Nebraska governor’s tax plans face more resistance

Farm Forum

LINCOLN, Neb. (AP) – Tim Kelliher paid more than $19,000 in state income taxes in 2011, an amount that could vanish in future years, depending on what happens to Gov. Dave Heineman’s two tax proposals.

But on Feb. 7, the Kearney farm producer made his first-ever trip to the Nebraska Capitol with a message for lawmakers: Kill both bills.

Kelliher told the Legislature’s Revenue Committee that he would pay less in income taxes if the governor’s plan becomes law, but losing sales-tax exemptions that the governor has targeted would prompt him to spend his money elsewhere. The 18-year-veteran farmer said he would travel out-of-state to buy seed, delay equipment purchases, and use manure for fertilizer instead of purchasing it from a Nebraska producer.

His testimony was part of a wave of opposition on Feb. 7 from groups that represent hospitals, farmers, low-income families and businesses that enjoy the sales-tax exemptions. Lawmakers convened the hearing on the second of two proposals aimed at Nebraska’s income tax and sales-tax exemptions.

Kelliher invoked the warnings of former presidential hopeful Ross Perot, who spoke of a “giant sucking sound” of jobs rushing from the United States to Mexico under the North American Free Trade Agreement.

“Nebraska will hear the same sucking sound of agricultural industry leaving, across our state borders,” Kelliher said. “Fertilizer, seed and equipment will be bought in neighboring states, whose Legislatures have not forgotten that it is profit that allows for payments of taxes – not gross expenses.”

Heineman has called on lawmakers to eliminate Nebraska’s income tax, or at least reduce the amount that retirees pay. The proposals would make up the difference by eliminating as many as 27 state sales-tax exemptions. The Republican governor has argued that bill’s main opponents are “highly paid lobbyists” who are trying to protect their specific exemptions.

The larger of his two proposals would eliminate 27 sales tax exemptions, worth an estimated $2.4 billion, while axing Nebraska’s corporate and individual income tax. The second, smaller proposal would eliminate about $400 million in exemptions and reduce what retirees pay in income taxes.

Steve Wellman, a Syracuse farmer and spokesman for the Nebraska Soybean Association, said the proposals would increase the cost of inputs, such as materials and energy, to stay in business. Wellman said the proposal would remove eliminate at least $200 million in sales tax exemptions that benefit farmers.

“There’s always a lot of discussion about helping young farmers and ranchers get started with their operations, yet our actions often do just the opposite,” Wellman said. “This appears to be another example of a policy that will hurt beginning farmers.”

Kathy English, executive vice president of the Children’s Medical Center in Omaha, said eliminating the tax exemption on energy use would increase her facility’s operating costs by 7 percent.

The bill’s prime sponsor, Sen. Beau McCoy of Omaha, said opponents have raised valid concerns. But he said he also wants suggestions from opponents on how to proceed with tax reform.

McCoy said he also has heard support from constituents who support the bill, but aren’t able to travel to the Capitol to speak in favor of it. One resident in his district, 49-year-old Shawn Sinner, said he and his wife may move to South Dakota or Texas after their two youngest children finish high school. The state’s income tax will play a major role in his decision, he said.

Sinner, who works for a Texas-based payment-processing company, said lawmakers should examine each sales tax-exemption, one-by-one, in a public setting.

“I think that would be in the best interest of the average Nebraskan,” he said.