LINCOLN — The most anticipated tax overhaul proposal of 2014 finally arrived Wednesday, the last day of bill introductions in the Legislature.
The measure to cut income tax rates was introduced on behalf of the Omaha, Lincoln and Nebraska chambers of commerce, three major players in forging state tax policy. The proposal, which has been blessed by Gov. Dave Heineman, would drop the top income tax rate over three years from 6.84 percent to 5.9 percent.
That's a benchmark proponents say will boost the economy and make Nebraska more competitive with neighboring states for high-paying jobs and highly skilled employees.
“This bill is an introduction to get the conversation started,” said State Sen. Burke Harr of Omaha, who introduced Legislative Bill 1097. “This is ideally what we'd like to do. The question is, can we afford it?”
Lawmakers have 50 more days in their 60-day session to figure that out.
They introduced 102 bills and two proposed constitutional amendments on Wednesday. That leaves a final tally of 456 legislative proposals for consideration before lawmakers adjourn in April.
Sen. Greg Adams of York, speaker of the Legislature, said he expects major debates on tax cuts, prison overcrowding, expanding Medicaid and funding water projects.
Tax policy overhaul has been seen as one of the top issues following a months-long study by a special legislative tax modernization committee. That group heard complaints about high property taxes, mostly from farmers and ranchers whose land prices have risen to record-high levels.
The panel recommended some tweaks in state tax policy and continued work on property tax reduction, but rejected income tax cuts.
But business groups have continued to focus their gripes on income taxes, saying that recruits to Nebraska shy away because the top rate, 6.84 percent, is higher than any neighboring state except Iowa.
Last summer, the Nebraska Chamber of Commerce and Industry floated a reduction of the top rate to 5.5 percent.
But the bill introduced Wednesday settled for a less dramatic cut to 5.9 percent and phased in over three years, which Joseph Young of the Greater Omaha Chamber of Commerce said was believed to have more support from senators.
“This is a responsible way to give taxpayers a tax cut,” Young said.
The bill would reduce individual income tax rates for all taxpayers and simplify tax brackets by reducing them from four to three.
The proposal also would cut the top corporate income tax rate to 5.9 percent over three years, from the current 7.81 percent. The biggest question about the bill will be its budget impact, an estimate that won't be completed by state tax officials for several days.
Sen. Galen Hadley of Kearney, who headed the tax modernization study and is chairman of the Revenue Committee, said he'll consider any tax cuts that are “reasonable” and won't harm state services.
He said they must be “sustainable” and cannot leave the state without sufficient cash reserves.
Both Harr and Young said that given the state's record-high cash reserves, there should be adequate money for tax cuts. But they said they were also waiting to see the price tag for their bill.
World-Herald staff writer Martha Stoddard contributed to this report.