Ricketts changes tax cut proposal; rural broadband debated

Gov. Pete Ricketts discusses tax cuts with the Revenue Committee Wednesday (Photo by Fred Knapp, NET News)
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January 31, 2018 - 5:45pm

 

Gov. Pete Ricketts proposed changes to his tax cut proposal Wednesday, amid criticism that it does too little -- or too much. And legislative debate revealed a split on how best to get broadband internet service to rural areas.


When he originally proposed property tax cuts earlier this month, Gov. Pete Ricketts said they would start out equaling about 10 percent of what people currently pay in the first year, and then there would be more cuts when the state’s economic forecast improves. In the version proposed Wednesday, those future cuts would be scheduled regardless of what happens with economic forecasts, and would reach 30 percent over the next 13 years. Sen. Jim Smith, who introduced the bill for Ricketts, called it a “work in progress.” And Ricketts signaled he’s open to other changes. “We plan to continue to talk to pro-growth senators, and pro-growth groups with regard to how we can amend this bill to be able to get consensus to get it to my desk,” he said.

One key audience is farm groups, who have complained strongly about property tax increases in recent years. Speaking for a coalition including the Farm Bureau, Corn Growers, Pork Producers, Soybean Association, and Dairy Association, Steve Nelson, president of the Nebraska Farm Bureau, said the groups support the bill as long as it gives a big enough tax break. “Our organizations are working on proposals for property tax solutions that are significant, that provide between 600 million and 1 billion dollars in property tax relief on top of the existing property tax credit program,” Nelson said.

Last week, the same coalition endorsed a competing proposal that would cost the state treasury between 600 million and $1 billion a year starting next year. Ricketts has criticized that proposal as costing nearly 25 percent of the state budget per year; the proposal he made Wednesday would reach similar costs, but over a period of 13 years.

Renee Fry of the Open Sky Policy Institute said even though Ricketts was dropping the idea of lowering taxes based on future economic forecasts, the changes he’s proposing are still too risky. “Whether it’s triggered or not, it still puts tax policy on auto-pilot. You can always pass tax cuts in the future when we’re on stable footing, rather than in the middle of a continued budget shortfall,” Fry told senators.

John Hansen of the Nebraska Farmers Union also opposed the bill, saying it does not do enough. Hansen, who’s in his mid-sixties, said the country is going through the worst farm crisis since the mid-1980’s, as reflected in calls to a hotline for farmers in financial trouble. “These are folks who are not just young. They’re folks my age and older. They’re established farms, they’re beginning farms.  They’re in trouble and I think that what we are hoping for this legislative session is something that provides more tangible property tax relief than what this bill offers,” he said.

Yet another proposal that’s been introduced would pay for property tax reductions by raising other taxes, including sales, income, and cigarette taxes. Al Davis of the Independent Cattlemen of Nebraska said it would require a shift to other taxes to truly relieve property taxes. Ricketts’ proposal would lower the top corporate and individual income tax rates. The Revenue Committee is expected to consider all the competing proposals before sending a proposal to the full Legislature for debate.  

In legislative floor debate Wednesday, senators split on how best to get broadband internet service to rural areas. The issue came up on a proposal to tweak something called the universal service fund. That’s a fund that gets money from a 7 percent surcharge on Nebraskans’ phone bills. It’s supposed to be used for purposes including subsidizing telecommunications service to rural areas, where low population density makes it expensive to serve. But Sen. Paul Schumacher calls the surcharge a boondoggle that subsidizes archaic local phone companies. And he said it is backfiring. “Rural broadband may actually be hindered by the universal service fund. Because as long as you have an extra $40-$50 million coming into your group of 35, 40 little phone companies, and that subsidy gives you an edge over some of your competitors, you’re not going to bust your rear end trying to hurry on and bring broadband to those communities. You’re going to carry this out as long as possible,” Schumacher said.

Sen. Curt Friesen, chairman of the Transportation and Telecommunications Committee, said the Universal Service Fund is needed because of expenses associated with providing broadband service, like laying fiber optic cable in areas with low population density, which he calls “last mile” areas. “It can only be used outside city limits in those last mile service of broadband. So when you’re talking last mile, you’re not going to have companies fighting over those because there’s no economic sense to go out there whatsoever. And without some sort of subsidy, there will be no broadband expansion in those last mile areas,” Friesen said.

Another bill coming up for a hearing would authorize a study of how to use the fund more efficiently to encourage rural broadband service.


Correction: An earlier version of this story, and the audio, omitted the Pork Producers from the list of supporting organizations. The Nebraska Cattlemen were neutral on the bill. 

 

 

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