A major new proposal for state tax reform is brewing and it appears likely to be moored to shifting more of the burden from income taxes to expansion of the sales tax base to include a broad array of currently untaxed services.
That could prompt a rate reduction for individual and corporate income taxes.
Sales and income taxes are the major sources of funding for state government.
Participating in a Zoom video conference Wednesday hosted by Blueprint Nebraska, an organization created by a coalition of business, industry and civic leaders to outline a plan to propel the state forward in terms of growth and prosperity, were two key senators deeply engaged in determining tax policy.
Sen. Lou Ann Linehan of Elkhorn, chairwoman of the Legislature's Revenue Committee, said Nebraska is living with a 1967 tax code and needs to consider proposals to broaden its tax base and lower its tax rates.
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"We have a governor with experience and we're going to lose 12 seasoned legislators" after the 2022 election, when they will be term-limited out of office, Linehan noted.Â
"The time frame is now," she said, and the state needs to go big in terms of tax reform even though "big is hard."
Sen. Tom Briese of Albion, who has emerged as the leading legislative voice in helping achieve growth in state funding to provide local property tax relief, said property tax relief and reform "must be near the forefront" of any tax reform package.
Linehan said her committee is poised to "talk about the big picture," seek consensus on a proposal and then "go across the state and sell it."
Contacted following the Zoom event, Linehan said her strategy will be "small steps this year, bigger steps next year."
Next year will be the eighth and final year in office for Gov. Pete Ricketts, who has recently worked closely with Linehan on tax issues, and also the final year in office for a dozen veteran senators, including a number of legislative leaders. Â
Previous legislative efforts to extend the sales tax to include dozens of services have been overwhelmed by a wave of opposition from business and professional interests that would be financially impacted.
Former Sen. Jim Smith, executive director of Blueprint Nebraska, said realignment of Nebraska's tax structure is needed to "provide statewide economic growth and prosperity."
Jim Greisch, a financial services leader at RSM US consulting firm in Omaha, said Nebraska needs to reduce its property tax burden, keep the corporate income tax rate "as low as possible" and "significantly broaden" the sales tax base to attract capital and spur economic growth.
"States with high taxes on businesses are at a competitive disadvantage," said David Brunori, a research professor of public policy at George Washington University and senior director at RSM US.
Nebraska's array of tax incentives and tax credits demonstrates its awareness that the state has "relatively high corporate and personal tax rates," he said.
Sound tax policy is built on a system of low rates and a broad tax base, Brunori said.
"Nebraska generally gets that principle backward," he said.
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