Momentum for cutting taxes built Wednesday among state senators, who weren’t slowed by warnings they might put the state at risk of falling into a deep financial hole.

Three years removed from a brutal session where lawmakers increased taxes to lift sagging revenue, senators united behind the effort to decrease taxes so Nebraskans would save a total of about $217 million over three years.

After about six hours of debate, senators gave first-round approval to the slate of tax cuts that is supported by Gov. Dave Heineman.

If given final approval in the last days of the session, the package would increase lids on income tax brackets so about half the state’s 851,000 taxpayers would pay lower rates.

It would also eliminate a much-criticized sales tax on home repair labor, lower the taxable value of ag land from 80 percent to 75 percent, and change a homestead exemption program so seniors and people with disabilities would pay less.

Sen. David Landis of Lincoln, chairman of the committee that crafted the package, suggested senators view it as a spending priority to which the budget must conform, instead of the reverse.

Another Lincoln senator, Chris Beutler, failed to persuade lawmakers that “this tax package, overall, long term, is simply not sustainable” and could eventually put the state in the red by nearly $200 million.

Beutler argued the cuts rely on an infusion of $100 million from the state’s rainy day cash reserve fund, tapped when tax revenues lag, and pointed to research he requested from the Legislature’s fiscal office. It showed $500 million is needed in the fund to prevent the state from having to raise taxes should an economic downturn strike again. There is now about $327 million in the fund.

“I do not want to cut taxes now in good times when people don’t need the money,” Beutler said, and be forced to raise taxes when people can’t afford it.

But senators never fell in line with Beutler, who yanked a request that the package go back to the Revenue Committee to be pared after it was clear there wasn’t enough support to do so.

The time for a tax cut is now, some senators said.

“If we want to ignore the … (tax) burden on the people of Nebraska, we have to realize that is not sustainable,” said Sen. Pam Redfield of Omaha, who introduced the main tax cut bill (LB968).

Said Sen. Don Pederson of North Platte in response to Beutler: “We’ve never had $500 million in the reserve, never.”

As chairman of the budget-writing Appropriations Committee, Pederson’s position on the package carries significant weight that could be buttressed by the fact he was an early skeptic of cutting taxes.

Early in the session, after Heineman announced he wanted to cut taxes and made it part of his campaign stumps, Pederson urged senators to pay the bills first and look at revenue estimates before seriously considering tax cuts.

“We are in a position now … to pay our bills,” said Pederson.

Some senators argued the state is also in position to give residents property tax relief, but that the tax-cut package doesn’t provide it and actually increases the burden for many.

The property tax lid for school districts was set to drop to $1 per $100 of assessed value from $1.05 in two years. Heineman’s original proposal called for lowering the lid sooner. But under the proposal that emerged from the Revenue Committee and got first-round approval Wednesday, the lid would not drop.

Combined with “minimal” income tax relief in the package, said Sen. Gail Kopplin of Gretna, the package actually increases taxes.

“We’re talking about minimal cuts in income tax but increasing the property tax 5 cents,” he said.

The only change made Wednesday with a significant cost was adding $10 million to the state’s ethanol fund over the next two years to help meet the state’s obligations to ethanol plants that qualify for incentives to build.

Because of the property tax increase, “I really don’t know understand why any governor would want his name to this package,” Beutler said.

Heineman remains supportive of the compromise tax cut plan voted on Wednesday, said his spokesman, Aaron Sanderford.

“It’s not everything that anybody would have wanted, but it’s a good package and we will remain supportive,” Sanderford said.

Reach Nate Jenkins at 473-7223 or njenkins@journalstar.com.