Neb. lawmakers consider commission on tax reform

LINCOLN, Neb. (AP) -- Nebraska lawmakers began considering a proposal to create a state tax modernization commission on Tuesday, just a few days after Gov. Dave Heineman scrapped his tax overhaul plans.

The Legislature's Executive Board of the Legislative Council considered a bill that would bring together a panel of lawmakers to review past tax studies and recommend the best tax code updates for Nebraska.

Columbus Sen. Paul Schumacher introduced the bill, which he says would help lawmakers make Nebraska's tax code simpler, fairer and more competitive with other states. He says the study is needed to address the robust tax discussion going on in the state.

Heineman said on Tuesday he hasn't reviewed the tax commission bill and declined to comment. On Saturday, the governor backed off his plan to eliminate Nebraska's income tax by getting rid of as much as $2.4 billion in sales-tax exemptions.

The public widely opposed Heineman's two proposals to overhaul the tax system at hearings earlier this month. Businesses, farmers, hospitals and nonprofits said getting rid of sales-tax exemptions would drive up everyday operation costs.

More than 10 organizations that opposed Heineman's tax reform proposals testified in support of forming the tax commission to keep the tax reform discussion rolling. A University of Nebraska-Lincoln geologist testified in opposition, saying he was nervous about tax increases.

"It is essential for the commission to study all aspects of the tax code including sales tax, property tax and income tax so that it can make the best recommendations for the state, for businesses and most of all, Nebraskans," said Bruce Rieker, vice president of the Nebraska Hospital Association.

The bill calls for the committee to offer a preliminary report to the Executive Board and the governor by Dec. 15 and the final report by Nov. 15, 2014. The report would cost an estimated $10,000 and the funds would come out of the state's general fund.

Revenue Committee Chairman Sen. Galen Hadley of Kearney testified in support of the bill. He said his goal would be for the commission to offer tax reform legislation, if needed, next year.

"We need to strike the rod when it is hot," Hadley told the executive board.

Schumacher agreed, saying the commission would need to act with "reasonable speed."

Omaha Sen. Steve Lathrop noted that lawmakers claim they want to study an issue when they don't want to act on it. He said that isn't the case now, and that lawmakers want to continue working toward creating tax reform policies.

"This isn't an attempt by the Legislature to bury this subject of our tax code," he said.

Hadley said he would like the Revenue Committee to have jurisdiction over tax commission, but would allow leaders of other legislative committees to be on the commission. Hadley said he planned to offer an amendment to Schumacher's current bill, which says the commission would consist of 13 senators from different committees and would seek outside advice from non-legislative tax experts.

Hadley said the commission would work to make changes to the tax code that wouldn't affect state revenues, but noted that no tax reform is completely revenue neutral because some taxpayers have to pick up some of the burden.

"I want to make it clear that this committee isn't out to lower everybody's taxes in the state of Nebraska," he said. "That just isn't going to happen."

Renee Fry of the tax policy think tank Open Sky Policy said her organization supports the creation of a tax commission because Nebraska's tax policies haven't been overhauled since 1967.

"Every year we find ourselves scrambling to respond to a tax and budget structure that's out of balance, rather than following a strategic plan that allows us to look forward and work toward our common goals," Fry said. "If we want our children to have a strong future, it's time for a strategy that puts us back in control."

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The bill is LB613.