Wednesday, January 31, 2007

Questions for Gov. Heineman on Tax Reform

by Kyle Michaelis
LB331, offered on behalf of Gov. Dave Heineman as the cornerstone of his 2007 agenda, is scheduled for hearing by the Legislature's Revenue Committee this afternoon. According to high-level sources in the state capitol, Heineman will actually be testifying at this hearing in support of the bill's eliminating the estate tax and changing Nebraska's income tax calculations.

I hope to be able to attend. In particular, I'll be listening for Heineman to answer some of the following, long overdue questions about the plan he's put forward:
1. Does Gov. Heineman deny that the unspoken hallmark of his reduction in income tax brackets is the outright dissolution of the lowest tax bracket, with those qualifying therein (students, retirees, the disabled, the unemployed) seeing a rise in the rate at which they are taxed?

2. Does Gov. Heineman deny that his proposal shifts a greater burden (as a percentage of the total income tax collected) onto working class Nebraskans (those earning less than $50,000 a year) to the benefit of Nebraska's upper-middle class and its wealthiest citizens?

3. Does Gov. Heineman deny that some select low-income taxpayers will see a tax hike under Gov. Heineman's proposal while those in the upper tax brackets will see across-the-board cuts? In fact, won't some taxpayers see a hike in their marginal tax rate as high as 44% (from 3.57% to 5.12%)?
If I'm able to attend the hearing, I'll also try and keep count of how many times Heineman tries to sell his plan as "middle class tax relief," even though the bulk of its benefits clearly rest with those highest on the economic totem pole.

It will also be interesting to see whether Heineman will continue to go on the offensive against alternative tax-cut proposals focusing on Nebraska's supposed property tax crisis. The majority of state senators and the weight of public opinion tend to favor the legislature's breaking with Heineman's lead and pursuing its options on property taxes.

The question now becomes whether those leaders who see the urgency and demand for property tax relief can come together on a single proposal that would both appeal to the average Nebraskan and reveal the many weaknesses of Heineman's plan. Several alternatives are on the table - many of them containing very good ideas - but probably the bill best positioned to succeed is freshman State Senator Tom White's LB453, which would provide an income tax credit up to $500 as a rebate for the property taxes paid by Nebraska homeowners.

The New Nebraska Network is watching White's plan and we're excited by the progressive priorities at its heart - not only encouraging home ownership but also returning a sizable chunk of change to taxpayers without writing a blank check to those with the least need and the most power.

We look forward to contributing further analysis of White's proposal in the coming days. For now, though, it's Heineman and his LB331 in the cross-hairs. Looks like we'll know soon enough just how far out on a limb the Governor's willing to go to get his way rather than doing the people's work.

It's also worth noting that, this weekend, the first signs of the Nebraska media offering some independent analysis of LB331 finally began to show, as both the Lincoln Journal-Star and the Omaha World-Herald made baby steps away from their prior regurgitation of whatever Gov. Heineman was spoon-feeding them.

If nothing else, both articles do a fair job of highlighting the enormous benefits Heineman seeks for those in Nebraska's highest tax brackets. Still a lot that's going unreported about his proposal - particularly its ramifications for Nebraska's poorest wage-earners - but at least the first trickles of the truth are starting to drip into the vast pool of public information.

All I can say's about damn time.

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