Governor Dave Heineman will appear before the Unicameral’s Revenue Committee today to talk about his proposal to eliminate the state income tax and replace it by expanding the sales tax.
Senator Tyson Larson of O’Neill says the governor’s proposal would hurt farmers.
“It’s obviously very concerning to those of us that represent ag communities,” Larson says. “I talked with the governor before he introduced this and I said I liked the idea but he can’t put an undue burden on the agricultural community because we are the number-one in the state.”
Heineman’s proposal would eliminate most business sales tax exemptions as well as sales tax breaks enjoyed by farmers in order to pay for the elimination of the state income tax. Larson says that’s unfair.
“Ninety-eight percent of the state’s exports are agricultural exports,” Larson says. “We drive this state and yet he feels that since there’s less ag producers in this state, they’re the easy people to pick on compared to Omaha or Lincoln.”
A number of sales tax breaks enjoyed by farmers would be eliminated: an exemption on agricultural chemicals which totals $87 million, an exemption on gasoline and diesel used in farming which totals $82.1 million, an exemption on tractors, combines and other farm equipment which totals nearly $67 million and an exemption on seeds for commercial use which totals $42.3 million.
Larson says the Governor should rethink some of the sales tax exemptions in his plan.
“South Dakota doesn’t have a sales tax exemption on food, every pays that sales tax,” he says. “I’d argue we should as well in Nebraska. Everyone eats. This needs to be spread across the board if we’re going to do something of this nature.”
The individual and corporate income tax in Nebraska generates $2.4 billion annually for state government. The state grants $5 billion in sales tax exemptions. The governor proposes eliminating an equivalent amount of sales tax exemptions to offset the loss of income tax revenue.
Jerry Oster, of WNAX Yankton, contributed to this story