(Bruce Baker/McCook Daily Gazette)
Heineman spoke to Rotarians and their guests during a luncheon at Community Hospital, Tuesday afternoon.
Heineman said we now lived in an electronic age, which required us to compete in a national and international global economy, far different from the 1960s.
Heineman has proposed legislation that he believes will position the state to be more competitive for jobs. Heineman said 43 states already exempted Social Security income from taxes and 23 similarly exempted military retirement.
Heineman's solution would eliminate state individual income tax, as well as small business, Social Security, military retirement, retirement and corporate income taxes. The governor plans to replace the lost revenue by removing some portion of existing sales tax exemptions, exemptions he said are inconsistent and create unfair business scenarios.
Heineman gave an example of the inconsistencies by saying he had visited several Rotary clubs in recent days, those meetings hosted at hotels paid sales tax for the meals, those hosted at hospitals such as the one in McCook, were exempt from paying the sales tax.
Heineman summarized the revenue numbers by saying the state received $2.4 billion in income tax revenue and $1.5 billion from sales tax and other sources.
"We exempt $5 billion in sales tax now, three times more than we collect," said Heineman, adding that if we removed only half of the exemptions we could do away with income tax.
Heineman said the shift in revenue was basically a trade-off for a more job competitive market.
Heineman said several times taxes were a difficult conversation to have and that he welcomed all positions. Heineman said he was open to any middle ground on his proposal and had received a wide range of feedback, from those wanting to eliminate all exemptions to those that were concerned with protecting the exemptions that most affected them.
Community Hospital President Jim Ulrich said the hospital industry was concerned with how the removal of tax exemptions would be facilitated and said they could wipe out margins and hamper hospitals' ability to provide health care. Ulrich said LB 613 had been introduced to create a commission to study effects of the changes, changes that he wasn't confident could be worked out in one legislative session.
Gov. Heineman said he didn't believe the issue warranted a study, which would create uncertainty in the business community while it was being conducted. Heineman said if any changes were made he wanted them to take place this legislative session and not be delayed by a study.
Heineman said that if we think out current tax system is going to take us where we want to go we should leave it as is, "if not, we need to have this conversation."