Proposal to form new tax committee moves forward

LINCOLN -- A legislative committee would be formed to study the tax system in Nebraska under a resolution advanced by lawmakers Thursday.

LR155, introduced by Sen. Ernie Chambers of Omaha, would create the Tax Modernization Committee to examine the state’s tax structure and submit recommendations to the governor and the Executive Board of the Legislature by December of this year.

Chambers said the committee would look at sales, income, property and other taxes and solicit input from the public to determine the best tax structure for the state.

The committee would comprise all the members of the Revenue Committee, the chairmen of several standing committees and two at-large members selected by the Executive Board, totalling 16 members.

Sen. Galen Hadley of Kearney, chairman of the Revenue Committee, would head up the new task force.

He cautioned that the study would not necessarily result in sweeping tax reductions but would focus on achieving equity in the tax system.

“What does a modern tax system look like?” Hadley asked rhetorically, adding that higher taxes on services, which were not a large part of the economy when the current tax laws were passed, might be in the mix.

Sen. Bob Krist of Omaha, who sits on the Executive Board, said the two at-large members would be freshman senators. The purpose of this is to ensure continuity in the process after senior members are term limited out of office next year, he said.

Senators expressed support for the creation of the the committee, but laid out their own individual expectations.

Sen. Dave Bloomfield of Hoskins said the committee should not look for ways to increase tax revenue.

“Let’s keep revenue balanced and let’s keep our system more fair,” he said.

Sen. Bill Avery of Lincoln said the committee should try to make the tax system more rational.

“We do not have a rational tax structure in the state right now,” he said, citing sales taxes that apply to soda purchased in a restaurant but not a grocery store.

Hadley said bringing equity to the tax system might mean raising taxes in one area, like sales, in order to lower taxes in another area, like real estate.

“Will you have the courage to vote on some of the proposals?” he asked his colleagues, referring to the committee’s future recommendations.  

Earlier this year, Gov. Dave Heineman introduced proposals to reduce or eliminate state income tax and make up for the lost revenue by repealing several sales tax exemptions.

Those bills did not have enough support to make it out of the Revenue Committee.