Business groups, local governments say they support Pillen tax shift proposal if changes made

But state chamber, Kawasaki and leading tax attorney oppose reductions in business tax incentives provided in ImagiNE Act

By: - February 2, 2024 8:10 pm
Lou Ann Linehan

State Sen. Lou Ann Linehan of Elkhorn takes questions about tax shift and spending cap proposals designed to reduce property taxes by 40%. (Paul Hammel/Nebraska Examiner)

LINCOLN — Four straight days of gathering public input on Gov. Jim Pillen’s plan to use higher and broader sales taxes to lower property taxes made it clear there’s more work to be done.

On Friday, several key business and local government entities said they agreed high property taxes were a problem, but their support for the governor’s plan came with conditions.

The Nebraska Chamber of Commerce and Industry — a key player in any major tax reform — testified that it supported the concept of a harder cap on local government spending and “front loading” the property tax break that now requires claiming it on an income tax form.

Opposed tax hike, shift

But Alex Reuss, a representative of the chamber, said its members can support Pillen’s plan for a $1 billion reduction in property taxes only if it doesn’t involve a sales tax increase or a tax shift from property to sales.

The governor’s plan, however, includes a 1-cent hike in state sales taxes and the removal of sales tax exemptions on several items, including farm repair parts, accounting and legal services for businesses, and new taxes on soda pop and candy.

Representatives of the state’s counties and cities testified “neutral” on Pillen’s proposal for a “hard cap” on spending increases — limiting them to 2% a year eventually unless voters decided to exceed the cap.

They said they preferred a 3% limit on spending increases and more exceptions to the cap than allowed by the governor.

Fastest growing county opposed

A member of the Sarpy County Board, Angi Burmeister, testified against the “hard cap” proposal, Legislative Bill 1414, saying it would might lead to cutting back on law enforcement or 911 services.

“We have some unique challenges as the fastest growing county in the state,” Burmeister told the Legislature’s Revenue Committee.

Friday’s public hearing was actually less negative about the Pillen plan than previous hearings on Tuesday, Wednesday and Thursday, when testifiers lined up to oppose his plan to remove sales tax exemptions, limit school spending and “sweep” out millions in state agency reserve funds to finance his tax shift.

No surprise about opposition

State Sen. Lou Ann Linehan of Elkhorn, who helped craft the package of bills as a member of the governor’s working group on tax reform, said Friday it wasn’t a surprise that organizations opposed parts of the plan.

Both Linehan and Pillen said state lawmakers need to look past the lobbyists and respond to regular Nebraskans who decry that the state has some of the highest property taxes in the country.

Conservative groups such as Americans for Prosperity joined the state chamber in opposing the tax shift and tax increases in Pillen’s plan, stating that a tax shift isn’t a tax reduction. Even the business-friendly Platte Institute generally didn’t like portions of the plan.

Farm groups supported Pillen’s proposals Friday, but in the past, it has taken the support of both farm and business groups to pass major tax bills, and that doesn’t appear to be the case so far.

Despite that, Linehan remained optimistic.

“I really believe if you tell people we’re going to knock 40% off your property taxes, and tax some other things, they’ll say ‘let’s do it,’ ” Linehan said.

Jim Pillen
Gov. Jim Pillen urged members of the Legislature’s Revenue Committee on Thursday to “tune out the noise” and have the courage to pass his proposed new taxes to reduce property taxes. (Paul Hammel/Nebraska Examiner)

Pillen, in his remarks at the Revenue Committee hearing, said that “all Nebraskans expect real change … real reform.”

“They’re tired of being told that property tax relief has been addressed. … This will fix it,” he said.

One of the most interesting exchanges of the afternoon-long hearing came when representatives of the state chamber, along with chambers of commerce in Omaha and Lincoln, testified against a bill to make the state’s 4-year-old business incentive program, the ImagiNE Nebraska Act, more “people focused.”

Changes to ImagiNE Act opposed

Representatives of the chambers, an economic development group and Kawasaki Motors of Lincoln, as well as well-known Omaha tax attorney Nick Niemann, all warned that it was too soon to make changes in the act and that reducing some of its benefits would harm business recruitment and expansion.

Critics also complained that business groups weren’t involved in crafting the bill, unlike in past years on other economic incentive bills.

A clearly perturbed Linehan, who introduced LB 1410 on behalf of the governor, questioned the opposition from business. For years, she said, they have asked for generous tax incentives because Nebraska’s taxes, especially income taxes, were too high.

But last year, she said, the Legislature passed a major cut in taxes, to gradually reduce the state’s top individual and corporate income rates to 3.99% from upwards of 6% and 7%, a significant cut.

“I just don’t buy it,” Linehan said of the opposition to LB 1410.

The bill also contained new incentives for employers to help with child care bills and for workforce housing — two priorities identified by Pillen’s working group on the state’s labor shortage.

Other aspects of Pillen’s tax and workforce plans subject to a public hearing Friday:

LB 1394: Income earned while serving in the Nebraska National Guard would be exempt from state income taxes. The $2 million break translated to an average savings of $400 per Guard soldier.

The bill was portrayed as a way to help recruiting for the Nebraska Army and Air National Guard, which has slumped in recent years. Officials said the Guard was now at about 92% of its authorized strength because of changes in societal attitudes towards the military and the tight labor market.

LB 1400: Tax credits would be provided for employers who help pay relocation expenses for new employees who make between $70,000 and $250,000 a year. The bill also would allow new employees to escape state income taxes for two years.

The proposal was portrayed as helping address the state’s workforce shortage.

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Paul Hammel
Paul Hammel

Senior Reporter Paul Hammel has covered the Nebraska state government and the state for decades. Previously with the Omaha World-Herald, Lincoln Journal Star and Omaha Sun, he is a member of the Omaha Press Club's Hall of Fame. He grows hops, brews homemade beer, plays bass guitar and basically loves traveling and writing about the state. A native of Ralston, Nebraska, he is vice president of the John G. Neihardt Foundation.

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