LB289 debate

Sen. Sue Crawford (left) speaks with Sen. Lou Ann Linehan during debate on major tax reform legislation.

And so the 2019 Legislature prepares to adjourn Friday after its journey through a brutal winter and hesitant spring, leaving tax reform and substantial property tax relief behind as senators flee Lincoln and step into June.

This has been essentially a defensive struggle; there wasn't much scoring during the past five months.

In its closing days, as major property tax relief floundered, the Legislature added a proposed new business tax incentives plan to its POW list, setting the stage for some heavy-duty negotiation and bargaining during the months that lie ahead before lawmakers return to the Capitol next January.

A major concern hanging over the newest tax incentives proposal is the history of their accumulated costs, along with skepticism expressed by some senators as to whether businesses might have expanded or located here without pocketing those tax breaks.

The counter-argument is that Nebraska cannot afford not to be in this high-stakes economic development game and come to the battle competitively armed.

The current tax incentives program, dubbed Nebraska Advantage, is scheduled to expire at the end of 2020.

But it was the failure to enact substantial property tax relief after a long journey through conflict and compromise and arduous negotiation that was this legislative session's headline.

Business tax incentives were yanked into that battle at the end.

It's not that this year's Legislature didn't score some points and make some gains. 

A carefully structured 2019-21 state budget, conservative but not regressive when measured at 2.9% in spending growth, sought to do no harm and even fuels some advancements. 

There was forward progress in correctional reform.

Legislation to require collection of Nebraska sales taxes for online purchases was approved; Lincoln got a big win with enactment of a bill that will speed up construction of the South Beltway by five years, allowing completion of the long-awaited project three years from now.

Freshman Sen. Myron Dorn of Adams won a showdown with Gov. Pete Ricketts when the Legislature overrode the governor's veto of his bill that will allow Gage County to levy a temporary sales tax to help pay the federal court judgment in the Beatrice 6 case.

But, in terms of legislative breakthroughs or triumphs, this was a session full of more dead-end alleys than open freeways. A lot more punts than first downs.

Although property tax reduction was the dominant and politically pressing issue, there never was a moment when you could sense that an agreement providing substantial property tax cuts could clear the Legislature's 33-vote filibuster barrier.

Sen. Lou Ann Linehan of Elkhorn, chairwoman of the Revenue Committee, drove the tax reform bus, with Sen. Mike Groene of North Platte, chairman of the Education Committee, helping steer the course as co-pilot.

They revised and reshaped their proposal in conjunction with other members of the Revenue Committee during numerous executive session deliberations before pushing a bill to the floor for consideration.

By then, Ricketts had branded the tax reform proposal as a tax increase even though the package would not have increased total taxes, but rather would have changed the distribution of the tax load, relying heavily on acquiring additional state sales tax revenue in order to reduce the property tax portion of the tax load.

The bill, fashioned to deliver property tax relief through a restructured program of state aid to schools that predominantly would benefit rural schools, would have increased the state sales tax rate by one-half percent while eliminating a number of current sales tax exemptions and making other proposed tax changes. 

That's tax reform, Linehan said.

Tax increases, Ricketts said.

And the governor scheduled media events at businesses affected by elimination of sales tax exemptions and argued against the proposal during speaking appearances and through online messaging.

Two conservative Republicans, Ricketts and Linehan, divided over policy and perspective and message. And the end results.

After the committee proposal was blocked at first-stage floor consideration, unable to display the support of 33 senators needed to jump a filibuster and thus barred from a return to the legislative agenda, Sen. Tom Briese of Albion stepped in with a scaled-down tax reform proposal of his own.

Whereas the committee bill envisioned raising $372 million in new revenue to reduce local property taxes in a process that centered on state school aid reform, Briese proposed a more modest $112 million property tax reduction backup plan that relied on additional sales tax revenue raised through elimination of an array of sales tax exemptions. 

Briese fell 10 votes short of jumping a filibuster, and supporters promptly took the proposed new business tax incentives bill captive two days later.

Once the Legislature adjourns, the hostage negotiations will begin.

In the meantime, the Legislature's budget decisions — signed into law by the governor without a single line-item veto — will increase the state's property tax credit fund by $51 million a year, bringing the total to $275 million in annual credits.  

The Appropriations Committee had recommended sending half of that $102 million fiscal 2019-21 biennial total into the state's depleted cash reserve fund, but the Legislature overruled the committee on a 28-8 vote and devoted all of it to property tax relief.

Shadowing the property tax legislative dispute now is an initiative petition drive to place a proposed constitutional amendment on the 2020 general election ballot that would provide Nebraskans with a state income tax credit for 35 percent of local property taxes paid.

That would deliver a billion dollar jolt to the state budget that would trigger substantial increases in state sales and/or income taxes or sharp reductions in spending for state programs and services, or both.

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

On Twitter @LJSDon.


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