October 5, 2015

Legislators consider options to cut property taxes & still fund schools

Sen. Roy Baker

Sen. Roy Baker

Members of two key legislative committees are meeting this week, looking at alternatives to property taxes to support schools. Nebraskans are complaining about the burden of property taxes in the face of higher valuations on farm land.

State Senator Roy Baker, of Lincoln, says one idea is to keep state spending increases in check and utilize revenue above the rate of spending to help pay for public education.

Baker says, “Under Governor Ricketts’ master plan, we would keep the overall state budget to somewhere around 3% increases per year and then hopefully, revenues to the state would be in the 5% range which, over time, could create some money that would be available to do just that.”

A former school superintendent, Baker says homeowners and property owners could see a rollback in their property taxes, under the plan.

“There’s concern among some that we don’t just want to give this money to the schools and let them keep leveeing the same taxes,” Baker says. “There’s going to have to be some way of demonstrating that if more state money goes to schools, then they have to be able to show that they’ve reduced property taxes by that amount.”

Baker says there’s some support for the idea of a greater use of income tax or sales tax revenue toward education. Last session, legislators approved an increase in the property tax relief fund. Baker says a tougher sell would be raising income or sales tax rates.

Other options include removing some sales tax exemptions or taxing some services. Baker sees little support for a sales tax on food because it tends to hurt those at lower incomes. Taxing junk food has been discussed. Another suggestion is expanding gambling, including online gambling, something Baker does not support.

“A whole lot of college students have become addicted to that type of thing,” Baker says. “They’re staying up all hours, neglecting their studies and the belief is it’s leading to more failures in college, more people dropping out of college.”

Baker opposes further spending restrictions on school districts, saying districts need to maintain local control of their operations. Education and Revenue Committee members of the legislature are meeting in the interim, to fashion possible proposals for the upcoming session. Meetings are scheduled for Wednesday and Thursday.

By Doug Kennedy, KWBE, Beatrice


Ralston Arena debt problems continue

The city of Ralston is in a financial dilemma due to their arena and officials are looking at the Legislature for help. Ralston is already receiving a turn-back tax and gets 70% of the state sales tax from businesses within 600 yards of the arena that opened shortly before or after it was built.

Jim Vokal is the Executive Director for the Platte Institute for Economic Research and says that is very generous turn-back money and wanting more is a stretch. He says now they want to expand that to 1,000 yards and 10 years within the arena opening.

Vokal says, “Where we have local decision making we should also have local accountability. I don’t think that the residents of Chadron who are looking for increased educational funding or someone in Lincoln County needs additional infrastructure funding should have to subsidize Ralston any further.”

Vokal adds Ralston officials need to come up with their own solution and unfortunately that could mean an increase in property or sales tax or an additional restaurant tax to offset losses.

Nebraska in top 5 states for fiscal health

A new report shows Nebraska is one of the top five states regarding fiscal health.   Platte Institute for Economic Research Executive Director Jim Vokal says ranked 4th best for cash position in the country and tied for 4th place when it comes to reliability of revenue.

Vokal says Nebraska has $780-million in cash reserves but Nebraskans are still not seeing across the board tax cuts for middle class residents. He says Nebraska has the highest income tax rate from North Dakota to Texas and is the 13th highest for property tax collections.

Vokal says, “There is a lot of pressure from senators and outside interest groups to carve out exemptions for certain groups but not for the middle class where it is needed most.”

Vokal believes the overall Legislature would like to debate a broad based tax reform bill but the Revenue Committee showed last session they are more interested in carving out deductions and tax breaks for car washes and certain property owners.

Tax filing errors that can prompt an audit

The first goal for many Nebraskans today is to get their income taxes filed before the deadline at midnight. For some, after the sigh of relief comes the fear of an audit by the Internal Revenue Service.  Berger and O’Toole CPA Bob Berger says there are a few red flags the IRS looks for when reviewing filings.

Berger says the IRS uses what they call a discriminate income function as a score. That helps the IRS identify taxpayers that have variances from the norm. Berger says, “Those are the ones that are under-reporting income. You forget about the 1099 or a W-2, you leave it off by mistake. The IRS gets that information so they will target you for an audit.”

Berger says they also look for math errors but those are few and far between. He says they also look for high income tax payers. He says, “If you have a year you made a lot of money, you are in a higher tax bracket and the odds of you making a material error or something that is going to generate revenue for them is much higher.”

If you can’t get your taxes filed by the deadline, Berger says request that six month extension. This really only benefits those receiving a refund because all taxes owed are still due today.

Tax procrastinators need not panic; just file an extension

IRS LogoFederal tax returns are due by midnight tonight and officials with the Internal Revenue Service expect more than 48,000 Nebraskans will request an extension this year.

IRS spokesman Bill Brunson says you can go the antiquated route, filling out a paper form that needs to be put in an envelope, stamped and postmarked before midnight, or speed up the process with a few clicks on the agency’s website.

Brunson says, “All you need to do is go to IRS.gov and click on the Free File icon where you can choose to request an extension automatically for an additional six months online at no charge.”

You have until midnight to make the request, which will push your federal tax deadline back to October 15th.

While it used to be a circus-like atmosphere on April 15th, with procrastinators rushing to the post office late at night, most of those offices now keep regular business hours on tax deadline day.

Brunson notes e-filing has all but eliminated that urgency and Nebraska is one of the nation’s e-filing leaders.

“You’re looking at approximately 901,000 returns to be submitted to the IRS for the 2014 tax period and of that number, some 826,000 Nebraskans are projected to electronically file,” Brunson says. “That’s a rate of 91%.”

E-filers also have until midnight to complete the tax task, which Brunson says is more accurate, since the program won’t let you make a math error. He touts another benefit:

“Your electronic return is secure in the sense that, if you have a refund coming, you can choose to have it directly deposited in your savings or checking account, and that item won’t get lost or stolen like an old-fashioned paper check,” Brunson says. “You can expect to get a refund from the Internal Revenue Service in 21 days or less.”

E-filing saves the IRS a bundle. Processing a paper return costs $3.54 on average, while an e-filed return costs more like 18-cents.