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Thursday, May 5, 2016

Governor: Tax discussions overdue

Wednesday, February 6, 2013

Gov. Dave Heineman enjoys a laugh with Don Klein of McCook following the governor's speech to the McCook Rotary on Tuesday.
(Bruce Baker/McCook Daily Gazette)
McCOOK, Nebraska -- Discussing what the future should look like for Nebraska's tax structure is not an easy conversation to have and one you only want to have about every 50 years, according to Gov. Dave Heineman. He told members of the McCook Rotary Club the time for that discussion was now and he hoped that by the end of this legislative session Nebraska would have a positive proactive solution.

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."

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Eliminating half the exemptions would not necessarily equal half of the uncollected sales tax revenues. A study would show this line item by line item. For somebody who wants to completely overhaul the tax system in a single session, the Governor seems poorly prepared and uncertain as to what's the best plan. He doesn't have a specific plan listing who he thinks should remain exempt and who doesn't, nor does he have the numbers those exemptions would add up to because he hasn't committed to a specific sales tax rate. He has only repeated very generic numbers without looking into the specifics of those numbers that are needed for legislation.

He needs to get past the "what if we did this" stage of the idea and now he needs to do the research to make an informed decision but right now he only has enough information to keep it in the "what if" stage. Unfortunately, it doesn't seem the Governor wants to do the research based on the lack of support for a study to actually get an idea of what the impact would be by looking at the numbers in detail.

It's like Nebraska's own version of "you'll know what's in it when it's passed" being rushed through before the consequences of its passage can be thoroughly assessed. That wasn't received too well back here and I doubt it will be received any better when it comes to people's taxes. A study will tell us the effect on the businesses being targeted by the Governor's idea and a real estimate of what it will do to tax revenues unlike the generic statements being floated by the Governor right now.

If the Governor wants this done then he can't throw it at the Legislature and ask for it to be rushed through because he didn't do the homework before he brought it to them. Like the old saying goes, "a lack of planning on your part does not constitute an emergency on mine."

-- Posted by Aaron Kircher on Wed, Feb 6, 2013, at 1:12 PM

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