The Coming Showdown Over Tax Reform

Starting next month, the Nebraska Legislature will be charging forward on reforming the state's tax system. Everything will be on the table -- from expanding the sales tax, to property tax relief, to outright abolition of the income tax. And Nebraskans for Peace intends to be right in the thick of this discussion, arguing for fairness and justice in any proposed plan.

In the Wednesday, December 11 Lincoln Journal Star, the newspaper's editorial board laid out its perspective on the forthcoming tax reform debate, which outlines, we think, some 'common sense' principles for the Legislature to heed. Despite its reputation as dry and technocratic, tax policy gets right to the heart of issues of equality and compassion and defines the kind of society we will be. There is, accordingly, no more important Peace & Justice issue.

Deliberate speed on tax reform
By the Journal Star Editorial Board
December 11, 2013 

When Gov. Dave Heineman proposed to take a meat cleaver to Nebraska’s tax system last year, farmers, business owners and much of the body politic recoiled in dismay.

The governor soon put away the cleaver, or, to put it more precisely, withdrew his bold plan to do away with the state income tax by shifting to a broader sales tax base.

Now, after months of public hearings and study, the Tax Modernization Committee has proposed a slower, more surgical approach, using a scalpel instead of a cleaver.

That sounds like a less risky way to fix problems with the state’s tax system.

It’s important that senators do not forget what they learned as they listened to ordinary folk from one end of the state to the other.

What they heard was a chorus of complaints about high property taxes – not a recitation of talking points based on rankings of state taxes by one think tank or another.

The first thing that senators can do to address that concern is to stop shifting the burden to local property taxes, as they have done time after time in recent years. Sometimes the Legislature does it inadvertently, as it did last year when it approved a plan to shift to a community-based juvenile justice system, rather than relying on juvenile offender centers in Kearney and Geneva. Lancaster County staff estimated the change would boost costs by more than $1.2 million in transportation costs alone.

And sometimes the Legislature shifts the burden purposefully, as it did when it OK'd the governor’s proposal to eliminate state aid to local government. That cost Lincoln almost $2 million.

According to analysis by the OpenSky Institute, most states give more aid to local government. Nebraska’s state government supplies about 27.5 percent of local government funding. The national average is 33 percent. And most states give school districts more funding. Nebraska provides about 30 percent of school funding. The national average is about 44 percent.

Where can the state get the money to provide property tax relief? The governor had the right target.

In contrast to many states, Nebraska has a relatively small sales tax base. Most states, for example, have a sales tax on various services to households, including such things as massages and spa treatments.

By using a scalpel in skillful fashion, state senators can address the ailments in the tax system pointed out by constituents. As committee chairman Galen Hadley put it, “These are incredibly difficult issues, and you want to do them right.”

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