Gov. Dave Heineman’s proposal to end income tax and pay for it by repealing 27 state sales tax exemptions certainly poked the hornets nest during Wednesday’s 10-hour marathon chat-fest hosted the Revenue Committee.
Farmers, manufacturers, college students, hospitals and the state’s largest chambers testified against LB 405.
Of course, the governor stated his case. In so doing, he mentioned for the third time in five days (by my count) that ordinary Nebraskans have urged him not to end 27 sales tax exemptions, but all 84 of them. A proponent who followed the governor echoed the idea, saying it would represent a fairer tax policy.
Added together, the sales tax exemptions total in the neighborhood of $5 billion. That represents more than enough revenue to end corporate and individual income tax AND allow the state to lower its sales tax rate going forward.
Where would the new sales tax rate settle? The governor said 3.5-percent. That would be a 2-percent drop from the current rate.
One farmer mentioned it costs about $450,000 nowadays to buy a new combine. Under the current rate, the sales tax on such a purchase would total almost $25,000. Under a 3.5 percent sales tax, it’s still almost $16,000.
So, would doing away with all exemptions in exchange for a lower rate calm the hornets?
Maybe. Or maybe it’s just a smaller stick.