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Governor's tax reform plan draws state and local reaction
It's been highly talked about since Governor Dave Heineman first proposed it on Tuesday. We're talking about him wanting to make some major tax reforms.
The governor outlined two bills Friday. He was joined by Senators Ashford and McCoy. The plan? To eliminate income tax. But, that means you may pay taxes elsewhere.
"The focus is a modern tax code that will generate and spur economic growth," said Heineman.
The first bill eliminates about $2.4 billion in sales tax exemptions.
Both individual and corporate income tax are eliminated under this proposal.
The second bill eliminates about $395 million in sales tax exemptions.
It would completely eliminate corporate income tax.
But, only the first $12,000 of retirement income for married couples and $6,000 for single individuals.
"The bolder you're willing to be to eliminate more exemptions, we can get to the goal that I think most Nebraskans would like," said Heineman.
But one local economics professor says getting rid of sales tax exemptions may not be in the best interest of a majority of Nebraskans.
"My first reaction to the governor's proposal is that this is a plan to shift more of the state's tax burden away from higher income households and onto middle and lower income households," said Hastings College Economics Professor Dr. Douglas Kinnear.
A sales tax is regressive. This means the lower a person's income, the more of it as a percentage will go to that tax.
Dr. Kinnear added that people can end up paying taxes without knowing it.
"If the governor wishes to exempt a great many intermediate goods a great many of the goods that farmers and ranchers buy like seeds, feeds, chemicals, those higher costs that farmers pay when they're paying sales tax on those items will be passed along to households," Kinnear said.
Things like food, gas and non-profit health clinics won't be subject to sales tax in either bill.
Prescription drugs and dorm and hospital rooms, and agricultural machinery are no longer tax exempt in bill number one.
Governor Heineman says that the pros of not having an income tax outweigh the cons of losing many tax exemptions.
The Nebraska Farm Bureau released a statement Friday against the Governor's tax plan. They say this policy will harm agriculture and cost the state jobs.
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