Opponents to the governor’s plan to eliminate the state income tax assail it as counter-productive, claiming it would damage the state economy, not improve it.
Those opposed to LB 405 dominated the final few hours of a 9 ½ hour public hearing held at the state Capitol by the Legislature’s Revenue Committee.
Open Sky Institute Executive Director Renee Fry insisted the best state tax policy rests on a broad platform of taxes that includes an adequate “rainy day” fund.
“LB 405, however, eliminates individual and corporate income taxes and makes the tax system heavily reliant on sales taxes. In the process, it will likely make it harder to recover from economic downturns and harder to fill the rainy day fund in good times,” Fry told the committee.
Business leaders warned committee members that manufacturers would consider moving from Nebraska if the legislature eliminated sales tax exemptions they now enjoy.
John Cederberg, speaking on behalf of the Nebraska Chamber of Commerce, urged the Revenue Committee to kill the bill.
“Not kill the discussion, though. Not kill the process,” Cederberg added, stating that the Chamber agreed with the governor that a debate on the state tax structure is long overdue.
Gov. Dave Heineman proposes eliminating the state individual and corporate income tax. To offset the loss of state revenue, the governor proposes eliminating $2.4 billion in sales tax exemptions Nebraska grants; approximately half the total amount of state sales tax exemptions granted annually.
Manufacturers get breaks on buying certain equipment. Farmers don’t have to pay sales tax on the tractors, combines or other equipment they buy. Agriculture chemicals and fertilizers are exempt from sales taxes.
Nebraska-Iowa Equipment Dealers Association President Andrew Goodman warned the committee that if Nebraska eliminates the sales tax exemption on farm equipment, farmers will simply buy from dealers in surrounding states.
“The ability to do that is there. They can transport it themselves today. It’s not a problem,” Goodman stated.
Farmer Stan Stobel of Scotts Bluff County said that charging sales tax on farm equipment would greatly undercut profitability and could even be a deciding factor in whether his son continues the family tradition of farming.
“It doesn’t take much for this smart, educated young man to see what the future is in agriculture and what profits would be left in this volatile business poised to be sent to the state in the form of a new tax,” Stobel said.
The Revenue Committee heard testimony on LB 405 Wednesday. It will hear testimony on LB 406, a less sweeping measure during a public hearing at the Capitol this afternoon.
Wilcox farmer Gale Lush urged the Revenue Committee to reject LB 405 and its slimmed down version, LB 406, seeing little difference between the two.
“It’s the difference between getting run over by a train or a bus,” Lush stated. “The end result is always the same. You’re still dead.”