This week begins with a bill to cap school district revenue growth on the Legislature’s agenda and will end with a Revenue Committee hearing on a measure to replace all state and local taxes with a consumption tax.
In between, lawmakers will hold hearings on measures that would impact business tax breaks and how the state taxes certain kinds of property.
School revenue cap likely to be debated this week
LB 986 – which would cap the amount by which public school district revenues could grow – is likely to be debated by lawmakers this week. Nebraska’s public schools are already subject to tax and spending caps. Adding further restrictions could harm funding for schools at a time when schools are already struggling to find teachers, cafeteria workers, bus drivers, and other essential personnel amid the uncertainty of the pandemic. Such caps also fail to get to the heart of Nebraska’s high reliance on property taxes – low state support of K-12 education and other local governments.
Wednesday’s Revenue hearings on focused on tax incentive changes
The Revenue Committee on Wednesday will hold hearings on five bills related to the new ImagiNE Nebraska tax incentive program – which lawmakers created in 2020 as part of LB 1107. Among the bills that will be heard is LB 985 – which would allow companies to retroactively apply for ImagiNE Nebraska incentives if they added employees in 2020 and 2021 amidst the pandemic.
Consumption taxes and valuation changes the focus of Thursday hearings
The Revenue Committee will hear testimony on six measures including LR 264CA, which would replace all other forms of taxation in Nebraska with a consumption tax. This would be an unnecessary and regressive overhaul of the state’s tax system that would likely push purchases out of state, deprive schools and other subdivisions of local control and create a host of other unintended consequences. Department of Revenue data showed that a 10.64% percent consumption tax would result in a nearly $4 billion revenue shortfall for state and local governments. Institute and Taxation and Economic Policy analysis indicates that a consumption tax rate would have to be about 20% to be revenue neutral. That means Nebraskans could find themselves paying a 20% tax nearly every time they make a purchase.
Several other measures considered by the committee on Thursday would treat commercial and residential property as separate classes of property, opening the door for those types of property being taxed differently than other classes of property. Such measures could create tax shifts from one type of property to another and could lead to local governments having to make cuts to vital services where taxes couldn’t be passed on to other property types.
Nebraska Public Media will stream all legislative debate and hearings live.