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Yahoo
20-05-2025
- Business
- Yahoo
Sales tax, tobacco tax push doom Nebraska's ‘One Big Beautiful Bill' for property tax relief
State Sen. Tom Brandt of Plymouth, at podium, with Gov. Jim Pillen and State Sen. Barry DeKay of Niobrara, from left. Brandt serves as chair of the Legislature's Natural Resources Committee. DeKay chairs the Agriculture Committee. May 7, 2025. (Zach Wendling/Nebraska Examiner) LINCOLN — Nebraska's version of 'One Big Beautiful Bill' for property tax relief went up in smoke Monday despite an effort to narrow new revenues to increased taxes on cigarettes and vapes. It becomes the third property tax package in the past year to propose and fail to garner traction to use new sales tax revenues to lower property taxes. It also deals a significant blow to Gov. Jim Pillen's pledge to keep property taxes flat this year as he eyes reelection. Legislative Bill 170, led by State Sen. Tom Brandt of Plymouth, failed 30-15. It needed 33 votes to overcome a filibuster from opponents across the political spectrum who opposed the tax 'shift. The proposal originally sought to add sales taxes to 20 currently exempt goods or services, including pop, dating services, chartered jets, swimming pool cleaning and maintenance services and pet grooming. It also sought to hike the taxes on cigarettes (up to $1.36) and vapes (up to 40%). The original package anticipated $110 million in new revenue, with $100 million directed to property tax credits to offset property taxes paid to local K-12 school districts. 'Property taxes remain one of the most painful burdens our residents face, impacting everyone from family farmers to first-time homeowners,' Brandt said. 'This legislation is a responsible, targeted effort to address the burden by broadening Nebraska's tax base.' However, as happened at the end of both the 2024 regular session and an 18-day special session Pillen called last summer, lawmakers ultimately rejected expanded sales taxes on several goods and services, which could have raised about $53 million, Brandt's estimates indicated. 'It's just rebranded or repackaged from the prior two failed attempts that this Legislature has not moved forward for a variety of different reasons, with strong support across a politically diverse coalition,' said State Sen. Danielle Conrad of Lincoln. Brandt sought to narrow LB 170 to a lower revenue target of $80 million for new property tax relief each year by striking any broadening of the sales tax base. Instead, he proposed to increase cigarette taxes to $1.64 per 20-pack, which he said would raise nearly $60 million each year, and to increase vape taxes to 40% wholesale, which he said would raise about $15 million. Both versions of LB 170 also included a proposal from Fremont State Sen. Dave Wordekemper to capture a 20% tax on cigars, cheroots and stogies purchased online, which senators estimated would raise $100,000 in revenue. That left roughly $5 million that would have needed to be made up later, such as by adding back a handful of expanded sales taxes to the package. State Sen. Jana Hughes of Seward, who has fought for increased taxes on vapes, said property tax relief is necessary for the grandmas or grandpas across Nebraska, as well as retirees and veterans, who are being priced out of their homes because of property taxes. Hughes, State Sen. Mike Jacobson of North Platte and a handful of other conservatives in the officially nonpartisan Legislature defended the shift to new sales tax revenue as targeting 'optional' goods or services. 'We are so dang lazy we can't even go to the McDonald's drive-through by ourselves to go pick up our food. We hire someone to pick it up, and that's a service, and we're not even talking about taxing that service,' Hughes said. A vote against LB 170, supporters said, was a vote against property tax relief. 'Don't tell me you're representing your constituents when you say you don't want to lower property taxes, because you aren't representing your constituents,' said State Sen. Mike Jacobson of North Platte. 'You're representing some ideology.' Much of the pushback to LB 170 was bipartisan, including from Republican State Sens. Brad von Gillern of the Elkhorn area, chair of the Legislature's Revenue Committee, and Stan Clouse of Kearney, who said the bill was not 'sustainable' relief. Clouse, a former longtime Kearney mayor, said the relief was 'not real' and was 'simply increasing revenue streams.' He suggested eliminating unfunded mandates was a better focus. Added von Gillern: 'This is putting dollars into the top of a bucket that has a hole in the bottom of it.' State Sen. Beau Ballard of Lincoln, a Pillen appointee, criticized LB 170 and its narrower components as a 'tax increase with no end in sight' that wasn't the right path forward, even as he identified property tax relief as a top priority for his district. Von Gillern and State Sen. Tanya Storer of Whitman said the increased revenue also wouldn't keep up with property tax growth, which was nearly $300 million in two of the past three years. The exception in annual increases that high was last fall, after the state took on the tab for property taxes previously levied by community colleges. The state budget passed last week included about $57 million in expanded property tax credits for next year, and about $11 million more for homestead exemptions. Even combined with the $80 million in Brandt's bill, property taxes would likely increase statewide next year. That stands in direct contrast to Pillen's pledge to hold property taxes flat. He has said that, without 'a shadow of a doubt,' he and allies would find additional property tax relief this year. Storer, a rancher in north-central Nebraska, said she was concerned that the continued reliance on property tax credits was 'feeding the demon' and taking away accountability from local taxing authorities. 'We still haven't pulled the right triggers,' Storer, a freshman lawmaker, said. Another path forward for property tax relief includes buying down property tax levies directly, an approach led by Hughes in a Pillen-backed LB 303, which also sought long-term changes to how the state funds K-12 schools. However, the provision to lower property taxes directly has since been stripped out of LB 303 to give time for senators to further study the approach before returning next January. On the Democratic side, State Sen. George Dungan of Lincoln, who has consistently opposed expanding the sales tax to exempted items without lowering the 5.5-cent statewide sales tax rate, said the latest package would pick 'winners and losers.' Dungan criticized repeated efforts for a 'grand slam swing' at tax policy when expansive adjustments need more time to be effective. State Sens. Ashlei Spivey and Terrell McKinney, both of Omaha, noted LB 170 wouldn't have helped renters. Conrad and State Sen. Dunixi Guereca of Omaha cautioned that an increased tax on nicotine products also wouldn't be paid by 'Big Tobacco' executives, but everyday Nebraskans. Dungan and State Sen. Machaela Cavanaugh of Omaha added that increasing taxes on cigarettes and vapes would hopefully decrease tobacco usage, which could lead to less tax revenue. 'If we continue to just try to put a piece of tape over the hole in the boat,' Dungan said, 'it's not going to fix the actual problem.' After the vote, Brandt said he was disappointed and that he had made his 'run' for more relief. 'If the Legislature doesn't want to give property tax relief, I don't know what else I can do,' Brandt told the Nebraska Examiner. Voting to move forward on LB 170: Democratic State Sens. Wendy DeBoer of Omaha, Jason Prokop of Lincoln, Dan Quick of Grand Island, Jane Raybould of Lincoln and Victor Rountree of Bellevue. Voting against LB 170: Republican State Sens. Bob Andersen of Sarpy County, Beau Ballard of Lincoln, Stan Clouse of Kearney, Glen Meyer of Pender, Tanya Storer of Whitman, Jared Storm of David City and Paul Strommen of Sidney. SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
Yahoo
14-03-2025
- Business
- Yahoo
Nebraska lawmakers told easiest way to dig out of budget deficit is to ‘pause' income tax cuts
Lawmakers were told Thursday that the easiest way to close the state budget hole and offset more in property taxes is to pause the next step in the state's income tax cuts. (Getty Images) LINCOLN — A rural senator told fellow Nebraska lawmakers Thursday that the 'simplest' and most 'straightforward' way to dig the state out of a $289 million budget deficit would be to pause the deep income tax cuts passed two years ago. 'While tax reductions are important, we also need to be responsible to the state budget,' State Sen. Tom Brandt of Plymouth told the Legislature's Revenue Committee. 'Let's pause and take a breath.' Under his proposal, Legislative Bill 171, the stair-stepped reductions in individual and corporate income tax rates passed in 2023 would be paused at 4.99% in tax year 2026 and would not drop further to 3.99% as the 2023 law prescribed. That change, which Brandt maintained was 'not a tax increase,' would provide an extra $497 million dollars to state coffers over the next two fiscal years, more than covering the budget gap and allowing funds to be devoted to property tax relief. Supporters of the bill, which included the state's major farm groups, said it would help fulfill promises by Gov. Jim Pillen and state leaders to address the state's worst tax issue, high property taxes, while providing the revenue to head off deeper budget deficits predicted in coming years. The tax rate could be cut further, they said, when state tax revenues allow it. 'Now is not the time to reduce income taxes if we are to realize property tax relief,' said Merlyn Nielsen, a Seward farmer, who said it was 'clear to me that property tax relief has been pushed to the back of the line.' But the state's business community slammed the idea of a pause, saying it would make Nebraska less competitive in attracting new employers and would renege on a promised tax reduction. The legislative hearing on sales tax exemptions pointed out several contradictions in state tax policies. For instance, dry cleaning of uniforms by a business is tax exempt because it's a 'business input,' but if a banker needs suits dry cleaned, that's taxed. People buying a bottle of soda pop from a vending machine are not taxed, but those buying a cup of pop from a concession stand or fountain dispenser are. 'This is absolutely the worst thing we could do,' said Bryan Slone, the president of the Nebraska Chamber of Commerce and Industry. Slone said that any 'pause' in the income tax reductions would be viewed as a tax increase. The debate over LB 171 renewed the differences exposed by the big tax cut passed in 2023. Advocates, like the business community, had long sought income tax cuts, and Iowa's recent move to lower its tax rate to 3.8% accelerated the push. But critics questioned whether the state would run short of money to fund operations. One state senator, Machaela Cavanaugh, has called the current budget deficit a 'manufactured crisis' due to the reduction in income tax revenue. Right now, two neighboring states, South Dakota and Wyoming, have no state income tax. While a 3.99% rate would put Nebraska in line with Iowa, both Kansas and Missouri have higher rates of 4.7% and 5.8% respectively, according to Open Sky Policy Institute. Nebraska's ranking for the best business climate for taxes by the nonpartisan Tax Foundation has improved recently from 28th to 24th in the nation, which Rebecca Firestone of Open Sky called 'a very good place to be' given the state's small population. Slone said that the state isn't in a budget hole because of its spending, but because it's devoting more and more money to property tax credits. He and other critics of LB 171 said the real answer to lowering property taxes was to find another way to finance those credits or to slow spending at the local level. 'Income tax reform will remain mission critical for states who want to remain competitive,' said former State Sen. Jim Smith, now with the Platte Institute, a free-market think tank. Brandt acknowledged during the hearing that his proposal was unlikely to advance from the eight-member Revenue Committee, but he said it should be considered given the future budget challenges faced by the state. The senator presented two other bills to the committee on Wednesday that would also address the state's budget shortfall and provide more funds for property tax relief. Those proposals prompted frustration from Brandt and at least one member of the Revenue Committee about opposition to past attempts to lower local property taxes. 'We are charged with trying to fix the (property) tax problem, and everything we try gets shot down,' said North Platte Sen. Mike Jacobson. Under Brandt's LB 169, sales tax exemptions on about 20 items would be removed, from charter flights and dry cleaning to golf lessons and tattoos, raising about $37 million in new revenue. The senator's LB 170 would impose sales taxes on soda pop and candy, and, as written, would raise taxes on cigarettes and liquor. Brandt called LB 169 a 'luxury tax' proposal, since the items identified in the bill are 'optional' purchases. He called LB 170 a 'sin tax' bill since it raises taxes on junk food, cigarettes and liquor. The senator said he was disappointed that last year's regular and special session did not result in expanding the sales tax base. Brandt said he had worked since then to craft a list of sales tax exemptions that fellow lawmakers felt most comfortable removing. But the bills sparked a long line of opponent testifiers, as have similar past proposals to eliminate tax exemptions. Critics called the new taxes regressive, since they shifted taxes onto lower-income Nebraskans and said they would be difficult and costly to implement. Some said the proposals represented a tax shift, not a tax reduction. Others said it's difficult to discern what is junk food and what isn't because some candy bars don't qualify as 'candy' and lots of soda pop sold has no calories. 'This is not tax reduction,' said Slone of the State Chamber. 'It's just a change in who pays.' Owners of Nebraska movie theaters testified that a new tax on their rentals of Hollywood films would be another burden for an industry still not fully recovered from the COVID-19 pandemic. They argued it would be a ''double tax' since customers already pay sales taxes on admissions and concessions. Brandt said he removed hair care from his bill due to opposition from barbers and beauticians and that he would probably remove the proposed increase in liquor taxes due to concerns that it violates the federal Commerce Clause by favoring in-state liquor producers. The Revenue Committee took no action on the three Brandt bills after the hearing Thursday. SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
