Lawmakers begin long discussion on possible tax reform

2013-03-15T20:00:00Z 2013-03-20T11:35:35Z Lawmakers begin long discussion on possible tax reformBy KEVIN O'HANLON / Lincoln Journal Star JournalStar.com

Lawmakers pushed away from the dock Friday on a voyage that could result in the first massive overhaul of Nebraska's tax system in some 50 years.

Senators began debate on a bill (LB613) by Paul Schumacher of Columbus that would create the Tax Modernization Commission and lay the groundwork for tax reform discussions that will go on for the rest of the year.

"It was pretty obvious that this session was going to be in large part the session of the conversation on taxing policy," Schumacher said, "and ... that that conversation would end up being far more complex and involved and with so many different interests that we would probably have to pause for a moment and try to figure out in the long term, what is right for the people of Nebraska, what is right for the future children of Nebraska and how to begin to cast a system which hopefully will serve the state as long as the previous one."

The framework for the present tax system was built in the 1960s.

Earlier in the session, Gov. Dave Heineman withdrew his plan for a massive overhaul of the state's tax system. He instead said lawmakers should take time to study the system. That development put the spotlight on Schumacher's bill.

But that wasn't until after scores of people swarmed the Capitol when the Revenue Committee held public hearings on Heineman's plan.

"It came across very clear to us that people would like us to look at modernizing the tax system," said Sen. Galen Hadley of Kearney, chairman of the committee. "Does that mean there is going to be change? I can't guarantee you that. Does that mean you're going to have lower taxes? I can't guarantee you that. But ... we need to look at this from a neutral standpoint.

"The goal of this ... is to look at our taxes in the state of Nebraska and determine whether they are equitable."

As written, the bill says the commission would include the speaker of the Legislature, several legislative committee chairmen and women and vice chairmen and women. Ex-officio members would include the Legislature's fiscal analyst, tax experts from the University of Nebraska and the state tax commissioner and property tax administrator from the Department of Revenue.

But under a pending amendment to the bill, makeup of the 12-member commission would be the eight Revenue members and chairs of the Education, Health and Human Services, Appropriations, Agriculture and the Legislature's Planning committees.

Education Committee Chairwoman Kate Sullivan is already on the Revenue Committee. The commission also would have ex-officio, nonvoting members such as employees from the Revenue Department and the Legislative Fiscal Office and could call in experts and help from legislative staffs.

The commission would consider tax code fairness, competitiveness, simplicity and compliance, stability, adequacy and complementary tax systems.

The tax overhaul bills (LB405 and LB406) introduced on Heineman's behalf fostered discussion about inequities in property taxes, particularly in rural communities, as well as about high corporate taxes, income tax brackets and expansion of the sales tax base.

The governor's boldest proposal would have eliminated income taxes and $2.4 billion in sales tax exemptions to make up for the loss of income taxes.

Reach Kevin O'Hanlon at 402-473-2682 or kohanlon@journalstar.com.

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