It is not surprising some businesses and large agriculture interests in Nebraska are not happy with Governor Dave Heineman's proposal to eliminate the state income tax by switching the revenue stream to sales taxes which have been exempted in the past. There are actually two proposals, one to eliminate the income tax, and a less ambitious one that simply removes taxes from senior retirement and social security benefits.
The Lozier Company, a large manufacturer of large office equipment, came out against the proposal, suggesting they might move operations across the Missouri River, from Omaha to Council Bluffs, Iowa. They believe the increased sales taxes cannot be offset by the reduction in payroll taxes, and they will not be able to "pass along" the new taxes as easily to their customers. Of course this move, if followed, would either require a change of suppliers, or cost them more in "use taxes" from out of state suppliers, too; as Iowa is one of a few progressive states that tax goods purchased out of state and brought into the state.
I am uncertain if it is a surprise Mayor Suttle (D) of Omaha opposes the governor's plan. It seemed to surprise and upset the governor that Suttle disagreed with his proposals. Following the party line of keeping taxes "progressive" (more costly for wealthier citizens) the Democratic mayor opposes any move to change the system base from income taxes, and supports the alternative proposal to add a new tax rate for the "wealthiest" citizens at $400 thousand/$450 thousand for couples income level. That's a political and philosophic disagreement. The reality is, Omaha faces its own budget shortfalls, and eliminating the exemptions to sales tax could, potentially, create a major boost in revenues for the city (as it adds local sales tax to the state taxes, as it does on goods and services now). One estimate is, if enacted, the potential amount of revenue could seriously reduce, if not eliminate, the need for property taxes for all residents of Omaha. That will be some serious political capital for someone to claim in the upcoming mayoral elections later this year.
Heineman also suffered another type of "defeat" with the announcement that the Greater Omaha Chamber of Commerce would "remain neutral" on the legislation. "The effect of the proposals on manufacturing and processing, hospitals, nonprofits, and a number of others would be counter to their intent and carry risk of driving some businesses out of Nebraska." said Chamber President and CEO David Brown on Tuesday. Brown wants to continue discussing tax alternative, however, and looking for anything that makes the state more competitive in drawing new business.
The VFW strongly favors the tax changes, since they also eliminate income taxes for military members and veterans.
The public hearings for the two proposals were held yesterday (on the more aggressive proposal) and today with the Legislature's Revenue Committee.