proposal, repeating that it had potential to make a positive economic impact and saying "the economy of a town is very important to us." Ulrich added that the governor makes a good point that Nebraska has a dated 1960 tax system and said for that reason, changes to it should be made cautiously, "why try to change it in one session?"