Tax reform package heads to rare three-committee public hearing Wednesday

April 24, 2019 GMT

It’s crunch time.

Three legislative committees, spearheaded by the Revenue Committee, will hold an extraordinary public hearing Wednesday to examine this session’s much-revised tax reform plan before it heads to a showdown on the legislative floor.

It’s the gateway to the end game, the prelude to a high-stakes shootout that has been building for four months.

Joining the Revenue Committee for the hearing will be members of the Education Committee and the Retirement Committee, a recognition that this comprehensive tax plan uses state aid to schools as the vehicle to property tax reduction and makes a change in Omaha’s school retirement levy limit to authorize additional funding for its troubled teacher retirement program.

“I hope the people will have some influence, not just the special interests,” Revenue Committee Chairwoman Lou Ann Linehan of Elkhorn said on the eve of the public hearing.

The Legislature will adjourn early Wednesday to accommodate what is likely to be a lengthy hearing that will begin at 4 p.m.

The tax reform proposal is a multi-faceted creature.

Adding suspense to the legislative drama is the fact that not a single Revenue Committee vote has been taken yet on the ingredients contained in the tax package.

It’s a committee composed of four rural senators and four who hail from metropolitan Omaha, and the likelihood is that the final version of the proposal may not be able to command universal support within the committee when the time comes to take a vote.

Committee members from both rural and urban areas have privately said they still want some changes in the bill.

“There will be changes,” Linehan said.

“It’s a big lift,” she said, “but we are pretty close to having a bill.”

The proposal (LB289) would raise the 5.5% state sales tax rate by three-quarters of a cent while wiping out a number of sales tax exemptions and hiking the state cigarette tax from 64 cents to $1 a pack in order to fund substantial property tax reductions.

That trade-off plays out somewhat differently in rural and urban areas of the state.

Rural Nebraska and agriculture, a vital sector of the state’s economy, are increasingly burdened by rising property taxes.

While urban areas also have experienced increasing property taxes, the sales tax rate in both Lincoln and Omaha now stands at 7% because of add-on local sales taxes.

Lincoln’s rate is set to go to 7.25% in October.

Sen. Mike Groene of North Platte, who has played a leading role in helping author the much-revised committee plan in concert with Linehan, said Tuesday he’s asking his staff to develop a look at how the proposal might impact average taxpayers in both rural and urban communities.

Linehan has said the average reduction in property taxes under the plan would be about 20%. Total property tax reduction has been pegged at $500 million a year.

In advance of the hearing, Gov. Pete Ricketts weighed in with another shot across the bow, once again describing the proposal as “the largest tax increase in the history of Nebraska.”

Ricketts has proposed increasing the $224 million annual state property tax relief credit fund by $51 million a year during the approaching fiscal biennium, along with a constitutional amendment that would limit future property tax increases to 3% a year.

“The key to tax relief is controlling spending,” the governor said in a statement that urged Nebraskans to contact their senators.

Linehan said the argument that increasing sales taxes to help fund property tax relief represents an unacceptable shift of taxes from one taxpayer to another ignores the fact that the current state property tax credit fund already represents a tax shift.

Linehan said she expects to schedule an executive session of the Revenue Committee on Thursday in an attempt to make any needed changes and move forward with the bill.