Would voters raise their sales tax?

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April 12th, 2011

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Lincoln, NE – Voters in cities across Nebraska could find themselves being asked about raising the sales tax they pay, under a proposal advancing in the Legislature.

Until now, the Legislature has been all about cutting tax revenues for Nebraska cities: doing away with a wheel tax that Omaha was planning to impose on commuters, scotching a phone equipment tax Lincoln was counting on, and eliminating state aid to cities, counties and natural resources districts. But now, lawmakers are moving ahead with a measure that could allow tax increases that would dwarf those cuts. On a vote of 27-14, they gave first round approval to a measure that would allow cities to increase their sales taxes by half a percent, if voters approve. Among those supporting the proposal was Senator Tom Carlson of Holdrege.

“We as a Legislature … have tied one arm behind our counties’ and municipalities’ backs, when we cut state aid. Now if we don’t give them some taxing authority, I think we tie the other arm. It’s kind of hard to negotiate, it’s kind of hard to work, it’s kind of hard to plan with both arms tied behind your back.”

But Senator John Harms of Scottsbluff said the proposal merely let’s cities get bailed out, rather than making tough choices on spending.

“I’m not convinced that in any of these cities and any of these counties as they are today, that they are going to be hurt, that they’re going to close their doors,” he said. “What it’s going to force them to do is put together long-range planning. Show me what they’re going to cut. Show us what’s going to be done. Show us that they’re going to be able to streamline this government. That’s what people want.”

Sen. Tom Carlson supports a measure that would allow cities to increase the sales tax by half a percent, with voter approval. (Photo courtesy Nebraska Legislature)

Senator LaVon Heideman of Elk Creek also opposed the bill. He said letting cities increase their sales tax to two percent, on top of the state’s 5.5 percent, would hit the ceiling of political approval. And that would eliminate any chance of the state’s tapping more sales taxes if it needed them for schools or health care in the future.

“This, to me, is eroding the state’s sales tax base that eventually we might need, we might have to access, that we will have to have the political will to say ‘We need this. We’ve cut enough. We can’t do any more.”

Senator Brad Ashford of Omaha, chief sponsor of the bill, denied it amounts to a tax increase.

“It is not a tax increase,” he said. “It’s giving the voters an opportunity to have a conversation about spending.”

Following the bill’s advance, Ashford said he expects an amendment at the next round of debate that would require any city proposing to raise sales taxes to give voters a limit on how long the increase would last. Ashford also described the 27 votes in favor of the bill as a “strong” showing. But it may need more than that. While he has not explicitly threatened a veto, Governor Dave Heineman has criticized the bill, saying he doesn’t want taxes increased on Nebraskans wherever they live. If he were to issue a veto, it would take 30 votes to override.

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