With a broad proposal for income and property tax reduction locked down in the Legislature by a successful filibuster, attention turned Tuesday to proposed reduction or repeal of personal property taxes applied essentially to business machinery and equipment.

Those taxes impede investment, productivity and job creation, participants in a Platte Institute legislative forum said.

Nebraska's personal property taxes are "some of the highest in the region," Scott Drenkard, director of state projects at the Tax Foundation, told an audience that included a large number of state senators.

And that has a negative impact on Nebraska's rate of economic growth, he said.  

Drenkard suggested that senators could consider exempting new property that fits the current definition of personal property, enacting a local option provision that leaves those taxing decisions to the counties, or simply decide to repeal the tax.

Personal property taxes represent 5.6 percent, or $217 million, of the total property taxes collected statewide. Rural Nebraskans pay the most on a per capita basis.

Sen. Jim Smith of Papillion, chairman of the Legislature's Revenue Committee, and Sen. Curt Friesen of Henderson, vice chairman of the committee, quickly ruled out the local option suggestion during an ensuing panel discussion. 

Smith said elimination or reduction of the tax would spark investment of capital, business expansion and job creation.

Both senators pointed to replacement of lost revenue as the biggest obstacle to overcome.

Property taxes represent the biggest tax challenge in Nebraska, especially in rural areas, Friesen said. Imposition of the current personal property tax means that farmers and rural businesses are "punished in a way for trying to become more efficient and be better for the environment," he said.

Smith said he sees potential for legislative agreement on personal property tax reform.

"We need to improve the business climate in the state," he said. "We need to do something (that) bridges the divide between rural and urban Nebraska."

Friesen said the biggest challenge is "how to fund K-12 education," which now is funded primarily by local property taxes.

Following the forum, Smith said he is continuing to meet with Gov. Pete Ricketts to consider changes in the big tax reform bill that currently is trapped on the floor of the Legislature by a filibuster.

Supporters fell six senators short of acquiring the 33 votes that were needed to break the filibuster last spring. The Legislature will reconvene in January.

"The governor and I continue to have conversations (in) looking for a way forward," Smith said. "We have not settled on anything specific so far."

Smith said he will sit down with Ricketts again next week.

Ricketts opened the Platte Institute forum pointing to his "No. 1 priority to control the (state) budget and taxes."

That is "critical (for us) to remain competitive in attracting companies" to the state and creating new jobs, the governor said.

Reach the writer at 402-473-7248 or dwalton@journalstar.com.

On Twitter @LJSDon.

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Don Walton, a Husker and Yankee fan, is a longtime Journal Star political and government reporter.

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