Nebraska Gov. Dave Heineman said Thursday he’s willing to consider expanding sales taxes on services, so long as it doesn’t bring more money into the state.
The governor’s comments came during a second day of hearings on his tax proposals to abolish or reduce income taxes by doing away with sales tax exemptions.
Wednesday, representatives of manufacturers, agriculture, health care and other groups blasted Heineman’s proposal to take away their sales tax exemptions to pay for abolishing personal and corporate income taxes. Opponents voiced their objections in a Revenue Committee hearing that lasted past 11 p.m.
Speaking to the senators on the Committee Thursday, Heineman adopted a conciliatory tone. "I stayed up well past my bedtime last night watching you all the way ‘til 11:15, and I want to say thank you to every citizen, every organization who showed up to share their concerns," Heineman said. "That’s what we needed to hear and we wanted to hear."
Thursday’s testimony concerned a smaller alternative bill, which would abolish only corporate income taxes, while reducing income taxes on retirement income. Many of the same groups that opposed the bigger bill also opposed the smaller, but said they were open to discussing tax changes.
That led Committee Chairman Sen. Galen Hadley of Kearney to speculate. "If we truly are looking at some sort of examining of our tax system, one of the things that we may have to look at is a sales tax on services," Hadley said.
Heineman had previously criticized the possibility of a sales tax on services as being part of a plan by liberal groups who want to spend more on government programs. In an interview outside the hearing room, the governor repeated that, but added something different.
"If you’re talking about taxing more services to bring in more revenue to spend on their favorite program, I’m opposed to that," Heineman said. However, he added "If you’re going to talk about taxing more services to provide tax reform to address some of the exemption issues, I’ll listen."
Hadley specifically mentioned taxing real estate commissions. Heineman challenged lawyers on the Revenue Committee to support taxing legal services. There is a long list of services Nebraska does not tax, ranging from home repairs and haircuts to parking and waste hauling.
Opponents to overhauling taxes this year have suggested a study leading to possible reform in the future. Heineman, who can’t run for reelection next year because of term limits, said he wants action sooner rather than later.
"I’ve got two years to go. It would have been real easy just to ride out on a white horse. But I don’t want to look back 10 years from now and say, 'You know, I should have addressed this issue,' he said. "We are losing too many young people. We have seniors who are moving to other states because of our income tax rate."
Heineman repeated his offer to work with Revenue Committee members to come up with a plan they can agree on.