Governor pushes massive tax cuts, prison reforms

By Deena Winter | Nebraska Watchdog

LINCOLN, Neb. — Nebraska Gov. Dave Heineman renewed his call for substantial tax cuts during his final State of the State speech Wednesday before lawmakers.

As he announced Tuesday night, the governor believes the state can afford $370 million to $500 million in tax cuts over the next three years, in part by using $220 million from the state’s cash reserve fund.

“The state of Nebraska has $1.2 billion in its checking and savings accounts,” he said. “Nebraska is overtaxing its citizens right now, and we need to change that.”

He wants tax relief for farmers and ranchers by reducing valuation of ag land from 75 percent of its actual value to 65 percent and a reduction in the top individual income tax rate from 6.84 percent to less than 6 percent. He later said he’s open to indexing or expanding tax brackets or phasing in the tax cuts over five to eight years.

Sen. Jeremy Nordquist, D-Omaha, said the goveror’s proposed “$500 million tax giveaway to the top 1 percent” would just be “putting more money in the pockets of the wealthiest Nebraskans” and require cuts to education, higher property taxes and higher tuition.

Heineman said he hasn’t even put forth specifics yet, so he doesn’t know what Nordquist is talking about.

“He believes in higher taxes and more state spending,” he said. “I’ve said we’re willing to be very, very flexible but at the end of the day we need to provide tax relief to Nebraskans.”

Heineman said a single person with an adjusted gross income of just $29,000 is subject to the top tax rate. A married couple earning $58,000 is subject to the highest rate.

Heineman also vowed to fight a bill that would expand Medicaid, a key provision of the Affordable Care Act that is not compulsory. On Tuesday, a dozen lawmakers, including Nordquist, unveiled their revised proposal to expand the program.

But the governor wasn’t having it. He said President Obama and his political operatives are trying to pressure Nebraska into expanding Medicaid, but Nebraskans won’t be intimidated into doing so.

“The implementation has been one disaster after another,” he said of Obamacare.

Heineman said the federal government is already trillions of dollars in debt and is unlikely to live up to its commitment to cover most of the costs of expanding Medicaid.

At a news conference later, the governor said the latest Medicaid expansion bill is just a “rebranding and remarketing to make it sound good.”

Asked why the state can afford $500 million in tax cuts but not Medicaid expansion, the governor said because middle class families are overtaxed.

“We are footing the bill and we deserve a break,” he said.

Heineman also said he has a short-term solution to prison overcrowding that includes contracting with county jails, sending more people to a McCook prison work camp and reducing the number of federal detainees in Nebraska prisons. He said he’s also willing to consider a limited supervised release program.

A long-term study on prison needs will be done this summer, he said, so it would be premature to recommend long-term fixes until then.

So how likely is Heineman to get his proposals passed by lawmakers? According to one University of California study, governors usually manage to get about half their State of the State proposals passed. That’s because the legislative branch holds more of the cards, and so governors usually only propose things they think they can actually get passed.

Heineman had pretty good luck with his proposals last year: Two of his three State of the State proposals ultimately passed:
• A 5 percent increase in special education funding
• A two-year tuition freeze for Nebraska students

However, his landmark, game-changing proposal to overhaul the state’s tax system — eliminating some of the state’s $5 billion in sales tax exemptions — was converted into a study of the tax system. He said Wednesday the issue has been studied enough: It’s time to take action.

Contact Deena Winter at deena@nebraskawatchdog.org. Follow Deena on Twitter at @DeenaNEWatchdog

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