LINCOLN — Tensions rose Friday at the State Capitol over whether state lawmakers should consider passing new tax breaks this year or wait until 2014 after a comprehensive study of the state tax system.
On the floor of the Legislature, senators on the budget-writing Appropriations Committee and those on the tax policy-deciding Revenue Committee got into a spat over tax and spending priorities.
And down the hall, Gov. Dave Heineman weighed in, during a press conference on another subject.
The governor, whose tax-shift proposals were shot down this year in favor of a proposed study, blasted lawmakers for the second straight week for considering a tax break for an out-of-state wind-energy company instead of first helping “Nebraska citizens, families, seniors and veterans.”
“I would be shocked and appalled if we're going to give tax relief to an out-of-state company without providing tax relief for Nebraskans,” Heineman said.
He referred to Legislative Bill 104, which would provide a sales tax exemption for wind farm equipment. The proposal is expected to lead to construction of a $300 million wind farm near Allen, Neb.
The bill is one of a handful of tax break proposals advanced by the Revenue Committee so far this year, including new exemptions on purchases of repairs for farm machinery, contributions to college savings plans and “angel” investments.
That drew the fire of some senators, who said that such ideas should await the results of a comprehensive study of the state tax system, which could decide if new tax exemptions and breaks should be passed.
State Sen. Danielle Conrad of Lincoln, a member of the Appropriations Committee, questioned the “strange and disparate” actions of the Revenue Committee and asked if it was neglecting its duty as a “gatekeeper” against bad legislation.
“This perpetuates the piecemeal approach to tax policy that we agree has led to (tax) inequities,” Conrad said.
That brought a strong rebuke from the chairman of the Revenue Committee, Kearney Sen. Galen Hadley.
He said the Revenue Committee has taken a responsible approach in advancing the bills, which would require a small amount of money compared with the $220 million in spending increases advanced by the Appropriations Committee.
“You want to say the Revenue Committee is not doing its job. I strongly disagree,” Hadley said.
Nebraska's laws on contributions to college savings plans need updating, he said, and there is more demand to invest in startup businesses than the state's angel investment tax credit program can handle.
Hadley, the sponsor of the wind bill, has said that Nebraska needs to act now, before federal wind-farm incentives run out at the end of the year.
Later, Omaha Sen. Steve Lathrop, who picked the wind bill as his priority measure, said he was puzzled by Heineman's opposition, since the governor has supported incentives for out-of-state wind companies in the past. Wind farms represent economic development for rural Nebraska, Lathrop said, which is long overdue.
Without the tax credits, he said, “the wind farms will just go to Kansas and Oklahoma, where the wind blows just as much.” Kansas, Oklahoma and Iowa already offer similar sales tax breaks.
The Revenue Committee deadlocked, 4-4, on whether to advance a bill to provide income tax breaks for senior citizens and military veterans. That was one vote short of what was needed to advance the bill.
Friday also marked the beginning of a debate over the tax study proposal, Legislative Bill 613, which would create a state “tax modernization committee” to study state taxes. By Dec. 15, the committee would report ways to make state taxes fairer, simpler, more stable and more competitive in attracting jobs and people to Nebraska.
That debate could be a long one. Omaha Sen. Ernie Chambers pledged to filibuster the tax study idea.
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