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Pillen plan to shift taxes onto sales tax and off property tax gets some support

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Pillen plan to shift taxes onto sales tax and off property tax gets some support

Mar 04, 2024 | 7:42 pm ET
By Paul Hammel
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Pillen plan to shift taxes onto sales tax and off property tax gets some support
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In a cavernous scrap metal shop near Fremont, Gov. Jim Pillen held a town hall on his legislative priorities on Monday. (Paul Hammel/Nebraska Examiner)

FREMONT, Nebraska — Judging from a handful of people who attended a town hall meeting Monday, Gov. Jim Pillen might have some popular support for raising sales taxes to lower property taxes.

“Things are way out of whack now,” said Lanny Schmid of Fremont, saying he’d be OK with a hike in sales taxes if it translated into lower property taxes.

Fremont banker Scott Meister agreed, though he added that it will take a variety of steps, not just raising sales taxes, to achieve Pillen’s goal of reducing property taxes by a total of 40%.

“That’s easier said than done,” Meister said.

Pillen held a trio of town halls Monday in northeast Nebraska, culminating with more than a hour-long discussion inside a cavernous metal-working business near Fremont, All-Metals Market Inc.

Series of town halls

The sessions were part of a series of recent town halls scheduled by the governor over the past few weeks to discuss his legislative priorities, which are topped by an ambitious plan to deliver an additional $1 billion in property tax relief this legislative session.

Tax rankings

Nebraska currently ranks 28th among the 45 states that levy a state sales tax, according to 2023 figures from the Tax Foundation.

A 1-cent increase, as Gov. Pillen is proposing, would move the Cornhusker State up to ninth highest in the country, at 6.5%, matching Kansas as having the highest state sales tax rate among neighboring states.

His proposal, which is still taking shape, has been criticized by both ends of the political spectrum because its key mechanism is raising the state’s sale tax by 1 cent, from 5.5 cents to 6.5 cents.

Conservative groups such as Americans for Prosperity and business organizations like the Nebraska Chamber of Commerce have panned the idea of raising one tax to lower another, saying that’s not “tax reform.” Meanwhile, the progressive OpenSky Policy Institute has also opposed the sales tax hike as being “regressive,” saying it would hurt low-income Nebraskans hardest because they spend a higher proportion of their income on goods.

Pillen, during his talk, defended his proposal as a “tax shift” that would reverse a shift from a few years ago onto mostly agricultural land that has left an imbalance in the state’s three main taxes: property, sales and income.

‘Give me a break’

“Some are calling me a tax increaser,” the governor told more than 100 people gathered in Fremont. “Give me a break. We need to have a tax shift.”

Right now, about $5.3 billion in property taxes is collected each year, compared with $2.3 billion in sales taxes and $3.6 billion in income taxes.

Previous action by the State Legislature has already reduced local property taxes by about $1 billion, so another $1 billion is needed to achieve Pillen’s goal of a $2 billion or 40% reduction, overall, in local property taxes.

He told those attending the town hall meeting that a 1-cent increase in sales taxes would allow a $500 million shift, which means another half-billion dollars in new revenue is needed.

He touted one aspect of his plan: increasing state tobacco taxes from 64 cents per pack of cigarettes to $2.64, raising the state ranking for tobacco taxes from 42nd highest to 14th.

“If you say you can’t afford that, I say ‘Good,’ ” Pillen said. That’s because, he said, it might mean someone would quit smoking — a habit that led to an early death of the governor’s father.

Pillen, acknowledging the pushback he’s getting on his tax shift proposal, asked those in attendance to each call five state senators.

Most OK with tax shift

“Our elected officials need help, to hear your voices,” Pillen said.

Of the seven people who asked questions at the town hall, and a handful of others interviewed later by the Examiner, most appeared ready to trade higher sales taxes for lower property taxes.

Bob Schlumberger of Fremont said that if it translates into a dollar-for-dollar shift, he’s OK with it.

“I don’t know if (40%) is doable. Maybe compromise at 35%. I don’t know,” Schlumberger said.

“Something’s got to happen,” said Kevin Yount, whose metal manufacturing shop served as host for the town hall.

Meister, the local banker, said a combination of things will be needed to lower property taxes, including a cut in spending and a removal of some tax exceptions.

Schmid, a farmer who was standing with Meister, said it might mean that farmers lose some tax exemptions. One exemption Pillen is targeting for elimination is for farm equipment repair parts.

The governor got clear pushback on one of his ideas, which is to deny spending increases for the Nebraska Department of Health and Human Services.

Mother opposes budget cuts

A mother of a 12-year-old developmentally disabled boy from Albion said that without adequate funding, DHHS can’t hire staff to provide daytime services for her son. She said a reduction in services might mean she has to quit her job to stay home with him.

Already, the woman said, some families are on a six-year wait list for services.

Pillen said he would take her comments to heart but said his plan is to reduce spending by state agencies while increasing services.

“We did not make this decision in a vacuum,” he said, adding that his administration is reviewing every contract to see if it can be done more efficiently.

Wife of former governor supportive

Pillen even got some sympathy from the wife of former Gov. Dave Heineman.

Sally Ganem, who said she wasn’t speaking on behalf of her husband, said her spouse was “tacked to the wall” by lobbyists when he proposed eliminating some sales tax exemptions, which she said are more numerous than items that are taxed.

But, Ganem said, something needs to happen to lower property taxes.

Pillen agreed, pointing out that his plan isn’t fully developed.

“This is a living, breathing piece of legislation, but we have to solve it this year,”  he said.