Legislative committee edges toward sales tax increase; tentative plan likely to earn veto
The Legislature’s Revenue Committee appeared to be embarked on a collision course with Gov. Pete Ricketts on Thursday as it began to informally shape a tax reform package during a three-hour executive session.
No votes were taken, no amendments were adopted, but there was general consensus on constructing a tentative proposal that could increase the 5.5 percent state sales tax rate by one-half percent while hiking the state’s cigarette tax and wiping out an array of sales tax exemptions.
Also on the table was consideration of a state income tax increase component.
Discussion centered on achieving a property tax reduction goal that would deliver at least a $200 million decrease in property taxes in Nebraska’s beleaguered agricultural sector, although one senator said agriculture ought to seek a higher level of immediate tax relief.
The committee’s tentative pathway would almost certainly lead to a gubernatorial veto. Earlier this week, Ricketts reiterated his vow to oppose any increase in tax rates.
In his fiscal 2019-2021 budget proposal, the governor has proposed a $51 million-a-year increase in the state’s property tax credit fund.
The plan being discussed by the committee would add at least $200 million to the current $108 million annual credit, bringing total property tax relief for the agricultural sector to at least $308 million a year.
During a free-wheeling discussion, committee members individually identified their preferences with one expressing their “need to stick together” in order to obtain success.
Ultimate passage of a tax reform package will be required to head off the prospect of a constitutional amendment that would impose immediate and dramatic property tax reductions that would require sharp increases in sales and income taxes or deep cuts in state programs and services, or both, one committee member warned.
Petitions already are being circulated to place such a proposal on the 2020 general election ballot.
A tax reform bill faces the daunting challenge of needing to clear both a filibuster and a gubernatorial veto.
It takes the votes of at least 33 senators in the 49-member Legislature to jump a filibuster waged by opponents and 30 votes to override the governor’s veto.
Revenue Committee Chairwoman Lou Ann Linehan of Elkhorn has been attempting to build a committee consensus, actively seeking the views of each member as the committee moves toward a decision.
Four members of the committee hail from rural Nebraska; four represent districts in metropolitan Omaha.