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Plan to scrap Nebraska’s income tax is dead

By   /   February 16, 2013  /   News  /   11 Comments

Nebraska Gov. Dave Heineman testifies earlier this month before the Revenue Committee (AP photo)

By Deena Winter | Nebraska Watchdog

LINCOLN — The governor has scuttled his ambitious proposal to end Nebraska’s income taxes and instead plans to begin a broader study of tax reform.

Just a couple of weeks ago, Gov. Dave Heineman was defiant in the face of overwhelming opposition to his proposal — proclaiming “we have only just begun to fight” — but Saturday he backed away as it became clear the Revenue Committee might kill the bills.

Omaha Sen. Beau McCoy and Heineman called reporters to inform them of their decision to take a step back. McCoy said he will make a motion in the Revenue Committee, most likely on Wednesday, to kill the two bills that were introduced at the governor’s request.

The more audacious bill, LB405, would have eliminated the income tax by ending $2.4 billion worth of sales tax exemptions. That prompted an outcry from farmers, businesses and nonprofits that would have been affected. The other bill, LB406, was a scaled-down version that would have ended the corporate income tax by scrapping $400 million in sales tax exemptions.

The public hearings on the bills attracted dozens of people from across the state who testified for hours, late into the night in opposition of the plan.

McCoy said he expected outcry.

“We will be paving the way for us to have a much broader discussion,” he said. “We’ve been listening to what Nebraskans have been saying the last two, three weeks that we’ve been talking about tax reform.”

Nebraskans want to talk about tax reform but also want to talk about charging a sales tax on services, property tax reform and reform of economic development incentives, McCoy said.

A performance audit released last week found that Nebraska spends up to $235,000 on business incentives per job created and that the Legislature hasn’t clearly defined its goals for the program or set limits on spending.

“There are a lot of people that say we need to really look at business incentives,” McCoy said. “Are we doing that in the most cost-efficient way?”

Renee Fry, executive director of the OpenSky Policy Institute, a Lincoln think tank that opposed the governor’s tax bills, was surprised but pleased to hear of the governor’s decision.

“The opposition has been pretty powerful and pretty consistent,” she said. “We really believe that the tax code should be modernized. It is out of date. He’s right. That’s great that they’re planning to include tax incentives as part of that broader tax reform.”

Hearings and briefings on tax reform will be held in the Revenue Committee beginning this session, McCoy said.

“We are going to end up with very meaningful tax reform in this state,” he said.

Omaha Sen. Ernie Chambers recently called the bills “peacock bills,” implying the governor didn’t expect them to pass. McCoy disagreed, saying, “We have every intention of getting to meaningful tax reform.”

Contact Deena Winter at [email protected].

Editor’s note: to subscribe to News Updates from Nebraska Watchdog at no cost, click here.


Deena formerly served as staff reporter for Watchdog.org.

  • Thats a a real bummer. Nebraska needs some relief

  • Joan

    Whoa, that is scary, the Governor is going to start “thinking” again.

  • Did the Gov really think he could pull this one off? No Nebraskan’s had tax reform at the top of their agenda. This idea came from the Koch brothers or Pete Rickett or the Platte Institute or somebody.
    And here is a news flash; Heineman is term limited and nobody except McCoy and Ashford have to kiss his behind anymore. Put a fork in the Gov he is done.

  • slycad

    So Lucy pulls the football away in mid kick, and Charlie Brown Falls flat on his face. Oooops, taxpayers here’s a tax cut, oh sorry, guess not this time.

  • WD

    Big Business gets its way again in Nebraska. big business cry’s wolf and everyone runs…

  • Watching_From_Lincoln

    Big business got NOTHING this time. Can you not comprehend what you read? Big business would have received massive tax breaks under either bill, instead they received nothing, nada, zilch from these bills being pulled. This is a perfect example of what is wrong with the Republican base nation-wide – too stupid to realize how stupid they are – they just bark and salivate on cue without knowing why.

  • I know the tax code. It has long been gutted by corporate lobbyists for some time. This is why they rebelled and the people lost.

  • WD

    Haven’t you read where if this tax cut was to passed, businesses said they would leave the state. Like the little kid says so if I can’t play I will take my ball and I will go home..

  • Jazzee

    at least you would think the idiots in the legislature would consider something anything a new idea for tax relief since their only solution to ALL their problems is raising taxes……………so the Governor’s idea isn’t going to fly how about you idiots come up with something??? OH yeah Ashford the leftie plans something…..we shall see bet it includes the stupid Buffet rule……..so sick of the class warfare there are better ways to do things if they had the GUTS to do it……instead of pitting each person against another

  • Pat Boyle

    I would’ve liked to have seen more specifics on the plan. I do not know if this plan would’ve made things better or not. I’m glad to see them doing more research but they should’ve had their act together before the “bold” announcement.
    I guess we’ll wait and see what Iowa does then we’ll copy it in 2018.

  • Ben Freeman

    I looked up Nebraska gross state revenue. we could illimate all taxes in nebraska if it is true we are loosing 5 billion in state revenue from exemptions on a 5.5 % sales tax. seems like a no brainer! no state property tax. no state income tax. no state service fee tax. no state inhertance tax. no state taxes! or fees for anything. just a flat 5.5 % across the state sales tax could double the state revenues! think of all the economic benifits to business and individuls in saved income and jobs. let alone how good it would feel to walk out of any state agency not feeling like you just got rob. sounds like “the good life” to me.