LINCOLN, Neb. (AP) - Nebraska lawmakers unveiled a tentative new plan Wednesday to lower property taxes by raising the state’s sales tax and eliminating tax exemptions, setting up a likely showdown with Republican Gov. Pete Ricketts.
Members of the Legislature’s Revenue Committee announced the plan as a way to substantially lower property taxes for farmers, ranchers and homeowners, but cautioned that it’s still subject to change.
“This is a very large step in the right direction,” said Sen. Lou Ann Linehan, of Omaha, the committee’s chairwoman.
The measure would increase state equalization aid to local school districts from roughly $1 billion to $1.5 billion a year in an effort to reduce their reliance on local property taxes. School property taxes - the largest component of property tax bills - would decline by an average of 2%.
It also would raise the state sales tax rate from the current 5.5% to 6.25% and eliminate sales tax exemptions for junk food, bottled water, storage, plumbing and repair services for heating, ventilation and air conditioning units. Nebraska’s cigarette tax would jump from 64 cents to $1 per pack.
Ricketts has said he opposes any plan that lowers one tax by raising another and is actively campaigning against it. On Wednesday, the governor held a news conference at a Lincoln gas station to rail against higher taxes on cigarettes, candy and pop.
“Many working families rely on the quick convenience of gas stations to make their lives function,” he said.
Linehan said she respects the governor’s position and supports his push to address the problem through curtailed spending, but argued that the new proposal would help property owners whose tax bills have soared.
She said the package will likely provide a boost to the state’s earned income tax credit, which benefits low-income people who are disproportionately hurt by higher sales taxes.
A hearing on the proposal is set for next Wednesday at the Capitol.
Some committee members said they still have concerns about the bill. Sen. Tom Briese, an Albion farmer, said he doesn’t believe the package does enough to help farmers whose property taxes have soared over the last decade even though farm incomes have declined.
Sen. Sue Crawford, of Bellevue, said she wants assurances that the bill won’t deprive local governments of the tax dollars they need to serve the public. She said she also wants an increase in the earned income tax credit that’s large enough to protect low-income people from the higher sales tax.
Nebraska Farm Bureau President Steve Nelson, a major advocate for lowering property taxes, said his group isn’t thrilled with all parts of the plan but said it will provide some relief.
“We have to start somewhere,” he said.
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