With his three tax-related bills awaiting a hearing, one Nebraska senator aims to generate what he considers more rational discourse in the conversation regarding state spending and tax cuts.
Sen. Paul Schumacher of Columbus, term-limited and on his way out of office, intends to wake up Nebraskans before he’s gone to what he considers the poor handling of state funds.
Legislative Bills 1021, 1022 and 1023 could do the job, he said.
“We have not handled the state’s finances properly in the time that I’ve been here,” he said, regarding his nearly eight years in office. “There have been a huge amount of tax cuts over the last decade. As a result, we don’t have the money that we need for mental health, for prisons and for building up some kind of contingency fund for pensions.”
If passed, his bills would allow Nebraska to recover revenue from business and agricultural sectors:
- LB 1021 would eliminate select sales tax exemptions for agricultural expenses related to farm equipment and operations.
- LB 1022 — The Irrigation Tax Act — would establish taxes on irrigation water at a rate of one-cent per 10 gallons used, and would apply to wells producing at least 5,000 gallons daily. Additionally, it would reclassify all farmland as dryland.
- LB 1023 would eliminate business sales tax incentives in 2019.
However, Schumacher — a revenue committee member — said there isn’t legislative motivation to pass the bills. He said their purpose is to get people talking about untapped revenue streams in the face of budget shortfalls and potential tax cuts.
John Hansen, Nebraska Farmers Union president, opposes Schumacher’s bills but agrees with the sentiment that inspired them.
“It’s one reason we are opposed to the governor’s proposed tax cuts,” Hansen said by phone. “[Ricketts] is using the need for property tax relief to try and piggyback the income tax cut that he wants for himself and high-income individuals in Nebraska.”
Hansen said current tax policies in Nebraska are irresponsible and not fiscally conservative.
Schumacher has a history of trying to steer conversations with his proposed legislation, and this trio of bills has succeeded at getting people fired up, Hansen said.
“I think this is one of the poke-the-bear bills,” Hansen said laughing. “I don’t think this has any prospects of passing, but it’s his way of putting [potential] revenues on the table.”
Revenue streams and projected growth are a concern for Schumacher, who said the states projected growth is exorbitantly rosy at 5% year-over-year, and it’s unreasonable to expect that kind of growth while simultaneously cutting taxes.
“If we box ourselves with tax cuts, with tax triggers — where our flexibility is limited — the Kansas experience is a real possibility,” Schumacher said, referencing Kansas’ budget problems.
Kansas tax cuts enacted in 2012 resulted in that state facing a $1 billion budget shortfall; the budget crisis pushed its legislature to raise taxes in 2017 by overriding the governor’s veto.
Nebraska faced a similar problem in 2016 with an estimated $900 million budget deficit. A mixture of spending cuts, tapping cash reserves and spending vetoes by the governor shrunk the state deficit to about $200 million in 2018.
But with the governor’s support for proposed legislation that would enact further tax cuts, the Legislature is set up to make more tough decisions.
Schumacher emphasized that his legislation would affect many who would benefit from tax cuts proposed in bills like LB 947, introduced by Sen. Jim Smith of Papillion at the governor’s request.
Hypothetically, if the Legislature is forced to come up with $1 billion, it would have to find the money someplace, he said.
“It’s not fair for people to say, ‘well, don’t worry about it, we’ll send you a check, but we won’t tell you the flip side where those ‘some places’ could be,'” Schumacher said. “Some of those ‘some places’ are [these] three bills.”
All three bills were referred to the revenue committee Jan. 18; no hearing dates have been set.