AP NEWS

Business groups back income tax bill; farm groups lukewarm

February 20, 2019

LINCOLN, Neb. (AP) — Nebraska business groups backed a proposal Wednesday to cut the state’s top income tax rates and put millions of dollars into a tax credit for property owners, but farm and ranching groups raised concerns that it wouldn’t do enough for their struggling industry.

The bill presented to the Legislature’s tax-focused Revenue Committee seeks to address the concerns of business owners who say Nebraska can’t compete with most of its neighboring states.

“We need to grow. We need to have our young people stay here and have people actually move to Nebraska and start businesses,” said Sen. Mike Hilgers, a Lincoln attorney and business owner who sponsored the bill.

The bill would trigger automatic cuts in Nebraska’s top individual and corporate income tax rates anytime state revenue grows by more than 3.5 percent and the state’s emergency cash reserve holds at least $500 million. It also would steer $75 million a year into Nebraska’s Property Tax Credit Fund, a state account used to reduce local property tax bills.

Business groups said they support efforts to reduce property taxes, but not if it means raising other taxes, as agriculture groups have suggested. The dispute has prevented lawmakers from passing any sort of major tax package in recent years.

“We support property tax reform, but merely doing so on the backs of other taxpayers who are already paying high income taxes and high sales taxes is not sustainable,” said Joseph Young, an advocate for a coalition of Nebraska business groups. “It has proven time and again that it will not work.”

Nebraska’s current top tax rate is 6.84 percent for individuals and 7.81 percent for corporations. The bill would ratchet both of those rates down to 5.99 percent over time, which Young said would help Nebraska businesses compete with nearby states.

But John Hansen, president of the Nebraska Farmers Union, said the bill would provide relatively little benefit to farmers whose incomes are already down because of low crop prices. Hansen said Nebraska has created a tax system over time that relies too heavily on local property taxes.

“The fact that you own property doesn’t mean you have the corresponding earned income to pay the tax load,” he said.

Mick Mines, a lobbyist for a seven-member coalition of Nebraska farm groups, said the bill is worth discussing but stressed that reducing property taxes should be a major part of the package. Mines said boosting money for property tax credit fund isn’t enough because it doesn’t offset the huge increases farmers and ranchers have experienced.

“The property tax credit fund isn’t working,” he said. “It doesn’t provide meaningful tax relief.”

Other critics said the bill favors wealthy Nebraskans who pay a larger share of their income at Nebraska’s top tax rate. The measure would reduce state revenue available for state services, said Renee Fry, executive director of the OpenSky Policy Institute. Fry also took issue with the automatic nature of the tax cuts.

“Putting tax cuts on autopilot without regard for current or future realities isn’t good tax policy,” she said. “It ignores the budget challenges we face and the need to build up the cash reserve.”

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