LINCOLN — Cutting property taxes, reducing income taxes and broadening the tax base to include more services are among the ideas a tax modernization group will seek public comment on in the next few weeks.
Other ideas, like imposing taxes on food and health care, eliminating state income taxes and exempting military pensions from taxation did not make a list the 14-member committee put together on Friday.
The head of the Legislature's Tax Modernization Commission said the list was an effort to hone the number of tax changes to get more focused comments during a string of public hearings across the state.
State Sen. Galen Hadley of Kearney said the list was a work in progress but represented ideas that the commission, after two months of work, believes are the most worthy of discussion.
He and others on the commission said providing specific options for the public to discuss would make the hearings more productive.
The tax modernization group will hold five public hearings on changing the state's tax system beginning Monday, Sept. 23, in Scottsbluff.
Subsequent hearings are scheduled Sept. 24 in North Platte, Sept. 26 in Norfolk, Oct. 17 in Omaha and Oct. 18 in Lincoln.
What didn't make the list was probably more interesting than what did.
For instance, eliminating the state income tax, as proposed by Gov. Dave Heineman earlier this year, won't be among the topics listed for the public hearings. Hadley said tax experts who addressed the commission made it clear that it's good policy to have multiple sources of tax revenue.
Also not making the list was eliminating or reducing income taxes on military pensions, an idea supported by the governor and the Nebraska Chamber of Commerce and Industry.
Hadley said tax experts warned that due to the aging of the population, providing too many tax breaks on pensions might leave too few people paying taxes.
The list of tax-change options did include one idea to help the elderly — reducing or exempting income taxes on Social Security benefits. Currently, about 30 states do not tax Social Security income. Nebraska exempts the first $25,000 in income for a single taxpayer, and $32,000 for a couple.
Reducing taxes on Social Security benefits, Hadley said, would provide broader tax relief than cutting it for military retirees.
The state chamber and others have argued that providing a break for military retirees is a workforce issue — many service members retire early while still able to work and with children in school. Giving them a break provides an incentive for them to stay in Nebraska, utilize their skills and pay other state and local taxes.
The main proponent of the change, Sen. Charlie Janssen of Fremont, said he knew beforehand that a tax cut for military retirees was not going to make the list for public discussion, but the issue is not dead.
Janssen, a candidate for governor and a military veteran, called the Modernization Commission a “dog and pony show” because it didn't include the tax break for military retirees and because it wasn't focused on tax relief, which is what Nebraskans tell him they want.
Among the ideas that made the list:
» Cutting local property taxes by increasing state aid to schools and other local wings of government.
» Reducing the state's top income tax bracket to be more competitive with neighboring states.
» Increasing or refocusing the $115 million now given in property tax credits to relieve the property tax load.
This week, the Omaha-based think tank, the Platte Institute, issued a report showing that property taxes in Nebraska had risen more rapidly than the overall state economy and faster than property taxes in neighboring states over the past decade.
The overall local tax bill, the study said, had grown to 4.7 percent of personal income as of 2011, compared with 4.5 percent nationwide.
Jim Vokal of the Platte Institute said that study's findings were concerning because higher taxes can slow growth.
Earlier Friday, a joint meeting of the Legislature's Revenue and Appropriations Committees heard a presentation about the state's business incentive programs.
The report, given by State Tax Commissioner Doug Ewald, is a requirement of a bill passed this year that seeks to give lawmakers better information about whether the incentive programs are working and creating jobs that otherwise wouldn't have been created without the tax breaks.
Sen. John Harms of Scottsbluff said the current information doesn't provide a clear picture and that lawmakers need to decide what additional data they need.
He added that it would be “foolish” to eliminate incentive programs, but that legislators need better information.
Figures provided by Ewald on Friday indicated that the Nebraska Advantage Act, the state's main incentive program, had generated $3.5 billion in investment and created 7,100 full-time equivalent jobs from 2006 through 2012.
It had so far provided about $130 million in tax refunds and credits, or about $18,300 per job. However, there are about $313 million in outstanding tax credits yet to be taken.
Ewald pointed out that about half of the companies that sought tax incentives under the state's oldest job incentive program, LB 775, didn't end up qualifying because they either failed to reach the investment and job creation thresholds necessary, or they halted their projects.
Also, about 25 percent of LB 775 credits were never claimed, he said.