Nebraska – Governor Proposes to Eliminate Sales Tax Exemptions

SALT Report 2046 – In his 2013 State of the State address, Nebraska Governor Dave Heineman announced that he has proposed legislation that will reduce or eliminate most sales tax exemptions so that the State can eliminate corporate income tax and individual income tax.

The Governor said, “Today, we are operating in a technology-driven, global free market economy. Our current tax system needs to be modernized and transformed. Taxes are too high in Nebraska and high taxes impede economic growth.  High taxes aren’t attractive for entrepreneurial growth and high paying jobs.”  Currently, Nebraska’s personal income tax rate is 6.84%, higher than every neighboring state.

Over the past few months, the Governor has been meeting with local business owners and asking them if they would give up their sales tax exemptions in order to eliminate the individual income tax and the corporate income tax. The overwhelming response was that most business owners would rather have a modern tax code that encourages productivity, profit, and job creation rather than a tax code in which they must hire lawyers and accountants to spend time mining for exemptions in an attempt to save a few dollars.

In his address, the Governor said that the current sales tax system is not working because the State exempts more than $5 billion in sales taxes annually, while only collecting $1.5 billion annually.  Therefore, the Governor says that the State must cut or eliminate most of the 84 different exemptions provided for everything from newspapers to airplane fuel.

If the Governor’s tax reform proposal passes the State will eliminate:

  • Individual income tax for working Nebraskans,
  • Small business income tax,
  • Social Security income tax,
  • Military retirement income tax,
  • Retirement income tax, and
  • Corporate income tax

For Further Information:

Office of the Governor Dave Heineman – State of the State Address