Sales tax exemptions eyed to fund Nebraska property tax relief

September 14, 2018

Nebraska’s long list of state sales tax exemptions was identified Thursday as the best potential revenue source to help fund substantial local property tax relief during a legislative forum sponsored by the Platte Institute.

But Sen. Curt Friesen of Henderson also pointed to current state tax incentives for business development and expansion contained in the Nebraska Advantage Act, which is due to expire — or be renewed or revised — by 2020, as a possible source of new revenue.

“Everything’s on the table,” Friesen said, including his own willingness to consider “moving the corporate (income tax) rate to zero” as part of a grand tax reform bargain.

The business incentive program is “a fairly large revenue drain,” Friesen said, “and it has not accomplished all that was intended.”

Sen. Mike McDonnell of Omaha said he would favor “putting all sales tax exemptions on the table” during legislative consideration of tax reform.

“We need to have that discussion,” he said.

Platte Institute CEO Jim Vokal noted that tax reform will require “a 33-vote consensus” to gain enactment in the 49-member Legislature. That’s the number of votes that would be needed to break a filibuster mounted by any proposal’s opponents.

Friesen, a member of the Legislature’s Revenue Committee, said turning to the state income tax to produce additional revenue that could fund property tax relief is politically off the table.

“The sales tax is the only possibility to generate the revenue,” he said, and newly authorized collection of state sales taxes for online purchases made by Nebraskans could be part of a compromise solution.

Friesen is one of three senators who are expected to contend for the committee chairmanship next year. Other anticipated candidates are Sen. Brett Lindstrom of Omaha and Sen. Lou Ann Linehan of Gretna.

The eight-member committee will count five new members next year as a result of legislative term limits, setting the stage for a new look at tax reform.

McDonnell, who is not a member of the committee, said he has been urged to take a role in attempting to help broker a tax reform solution and he is prepared to work with Gov. Pete Ricketts and his legislative colleagues to help seek an agreement.

“We need to bring everyone to the table and compromise,” he said.

Friesen said local property tax relief is “the largest single issue” facing the state and it would have been easier to achieve if the state was experiencing revenue growth instead of revenue and budget challenges.

“Everybody’s going to have to give a little bit,” said Jay Rempe, senior economist for the Nebraska Farm Bureau and a panelist.

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