A New Tax Climate in the Making


Gov. Dave Heineman's State of the State address focused on bold tax cuts that could pave the way to a new tax environment.

Lawmakers said they're ready to begin discussions that would decide the best tax climate for Nebraska.

The governor's State of the State address focused on the need for tax reform, something that hasn't been done for nearly 50 years, and lawmakers said they're ready for long hours of debate.

Addressing the 103rd Legislature, Heineman said it's time for Nebraskans to open serious debate on the overall tax system.

The governor said he wants to eliminate the individual and corporate income tax, or at least lower those rates.

Hastings Sen. Les Seiler said of Heineman's plan, "I believe the goals he set are attainable, they're great goals for long term success for Nebraska."

Lawmakers weighed in on the governor's tax reform proposal that includes:

- No individual income tax for working Nebraskans.

- No taxing of small business income.

- No taxation for Social Security, military, or any retirement income.

- No corporate income tax.

In order to keep the budget neutral, the plan has the state's revenue dollars coming from undoing all of the current sales tax exemptions.

Sen. Kate Sullivan of Cedar Rapids said, "If we remove some of those exemptions, some of that business activity could go to neighboring states."

Sullivan added "Every single one of those was put in place because some entity, some group fought hard for them and built the case that they were necessary. "

Sen. Tom Carlson of Holdrege said now is the time to focus on tax reform because the list of exemptions has been adding up.

Carlson said, "The thing that happens more and more over the years is you get more and more sales tax exemptions and pretty soon you've eroded the base, so it does need to be looked at, but that's no simple matter -- It's not something we're going to do overnight."

The governor's plan also includes an increased funding to schools. He wants to increase state aid to education from $852 million to $895 million in fiscal year 2014 and to hit $939 million in fiscal year 2015.