By GRANT SCHULTE
LINCOLN, Neb. (AP) - Nebraska Gov. Pete Ricketts is preparing a new push to lower income and property taxes in next year’s session, with arguments that the state can’t compete with its peers.
Ricketts told a Lincoln audience Thursday that he expects a lot of discussion in the Legislature about the state’s income tax, an issue that has taken a back seat to property tax reform. His comments came at a forum sponsored by the Platte Institute, an Omaha think tank that frequently advocates for lower taxes.
“Income tax relief is one of the areas where we have to be more competitive,” Ricketts said in his speech. “We’re working on ideas with regard to that. I see this as something that we’ll be talking a lot about in the next session. How do we become more competitive when it comes to taxes?”
Lawmakers shifted their focus from income to property taxes after a 2013 legislative study concluded that Nebraska’s tax code isn’t substantially different from its neighboring states, but property taxes were higher than average.
The study has served as a rough guide for lawmakers working on tax policy, although four lawmakers on the 14-member study committee refused to sign the report because they disagreed with it.
Nebraska’s top individual income tax rate is 6.84 percent, which is lower than the 8.98 percent top rate in neighboring Iowa but higher than the 6 percent imposed by Missouri, according to the Washington-based Federation of Tax Administrators. South Dakota and Wyoming levy no income tax, largely because of revenue from natural resources and tourism, and Kansas is phasing out its income tax even though the decision created state budget problems. Colorado imposes a flat 4.63 percent tax.
Sen. Jim Smith of Papillion said he wants lawmakers to look at baseline tax policies when they convene next year. Smith said Nebraska’s tax code hinders small businesses, many of which pay the individual income tax instead of corporate income taxes because of the way their companies are structured.
“We have to have baseline tax policies that are attractive for businesses to expand,” said Smith, who spoke on a four-member tax policy panel.
Creighton University economist Ernie Goss said state officials should focus on reducing or eliminating tax exemptions as a way to pay for broader income tax cuts, but lawmakers have not shown the will to do so. Goss said he believes state aid to local governments should only increase with population growth or a natural rise in costs.
“Nebraska’s moving in the opposite direction that we need to,” Goss said.
Former Gov. Dave Heineman announced a plan in 2013 to abolish the state’s income tax by eliminating tax exemptions, but the proposal faced heavy opposition from lawmakers and groups that received the exemptions. Critics of the plan also argued that taxes play less of a role in attracting businesses than quality schools, roads and amenities for young people.
Sen. John Stinner of Gering said lawmakers need to maintain their focus on reducing property taxes to help farmers and ranchers. Stinner said they also need to keep lowering the tax burden of retirees, many of whom leave the state for places like Arizona, Nevada, Texas and Florida.