The Legislature gave first-round approval Tuesday to a scaled-down income tax cut proposal.
As debate got underway, Revenue Committee Chairwoman Sen. Abbie Cornett described the latest version of tax cut legislation as "a downpayment on tax relief that the governor and I promised to Nebraska taxpayers in January."
Back then, Gov. Dave Heineman and Cornett introduced a bill that would have eliminated the inheritance tax, lowered corporate taxes, and cut individual income taxes on all brackets, saving state taxpayers more than $326 million over three years.
Now, the inheritance and corporate tax cuts are gone, as are the proposed cuts for the upper income bracket.
What's left are individual income tax cuts for the lower and middle brackets. That would save a family of four with $50,000 income $54 in 2014, according to the Department of Revenue. And it would cost the state treasury about $148 million over three years.
That cost didn't sit well with Lincoln Sen. Danielle Conrad. "This legislation, no matter how far whittled down, remains unaffordable. Nothing has changed in regards to our impending budget deficit and the forecast that we have in relation to the challenges on the horizon. The only thing that's changed is a political compromise that can generate enough votes to move Forward," Conrad said.
Among the votes that changed was that of Omaha Sen. Jeremy Nordquist, one of the harshest critics of the original tax cut proposal. Nordquist contrasted the benefits and cost of that plan to the latest one. "Under that package, the top 5 percent of Nebraskans got more than the bottom 60 percent of Nebraskans combined. The top 20 percent got 55 percent of the benefit under the tax plan that the governor initially introduced. It's now almost only a quarter of the size that it was, and the money is going where it needs to go, and that's in the pockets of middle-income Nebraskans and low-income Nebraskans," he said.
Sen. Charlie Janssen of Fremont offered another couple of reasons to support the proposal. "I don't like to leave money sitting around. If it sits around, a lot of times a program finds it. Some senator finds it. We add it to something else. If we've got the money to give back it's not our money. I always come back to that. It's not our money. It's the taxpayers' money as a whole," he said.
Several senators expressed concerns about how the loss of revenues would affect programs. Among them were Education Committee Chairman Sen. Greg Adams, and Health and Human Services Chairwoman Kathy Campbell. Both eventually voted to advance the bill. Omaha Sen. Steve Lathrop, who has been warning about the shortfall in the next two year budget, said he wanted to study the numbers some more, but also voted to advance the bill.
Not so Sen. Norm Wallman of Cortland. He cited needs for things like roads and medical care, and said taxes are needed. "It takes some money to live in a society. It takes money. If you want to live in a society you can live cheap, go to Haiti. Go to South America. You don't have to worry about taxes. Cheap. You can live very, very cheap. It's going to cost money to live in a society such as ours," he said.
But Sen. Jim Smith of Papillion said the issue was simple. "Taxes are a wedge. They're a wedge between what an employee earns by the sweat of their brow, and the amount they are afforded to meet their own needs and their dreams. Taxes are a wedge, and any reduction, any reduction in the size of that wedge, is a very good thing," he said.
After a little more than three hours of debate, senators voted 36-6 first round approval of the bill.