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Tax findings released
December 23, 2013 Jerry Purvis   

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On Dec. 6, the Nebraska Tax Modernization Committee announced the findings and recommendations from its six-month study.

The committee’s 14 members traveled the state this fall, holding five public hearings about how the state can streamline its tax system.

During the meetings, the committee heard from more than 250 citizens, which spanned 17 hours of testimony. They also received many written comments through letters and emails.

The committee’s 94-page final report, released Dec. 9, addressed three major areas: property tax, income tax, and sales and use taxes.

State Senator John Harms, one of the committee members, said property tax reduction was what most people wanted. “We went across the state, and overwhelmingly it was property tax,” he said. “Property tax isn’t easy to look at because a lot of people argue it’s a local issue. It is, but the state hasn’t helped the situation by taking away most of their state aid.”

Property tax was most important to western Nebraska citizens. The committee recommended increasing state aid to schools to offset property tax use, reducing property taxes as a share of total state and local taxes.

The committee also recommended raising homestead exemption income guidelines, increasing the number of low-income households that would qualify. Another recommendation would provide relief to households that have a higher burden of property tax on their household incomes. That would help offset the regressive nature of property taxes.

Harms warned the Legislature needs to go slowly in implementing cuts because it could have adverse effects in other areas.

The committee report said that corporate and individual income taxes were “appropriately progressive,” but the bracket system used by the state has not kept pace with inflation.

They also recommended raising provisional income thresholds used to calculate Social Security benefits. That would exclude more Social Security income for low-income taxpayers. And they recommended further study of additional exemptions on retirement income.

Under committee recommendations, the corporate tax bracket would be adjusted from $100,000 to $250,000 of taxable income at the 5.58 percent rate. The top bracket rate of 7.81 percent would apply to corporations with more than $250,000 of taxable income.

In the area of sales and use taxes, the committee recommended exempting repair and replacement parts for agricultural machinery and equipment. The also called for further review to determine what consumer services should be added to the tax base.

Nebraska is the only one of the surrounding states that collects sales tax on residential utilities. The committee recommended a refundable credit be implemented through the income tax system to offset those taxes paid by low-income households.

“I don’t have any real interest in broadening sales taxes very far,” Harms said. “We shouldn’t include food or any of those sorts of things.”

Harms expects to see senators introduce individual legislation in the upcoming session that is based on the committee’s recommendations. “Those bills are usually done on the committee level and I’m sure we’ll have plenty to discuss,” he said. “We only have a 90-day session next year and we need more time if we’re going to overhaul the tax structure.”
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