Thursday, October 13, 2005

Tax Cuts 'R Us

by Kyle Michaelis
It's becoming incredibly clear that Governor Dave Heineman is going to have one agenda for the 2006 session of the Nebraska Unicameral, and that agenda is cutting taxes. Well, the true agenda is actually getting elected in his own right, but tax cuts are obviously the means by which he thinks that's most likely to happen.

The Omaha World-Herald reports on Heineman and his fellow Republican gubernatorial candidates' attempts to turn next year's primary into a dangerous game of the limbo, each one promising lower taxes than the other with little concern for anything but the votes they might win:
The possibility of tax cuts turned up the heat in the Republican governor's race Wednesday.

Gov. Dave Heineman defended himself against criticism that his suggested tax-cut package should have come sooner or was politically motivated.

With state tax revenues on the rise, Heineman said this week that he might offer a tax-relief package in the next couple of months.

His opponents for the Republican nomination - U.S. Rep. Tom Osborne and Omaha businessman Dave Nabity - said the cuts should have come sooner.

Nabity said talk of tax cuts now, rather than in the last legislative session, "reeked of politics."

Heineman denied that charge.

"I realize there is an election - that happens every four years - so people can make that argument. But I'm trying to find a way, as I have said repeatedly, to grow this state's economy," said Heineman.

Since July 1, Nebraska has collected 13.4 percent more in taxes than in the same period last year, or about $85.7 million more than a state forecasting board predicted in April....

Osborne said he would have pushed for a tax cut in the last legislative session rather than allow state spending to grow by 7.2 percent over the next two years.

"We didn't pay down. We spent the money," said Osborne.

Heineman responded that his two opponents were "playing politics" and that his proposed tax cut was always part of his plan.

He said he pushed for an economic development package last spring in hopes that tax revenues would grow and a tax cut would be possible....

The debate on taxes in the Republican primary is not surprising. It isn't unusual for candidates to push for tax cuts at election time, said John Hibbing, a political science professor at the University of Nebraska-Lincoln.

"I think it's going to be an arms race. Each candidate is probably going to offer more tax cuts, and everybody is going to try to out-tax (cut) the other person," Hibbing said.

He also noted that the timing of a tax cut next year could work to Heineman's advantage. As governor, he could shepherd a tax cut through the Legislature a few weeks before voters go to the polls May 9....

But it also could pose a political risk to the governor, he said. Heineman could open himself to criticism for the size or type of cut. He also has to get state lawmakers onboard.

At least one state senator, Lowen Kruse of Omaha, said he would rather put the money into a savings account to protect against future economic downturns. He also noted that because of term limits, many senators will not have to worry about re-election.

"We simply will be looking at what's best for the state, and if a tax cut is best, we would do that. But we would not do that reflexively, as we might have done in the past," said Kruse.

How ironic it would be if the term limits pushed so vigorously by Nebraka's anti-government, anti-tax crowd ended up preventing tax cuts because state senators don't feel as much need to pander to voters' pocketbooks and are actually able to put the long-term interests of the state ahead of their political fortunes.

Wishful thinking? You never can tell, but it sure would throw one hell of a wrench in Heineman's election game plan.

I'm not saying tax cuts shouldn't be on the table or that, targeted correctly, they might not do a lot of good for Nebraska's economy and its working families. The problem is that the state has incredible responsibilities to live up to in education, in health care, and in any other endless number of social services that are easily forgotten in election year pushes for tax-payer bonanzas.

The long-term solvency of our government, vitality of our economy, and security of our citizens should be our leader's true priority.

We need to remember the lean times of just three years ago that forced very real cuts in services - few of which have been restored - that hurt very real Nebraska citizens, particularly the young and those on the verge of poverty.

Also, as the World-Herald points out in a separate article today, the state's tax receipt windfall may not be all that it's cracked up to be:
Nebraska's economy is stronger than expected this year, but it's not booming as much as state tax collections might suggest.

Conservative state projections and unexpected spikes in tax receipts have resulted in Nebraska collecting an $85.7 million tax surplus so far this year, said State Tax Commissioner Mary Egr Edson.

Only about 20 percent of that surplus has come from better-than-expected economic growth.

The forecasting board's cautious estimates, used by legislators to prepare the state's two-year budget, came on the heels of lackluster tax receipts in February, Edson said.

"Things were still a little unsure," Edson said. "They wanted to stay a little bit on the conservative side."

The legislature was cautious and conservative in estimating the state's tax receipts and balancing its budget (besides the whole corporate give-away). They should take no less cautious an approach to any proposed tax cuts, no matter the political pressures coming from the Governor's Mansion.


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