The great debate over taxes in Nebraska came to Omaha on Thursday, and the chorus of calls for property tax relief was joined by requests for lower taxes on income and on Social Security benefits.
There was also a halfhearted call for a tax on beards, which was imposed in England and Russia centuries ago.
“As long as it isn't a tax on gray hair, I'm OK with it,” joked State Sen. Galen Hadley of Kearney, a beardless lawmaker who heads a legislative group looking at modernizing the state's tax system.
Taxes, of course, are serious business, and more than 200 people filled an auditorium and testified for nearly four hours at the South Omaha campus of Metropolitan Community College.
It was the fourth of five public hearings being conducted by the Legislature's Tax Modernization Committee. The group will hold its last hearing Friday in Lincoln and is slated to issue recommendations in December.
Two heavyweights on tax issues, the Greater Omaha Chamber of Commerce and the Nebraska Farm Bureau, brought proposals for the first time.
David Brown, president and chief executive of the chamber, said the group has commissioned two studies of state taxes that will be completed next month.
But he said it's clear that income tax relief is needed because businesses tell him that they have a hard time keeping and recruiting talent because state income taxes in Nebraska are higher than in neighboring states. Gov. Dave Heineman and the Platte Institute, an Omaha-based think tank, have been saying the same thing.
Brown also said it was unfair that the state's main economic incentive program, the Nebraska Advantage Act, provides tax breaks to new and expanding companies, but not to existing firms. Income tax rates, overall, need to be lowered, he said.
“We believe it's time to make our tax structure more competitive for the other 49,000 businesses in Nebraska,” he said. “That truly is an issue of fairness.”
The Farm Bureau, the state's largest farm organization, outlined a three-year plan that would eventually cut property taxes by $405 million, or about 12 percent. The group said it was unfair that farmers are paying 24 percent of total property taxes when they represent less than 3 percent of the population.
The plan would use the state's cash reserve in the first year to increase the state's property tax credit that goes to all landowners. Ag land valuations would drop, from the current 75 percent of actual value to 65 percent.
The plan also calls for unspecified cuts in state and local spending, an end to property tax funding for community colleges and a broader sales tax applied to more consumer services.
“We're thinking big picture. We're not just talking about property tax relief ... but balancing the tax burden among property, sales and incomes taxes for the long haul,” said Farm Bureau President Steve Nelson of Axtell.
Omaha Mayor Jean Stothert was among a dozen officials from metro-area cities, counties and schools who testified.
Several said it's important to maintain quality schools and city services, and warned against radical changes in tax policy.
Stothert didn't provide any specific recommendations for tax changes but said high property taxes were the biggest problem facing local businesses and residents.
She spoke in favor of a plan to send some sales taxes to Omaha to help pay for the massive federally mandated overhaul of the metro-area's sewer system. Stothert also said that other cities should follow her lead in promising that any tax windfall received by Omaha as result of a state tax overhaul would be used to reduce other property or occupation taxes, not to increase spending.
Retired advertising executive and Omaha philanthropist Dick Holland warned senators against shifting the target of taxes from income to sales, which he said would hurt mostly Nebraska's poorest residents.
He also rejected the idea that wealthy Nebraskans are moving away because of high taxes.
“You know, Warren Buffett loves it here,” Holland said. “And I have another 15 to 20 friends who love it here who are filthy wealthy.”
There was a spirited exchange about whether Nebraska should join states such as Iowa and Missouri in phasing out taxes on Social Security income. Retirees testified that Nebraska is one of only five states that tax Social Security benefits to the highest extent allowed.
David Drozd of the Center for Public Affairs Research at the University of Nebraska at Omaha said the rate of outmigration of residents 55 and older in Iowa and Missouri was reduced in the first year after those states' tax breaks for retirees took effect. He suggested that Nebraska needs to follow suit or risk a large enough population decline to lose one of its three congressional districts after the 2020 Census.
But under questioning by state senators, Drozd agreed it was hard to prove that having lower taxes inspired fewer older Iowans and Missourians to move from their states. He acknowledged that some people who leave Nebraska might do so because of the cold winters.
Hadley, who is chairman of the Legislature's tax committee, said some studies have found that low taxes on pensions have no impact on outmigration of retirees.
He also said that as more and more baby boomers retire, the working population will be presented with a bigger and bigger tax bill if taxes on Social Security income are reduced.