Taxes, taxes and more taxes. From property taxes, income taxes, sales taxes, road use taxes, tax credits and tax incentives there are a lot of taxes we can talk about. All of these and I haven’t even mentioned fees yet. What this boils down to is that Nebraskans are over taxed. While taxes have been a main topic of discussion over the last few years, I would say little has been done to move towards good solid reform.
This week was another one of those weeks where the talk of tax reforms took center stage. On Thursday, the Legislative Performance Audit Committee released a report looking at the tax incentive evaluation process. LR444 created The Tax Incentive Evaluation Committee as a result of questions raised in a 2013 Legislative Performance Audit Committee audit of the various tax incentive programs.
Nebraska currently has six primary tax incentive programs: the Nebraska Advantage Act, the Nebraska Advantage Rural Development Act, the Nebraska Advantage Microenterprise Tax Credit Act, the Nebraska Advantage Research and Development Act, the Beginning Farmer Tax Credit Act and, the Angel Investment Credit Act. These six programs provided $175 million in tax refunds/credits in 2012 and 2013 alone. There is also a list of sales tax exemptions, such as food, manufacturing inputs, agriculture crop inputs (seed, fertilizer, etc.) and last year we took the sales tax off of farm machine parts and repairs. There is also a property tax credit which is way too small.
While there is value to all of these programs, the report emphasized the need to have specific and measurable goals for each of them. As with anything, significant benefits often come with significant costs. We need to make sure that these incentives are providing the state with the most for your money.
Recommendations from the committee suggest the following items be considered. 1) The cost of the program to the state. This includes administrative expenses, costs associated with application and compliance requirements for businesses and the loss of revenue. 2) What benefits are seen by the state as a result of tax revenue from jobs that are created by the program. 3) How many jobs are created versus how many there would have been without the incentives. 4) What is the quality of the jobs created, looking at the pay and benefits. 5) It suggests looking at the investments and innovations made by the companies receiving incentives. Additionally, what is the longevity of the business in the state compared to similar businesses that do not receive the incentives. 6) What is the job creation in the rural parts of the state.
The report suggests reviewing each of the programs on a three year cycle. It also encourages that the review be done by legislative fiscal analysts and auditors and input from the chair or members of the Revenue Committee with the Legislative Performance Audit Committee having oversight.
There are definite benefits to these programs but we need to be able to evaluate them and insure that the money spent on them is doing what it was intended to do. We need to be responsible wards of your tax dollars and if programs are not performing we need to be aware of it so changes can be made. I think this review was long overdue and that we will be joining the 11 other states that since 2012 have improved their own methods for evaluating tax incentive programs. The whole thing gets rather complicated but I still think President Reagan had it right when he said (“It’s not that people are taxed too little, it’s that the government spends too much”). We must have money to run the state, the question is and has been how best to do that.