Income tax cut signed, but possible sales tax increase still in the mix

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April 10th, 2012

Lincoln, NE – Gov. Dave Heineman signed an income tax cut Tuesday while warning against a possible sales tax increase, and Speaker of the Legislature Mike Flood postponed the end of the session to give lawmakers time to consider overriding the governor’s vetoes.

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Gov. Heineman is joined by state senators to sign tax relief bills and economic development bills into law (Photo credit State of Nebraska)

Gov. Heineman held a press conference to sign LB970, a scaled-down version of the tax cut he proposed in January. “Many Nebraska middle-class families still struggle from paycheck to paycheck. We can help these families by changing Nebraska’s income tax structure and allow them to keep more of the money they make,” Heineman said. “With (LB)970 we have made a modest effort to reduce the income tax burden on middle class Nebraskans.”

When it’s fully implemented in 2014, the bill will save a family of four with $50,000 income about $54 a year. But another bill, allowing cities to increase their maximum sales tax rate from the current 1.5 percent to 2 percent, could negate that.

According to a District of Columbia study of tax burdens in cities across the country, an Omaha family of three with income of $50,000 paid just over $1,000 in sales taxes in 2010. That was with a combined city and state sales tax rate of 7 percent. Increasing that by half a percent would amount to a tax increase of about $70.

Heineman reiterated his opposition to the measure. “When that bill reaches my desk I’m going to veto it. I hope the Legislature will reconsider. Why would you, again, lower taxes in the morning, and increase them again in the afternoon? It doesn’t make economic sense,” he declared.

Tuesday afternoon, mayors and city administrators from across the state held a news conference to stress that a sales tax increase would be subject to a vote of the people. Omaha Sen. Brad Ashford discounted the governor’s argument that such an increase could negate any income tax savings. “I’m not sure that’s really the issue. I think the real issue here is what the individual communities feel is appropriate for them,” he said.

Meanwhile, the governor explained his veto of another bill, to allow betting at the state’s racetracks on so-called “historic” horseracing, which involves videos of previously run races with identifying information removed. Supporters say its needed to boost revenues, help build a new track in Lincoln, and keep racing alive in the state.

Heineman said he’s aware of the concerns of bill supporters. “All along I’ve been concerned about the jobs issue. But when you’re the governor, you’ve got to take a look: Is there a constitutional issue here? I think it is. It’s a new form of gambling — electronic horseracing. And it is expanded gambling, and I’ve opposed that,” he said.

Omaha Sen. Scott Lautenbaugh, sponsor of the bill, said he’ll try an override, and without new revenue, the future looks dark for racing in the state. “I think the downward spiral of live racing days decreasing and purses decreasing and trainers leaving to go to greener pastures, so to speak, will continue,” he predicted.

Attempts to override those vetoes will be made on Wednesday, April 18. That’s also when lawmakers would try to override a proposed veto of prenatal care for illegal immigrants, if that passes. A vote on that bill is scheduled for Wednesday.

Originally, this Thursday was to be the Legislature’s last day. But the governor has up to five days to veto bills. Speaker of the Legislature Mike Flood said he decided to extend the session to give lawmakers a chance to override any vetoes if they wanted to. “To be honest, prior to even the issues that we have now coming up, the governor notified me several weeks ago that he felt that given the number of bills we’d be sending over at the last minute he would be taking advantage of his full five days,” Flood said. “So this isn’t necessarily a surprise.”

However, it is the first time in Flood’s six years as speaker that he and the governor have not negotiated an arrangement for all vetoed bills to be returned to the Legislature in time for lawmakers to act by their last originally scheduled day.

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