LINCOLN — The plot thickens.

An alternative property tax relief package funded by a half-cent increase in the state sales tax, along with a cigarette tax boost and elimination of more than two dozen sales tax exemptions, was introduced in the Legislature on Thursday.

Meanwhile, Sen. Burke Harr of Omaha was poised to introduce a multi-layered plan to "build a bigger, better economy" in Nebraska with a series of workforce development initiatives along with increased state aid to schools funded by a half-cent increase in the state sales tax for four years.

Those two proposals represent a challenging embarrassment of riches for a Legislature already confronted by competing tax reduction packages, one designed to provide personal income tax, corporate income tax and property tax reductions, and the other promising $1.2 billion in local property tax relief.

Sen. Tom Briese of Albion is sponsoring the new property tax relief plan that he describes as "the product of much negotiation," arriving with broad-based support from education, agriculture, commercial and residential property interests concerned by the state's heavy reliance on local property taxes.

"Yes," Briese said, "this is the alternative" to the two big tax proposals already in play.

His package would provide immediate and substantial property tax relief while protecting funding for local school districts, he said.

In addition to a half-cent state sales tax rate increase, he said the bill would boost cigarette taxes by $1 a pack and eliminate 25 or 30 sales tax exemptions, including those applied to the purchase of candy and soda pop.

The proposal would also apply "a small surcharge to our highest income earners" while eliminating the personal property tax exemption along with a designated capital gains exclusion.

The bill would direct revenue from internet sales tax collections to the state's property tax credit fund, according to a summary sheet outlining the proposal.

In addition, the measure would place what is described as "a soft cap" — 2.5 percent annual growth — on the amount districts are allowed to increase their local school property taxes, with flexibility for inflation, student growth and poverty growth.

"My hope is that it has the potential to garner the bipartisan support needed to get it across the finish line," Briese said. "Most likely, adjustments to it will continue."

The bill would raise an estimated $700 million to $800 million in annual revenue.

Along with restoring cuts in state aid to schools and reinstating a previous change in the school aid formula, the proposal would inject an additional $600 million into the state property tax credit fund.

Already in the legislative hopper are the income and property tax reduction plan supported by Gov. Pete Ricketts and sponsored by Sen. Jim Smith of Papillion, chairman of the Legislature's Revenue Committee, and a $1.1 billion property tax reduction bill championed by Sen. Steve Erdman of Bayard.

Over the horizon looms an initiative petition drive to place the Erdman proposal on the November general election ballot if it is rejected by the Legislature.

Harr's proposal, which is ready for introduction, is designed to look beyond the tax battles of today to build a strong economy that will create a strong and stable tax base.

"We can fight property versus income taxes all day long," he said. "When both sides win is when our economy grows."

When big companies want to grow, he said, they look for a trained and talented workforce first. Then location, he said, "and after that, they look at taxes."

That's how you grow a state, Harr said. "This is how you incentivize the next generation.

"And if you keep kids here by creating high-demand, high-wage jobs, that's the way to reduce taxes," he said.

Harr's proposal would raise the state sales tax rate from 5.5 percent to 6 percent and allocate the $160 million in additional annual funding into a series of programs, including $71 million in additional state aid to schools.

Seven designated education and training programs would be allocated funding totaling another $71 million.

The $18 million raised by sales tax assessments on motor vehicles would be funneled into the state's transportation infrastructure bank and a light-rail grant fund.


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