Gov. Dave Heineman calls for tax cuts of up to $500 million over next 3 years - Omaha.com
Published Wednesday, January 15, 2014 at 1:00 am / Updated at 10:34 am
Gov. Dave Heineman calls for tax cuts of up to $500 million over next 3 years
Study ranks Nebraska No. 1 for long-term solvency
LINCOLN — A report released Tuesday by George Mason University ranked Nebraska No. 1 nationally in its ability to cover its long-term financial obligations, and fourth in its overall fiscal health.

The U.S. Government Accountability Office has suggested that states face a negative long-term outlook, despite recent gains in tax revenues and pension assets. The predictions are based on an expected rise in the cost of health care and funding for state and local pensions.

The study ranks Nebraska No. 1 for its long-term solvency, followed by Alaska, Indiana, Tennessee and Alabama.

Nebraska ranked fourth for overall fiscal health, behind Alaska, South Dakota and North Dakota. Wyoming ranked fifth.

— The Associated Press

LINCOLN — Gov. Dave Heineman is wasting no time promoting his push for tax-relief legislation in 2014.

Heineman scooped his own State of the State address — scheduled for delivery this morning — by revealing his plan Tuesday night to seek up to $500 million in tax cuts over the next three years.

In an usual press conference before his biggest speech of the year, Heineman used fiscal estimates by the Legislature to argue that the state's record cash reserve — and holding spending growth to 4 percent — would more than accommodate major tax cuts.

“We are sitting on a bundle of cash,” Heineman said. “We are overtaxing our citizens, and they deserve some of it back.”

Heineman did not outline a specific plan of exactly what taxes to cut and how much, saying he wanted to work with the Legislature on that.

But he said it should include a reduction in individual income taxes, as advocated by business groups, and a cut in the property valuation of agricultural land, as called for by groups representing farmers and ranchers.

The proposal by the conservative Republican comes in his final year in office and would be a feather in his tax-cutting cap.

Heineman pushed through a $425 million tax-cut package in 2007 and has touted improvements in Nebraska's ranking for business tax climate by the conservative-leaning Tax Foundation.

But the tax-cut proposal will spark a sharp debate in the Legislature on whether the $500 million cash reserve called for by Heineman will be adequate to weather another economic downturn.

Lawmakers also will disagree on whether it is wise to make a one-time withdrawal from the state's “rainy day” fund to cover an ongoing loss of revenue that could reduce funding for services.

State Sen. Heath Mello of Omaha, the Legislature's top budget-watcher as head of the Appropriations Committee, called the Heineman plan “voodoo economics” that might force the state to raise taxes if another recession hit.

“The reality is he's taking away from our emergency fund,” Mello said. “History has shown it's not good fiscal policy to do that.”

He said he would fight any attempt to draw down the cash reserve beyond a minimum of $643 million, the level recommended last fall by the State Tax Rate Review Committee, a panel that includes lawmakers and the state tax commissioner, who serves at the pleasure of the governor.

The cash reserve is projected to grow to $726 million by June 30, the end of the fiscal year, which would be a record amount.

Heineman said that Mello was “wrong” and that if you asked any citizens if they need tax relief, and if a $500 million cash reserve is sufficient, they'll answer with a resounding “yes.”

“A half a billion dollars? Isn't that enough?” Heineman said. “Who are we kidding?”

Mello has expressed worries that even the $726 million cash reserve might not be enough.

He said about $125 million of the reserve was a one-time infusion of tax revenue from the sell-off of assets in advance of the so-called “fiscal cliff” on Jan. 1, 2013. During the recent recession, Nebraska, unlike many states, avoided a tax increase and deeper cuts in services because it had a generous cash reserve — plus it received $600 million in federal stimulus funds, Mello said.

“I'm very cautious about utilizing the cash reserve on anything this year,” he said, citing uncertainties about the state's economy, including the steep drop in corn prices, prices that have padded farm incomes in recent years.

Mello said that if the cash reserve is too low, the state may have to cut services or reduce aid to K-12 schools, which could result in a property tax increase.

Sen. John Wightman of Lexington, who also sits on the Appropriations Committee, said he would support using some of the cash reserve for tax cuts.

Sen. Jeremy Nordquist of Omaha said Heineman's tax plan threatened the state's strong financial status. A report by George Mason University released Tuesday ranked Nebraska No. 1 for its ability to cover its long-term financial obligations and No. 4 for its overall fiscal health.

Nordquist also said that when neighboring Kansas cut income taxes, the cuts benefited the rich.

“Enormous tax giveaways for the wealthy did not create greater economic growth in Kansas, it created massive cuts to K-12 and higher education,” Nordquist said.

Nebraska's top individual income tax rate of 6.84 percent is the highest among neighboring states except Iowa. Heineman has repeatedly said income taxes are too high to lure workers for high-paying jobs.

The Nebraska Chamber of Commerce and Industry has called for cutting the top rate to 5.5 percent, but Heineman said Tuesday night that he was unsure if it could be cut that much.

Heineman has embraced a plan by the Nebraska Farm Bureau to reduce valuation of agricultural land from its current 75 percent of market value to 65 percent. He said that would relieve “record high” property taxes now being paid by ag producers.

Heineman did not detail any of his other budget priorities for 2014. But he said he was more than willing to work with the Legislature to craft a tax plan.

A long list of new spending proposals is expected to be introduced this year that might tap the cash reserve, but the governor made it clear that tax relief was his priority.

Those spending ideas include $25 million for lower-cost alternatives to imprisoning nonviolent criminals; $30 million for deferred state park maintenance; $1.5 million for public health centers; $2.5 million for new cabins and a swimming pool at Ponca State Park; and $3 million for a new state plane for use by the governor and state agencies.

Contact the writer: Paul Hammel

paul.hammel@owh.com    |   402-473-9584    |  

Paul covers state government and affiliated issues and helps coordinate the same.

Kelly: Started at a dining room table, Home Instead thriving at 20 with $1B in annual revenue
Nebraska's U.S. Senate candidates stick to familiar topics at Omaha forum
8% of alcohol sellers checked in Omaha area last week sold booze to minors
OPS bus, SUV collide; no students onboard at the time
Waitress who served alcohol to teen before fatal crash gets jail time, probation
Lori Jenkins, charged as accessory in 4 murders, waives speedy trial
Iowa State servers hacked, nearly 30,000 SSNs at risk
New public employee pay data: Douglas, Lancaster, Sarpy Counties, plus utilities
2nd District House race: After 8 terms, Lee Terry knows how D.C. works — and doesn't
Bellevue man is killed at Minnesota dance hall after South Sudanese basketball tourney
Spring corn planting still sputters in Nebraska, Iowa, other key states
Nebraska banking and finance director to retire
19-year-old killed in one-vehicle crash at 72nd & Shirley
Gov. Heineman vetoes bill to ease restrictions on nurse practitioners
U.S. Senate race: State Auditor Mike Foley defends Shane Osborn against ad campaign
Public defender to represent Nikko Jenkins in sentencing
Mid-America Center on track for lower operating loss
Bluffs City Council approves dozens of new numbered street lights
National Law Enforcement Memorial Week set for May
Ted Cruz backs Pete Ricketts' campaign for governor
Omahan charged with 5th-offense DUI after street race causes rollover
2 blocks of Grover Street closed
Safety board report blames pilot error in 2013 crash that killed UNO student, passenger
Omaha man accused in shooting ordered held on $75,000 bail
2 men charged with conspiracy to distribute meth held on $1 million bail each
< >
COLUMNISTS »
Kelly: Started at a dining room table, Home Instead thriving at 20 with $1B in annual revenue
The idea that Paul Hogan had studied and then hatched at his mother's table was that older people, rather than moving in with relatives or to an assisted-living center, would much prefer to stay home instead.
Breaking Brad: Into the claw machine! Florida kid follows Lincoln kid's lead
In Fort Lauderdale, Fla., a child climbed inside a claw machine. Hey, Florida kid: Nobody likes a copycat.
Breaking Brad: Even Chuck Hassebrook's throwing mud!
The Nebraska campaigns have turned so ugly, Democrat Chuck Hassebrook lobbed unfounded accusations at an imaginary opponent.
Breaking Brad: Kraft wiener recall is business opportunity for TD Ameritrade Park
Instead of returning the wieners, TD Ameritrade Park is calling them "cheese dogs" and charging double.
Breaking Brad: Photos with the Easter Bunny are so 2010
In a sign of the times, most kids ran out of patience waiting for a photo with the Easter Bunny at the mall, just snapped a selfie and went home.
Deadline Deal thumbnail
Tokyo Sushi
$5 for $10 or $10 for $20 toward All-You-Can-Eat Sushi Purchase
Buy Now
PHOTO GALLERIES »
< >
SPOTLIGHT »
Omaha World-Herald Contests
Enter for a chance to win great prizes.
OWH Store: Buy photos, books and articles
Buy photos, books and articles
Travel Snaps Photo
Going on Vacation? Take the Omaha World-Herald with you and you could the next Travel Snaps winner.
Click here to donate to Goodfellows
The 2011 Goodfellows fund drive provided holiday meals to nearly 5,000 families and their children, and raised more than $500,000 to help families in crisis year round.
WORLD-HERALD ALERTS »
Want to get World-Herald stories sent directly to your home or work computer? Sign up for Omaha.com's News Alerts and you will receive e-mails with the day's top stories.
Can't find what you need? Click here for site map »