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State chamber unhappy with senators’ proposal

December 20, 2018

A legislative task force voted to make a critical recommendation Friday in its final report, but this week some members want to take it back.

And Nebraska Chamber of Commerce and Industry President Bryan Slone wants to encourage that do-over.

The six senators at the Economic Development Task Force meeting voted unanimously to include in their final report a recommendation to the Legislature to move up the end date for the Nebraska Advantage Act and the Rural Advantage Act and to terminate the New Farmer Credit, the Historic Tax Credit and the New Markets Tax Credit.

The task force has 10 members.

The Nebraska Advantage Act (LB312), voted into law in 2006, allows a taxpayer in a qualified business to earn and use tax benefits based on investment and employment growth. Six tiers have varying requirements and benefits.

Sen. Dan Watermeier of Syracuse said that as the group discussed its final report, some believed it ought to recommend ending the Advantage Act in 2019, rather than letting it go on another year past that.

“That would push up the conversation about how we fix it. What do we do better? What do we do different?” said Watermeier, who will leave the Legislature for a seat on the Public Service Commission in January.

But he really hopes it would just end. Economic development is more than just creating a tax incentive for business, he said. Maybe there’s a way to give incentives to workers, instead.

“The problem with what we’re doing here is that we’re never going to grow our state without investing in the people,” he said.

He’s not alone in his opinions.

Sen. Paul Schumacher of Columbus, who will leave the Legislature in January, said there were indications five years ago that the Advantage Act was not performing, not creating higher-wage jobs and not successfully increasing employment.

In 2017, the task force recommended making economic development programs a priority, saying a state Department of Revenue analysis found the act’s lost tax revenues exceeded gains from additional economic activity and would continue to do so through 2025.

The net cost to the state was $50.7 million in 2017, and that cost was expected to grow to nearly $82 million by 2025.

Hundreds of millions of dollars in tax credits accrued mostly to about 80 companies, and most of those companies were already in Nebraska, Schumacher said. About five companies receive the bulk of the credits, he said.

“It has not passed any of the tests under which it’s been examined by the Legislature. Nevertheless, the thing lives on,” he said.

And applications are being approved faster now than a few years ago.

“It’s time to say that the gig is up for the Advantage Act,” rather than let two more years of accelerated applications occur, committing resources the state doesn’t have, he said.

Sen. Sue Crawford of Bellevue is chairwoman of the task force and sent an email Monday to members asking that they reconsider Friday’s vote and vote again. Although she supported the recommendation to sunset the Advantage Act early, she has changed her mind and will vote no.

It’s an unusual situation, she said.

“I just thought it was an important recommendation and wanted to make sure that the full committee had a chance to debate on it, and make sure it was a recommendation the majority definitely wanted to support,” Crawford said Tuesday.

Slone said it’s clear to the chamber the state needs tax incentives to be competitive. The state’s tax rates are in the top half of rates in the country, and the economics of the incentives have been proven over time.

“In order for us to compete for investment and great jobs, we have to have an incentives package,” Slone said. “Their own (task force) report says we need an incentives package.”

He expects a debate in the Legislature over the criteria for incentives and how much the state should give to recruit companies and jobs, he said. The chamber doesn’t oppose conversations about tweaks to the incentive provisions to make them more effective in today’s economy.

But they must be careful about the message being sent to businesses that might come here, Slone said.

When discussions began about creating tax incentives, a number of companies in the state were considering moving out. And at least one did, he said.

“Those incentive packages over the years were not only very helpful in bringing some very significant employers to the state, but also maintaining some of our core anchor companies in the state,” Slone said.

Some of the larger employers not only kept their headquarters in the state but expanded their operations.

“I would hate to think of what our business environment would be if we hadn’t had those incentives over the years,” he said.

Sen. John McCollister of Omaha, who wasn’t at Friday’s meeting, said he would vote to rescind the recommendation, giving the task force time to discuss it further.

But Sen. Mike Groene of North Platte, who also was not at the meeting, said Tuesday he would vote against changing the recommendation.

At the task force hearings, he said, testifiers said the Advantage Act wasn’t effective, that the “bang for our buck wasn’t there,” too much was concentrated on infrastructure and construction rather than on actual job creation.

“Quite frankly, it wasn’t good for rural Nebraska,” Groene said.

His opinion is this: Why wait? We live in a high-speed society and don’t need to linger if things need to be changed.

The vote was a message, he said, that the Legislature needs to come up with a plan, not the Nebraska Chamber of Commerce.

The group’s final report is due before the end of the year.

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