Two bills that garnered a lot of interest last week were LB44 dealing with collection of sales taxes for online purchases and LR6 a legislative resolution calling for a convention of the states.
Sen. Dan Watermeier of Syracuse introduced LB44 which would require that online retailers without a physical presence in the state report the names of customers and the amounts of purchases sent to Nebraska if their gross sales revenue in the state is over $100,000 or they make more than 200 separate transactions in the state that year. It is estimated this would bring in an additional $30-$40 million per year in sales tax revenue. Currently, based on a 1992 U.S. Supreme Court ruling, a business must have a physical presence in the state before it can be required to collect state sales taxes.
The bill received enough support to advance to select file although some senators expressed concern that it would be struck down as unconstitutional. I voted for the bill because I think it would help small retailers in the state who are disadvantaged by having to charge sales taxes when online retailers don’t. In fact under current law, Nebraskans are required to self-report online purchases and remit sales taxes on those purchases when they file their state income tax returns but very few people actually do this.
LR6 introduced by Sen. Laura Ebke of Crete calls for holding a convention of the states as authorized under Article V of the U.S. Constitution. The convention would be able to propose amendments to the constitution that would impose fiscal restraints on the federal government, limit the power and jurisdiction of the federal government, and implement term limits for members of Congress and federal officials. It would not be authorized to take any additional action.
It is highly unlikely a convention will take place and even if it does chances are slim it would come up with an acceptable amendment. The framers of the constitution purposely made it difficult to amend the constitution – a two-thirds majority – 34 states – must pass identical resolutions and any proposed amendment would then have to be ratified by a three-fourths majority – 38 states.
The resolution is still being debated but I will support it if it comes to a vote. I strongly believe something needs to be done to address the growing federal debt and curb the overreach of the federal government stemming from the countless rules and regulations drafted by Washington bureaucrats.
After the Easter recess the legislature will begin debate on the Revenue Committee’s proposed tax package. LB461 as amended by AM954 is an omnibus bill containing provisions from LB337 (Smith) and LB452 (Lindstrom) relating to changes in the structure and rates of personal and corporate income taxes, LB129 (Morfeld) increasing the state’s Earned Income Tax Credit (EITC), and LB338 (Brasch) changing how ag land in the state is valued for tax purposes.
The bill would eliminate the lowest personal income tax bracket and collapse the four current brackets into three. The highest individual income tax rate will decrease by approximately 0.1 percent per year from 2020 to 2027 thereby dropping the state’s top individual income tax rate from 6.84 percent to 5.99 percent. If the projected rate of growth in revenue is less than 3.5 percent, the tax rate cut would be deferred and the deferral would remain in effect until the expected rate of growth exceeds 4.2 percent.
The bill lowers the top corporate income tax rate of 7.58 percent on income over $100,000. The rate will be incrementally reduced until it reaches 5.99 percent. Reductions in the corporate tax rate would be subject to the same revenue growth rate triggers as those for personal income taxes except a 4 percent growth rate would be required.
While the majority of Nebraskans should see income tax relief, some individuals at lower income levels might not. In order to prevent any detrimental impacts on these individuals the bill will increase Nebraska’s EITC from 10 percent of the federal credit to 11 percent in 2018 and to 12 percent in 2019.
The bill will make significant changes in how ag land is valued for tax purposes and mandates that the aggregate value across all classes of land will increase by no more than 3.5 percent from the prior year.
Rather than basing valuation on the land’s market value, the new system would use an income-based valuation taking into account land’s projected income producing potential. The new valuation would be between 55 and 65 percent of actual value for each class of land as determined by the state property tax administrator. Valuation rate decreases will trigger increases in state TEEOSA funding.
Overall I think this is a good bill that begins the process of overhauling taxes in the state. While my primary focus will continue to be achieving a significant reduction in property taxes on agricultural land and a more equitable approach to school funding for everyone, this is a step in the right direction. No doubt there will be a great deal of discussion and possible amendments as the bill is debated on the floor which will set the stage for tackling the budget, the next big challenge looming on the horizon.
Please feel free to contact me and my staff about your legislative concerns or other issues you would like to discuss. My email address is email@example.com and our telephone number is 402-471-2630.