Nebraska governor signs tax cuts into law

LINCOLN, Neb. (AP) — Nebraska Gov. Dave Heineman signed his tax cut package into law Tuesday as legislators prepared for veto-override votes on three other measures that have put them at odds with the Republican governor.

Heineman approved the scaled-back version of his top legislative priority at a packed press conference with lawmakers and supporters. He said he would likely push next year for tax cuts that were stripped out of his original plan.

"I'm not done with tax relief," Heineman said. "I've still got a couple years left (in office), and if there's any way to continue to reduce the tax burden on Nebraska, I'm going to try to do it."

Meanwhile, lawmakers and lobbyists worked to sway the public to support three other proposals that the governor doesn't like: A bill to allow machine bets on old horse races, a sales tax measure for Nebraska cities, and legislation that would restore state-funded prenatal care coverage for low-income women, including illegal immigrants.

Heineman vetoed the horse racing bill on Monday, saying it would create a new form of gambling. He has said he would reject the other two measures because they could place a financial burden on taxpayers. Heineman has five days to sign or veto the measures.

On Tuesday, Heinemen said he would use every power at his disposal to block both plans.

Lawmakers and the governor "both have certain powers under the constitution," Heineman said. "They're going to use theirs, and I'm going to use mine."

Lawmakers will convene for their final day next Wednesday, Speaker of the Legislature Mike Flood announced Tuesday. That means Heineman will be forced to veto the bills and give lawmakers the chance to override them.

A coalition of Nebraska city officials and lawmakers rallied at the Capitol on Tuesday afternoon in support of the sales tax bill. The proposal by Omaha Sen. Brad Ashford would allow cities to increase their sales tax rates to a high as 2 percent, with voter approval. The current ceiling is 1.5 percent.

"The cities and municipalities represent our neighbors and all the citizens," Ashford said. "We believe in you, we believe in you, we believe in you — and it's time for a change. It's time to give the citizens of this state an opportunity to make the critical decisions as we go into the 21st century."

Heineman said the bill would represent a potential 33 percent sales tax increase for Omaha, Lincoln and other cities, and could offset the tax relief offered his plan.

"It doesn't make sense to lower taxes this morning and increase them this afternoon," he said.

Gambling with the Good Life, a group that opposes the historic horse racing bill, called on lawmakers Tuesday to uphold the governor's veto of the horse racing bill. Executive director Pat Loontjer accused lawmakers who supported the measure of succumbing to pressure from gambling lobbyists.

And supporters of the prenatal care bill said they were planning a Wednesday night vigil to urge lawmakers to "stand strong" against Heineman's veto.

Lawmakers approved the governor's tax plan last week, 39-9, following a long debate over whether it would financially weaken the state. Critics argue that the measure would reduce future funding for services, with a relatively small payoff for taxpayers.

A family of four making $48,000 annually — the state's median household income — would see an extra $52 in yearly tax relief when the plan is fully enacted, according to an analysis by the OpenSky Policy Institute, a group that studies Nebraska tax policy. A family making more than $75,000 would see $145.

Bellevue Sen. Abbie Cornett said she and Heineman opted to focus on lowering individual income taxes when it became clear that the full tax cut package lacked the support it needed to pass. The final proposal will cost $97 million over a three-year period — less than one-third the size of the original bill — and does not address the inheritance tax or corporate tax rates.

Heineman also signed three economic development bills into law. Two measures by Kearney Sen. Galen Hadley would provide a sales-and-use tax exemption for biochips used in genetic science and reduce the income tax burden on Nebraska-based businesses that serve customers in other states.

"Technology and the way we do business are changing," Hadley said. "We must modernize our tax laws to reflect that. If we don't do that, we're going to be driving industries out of Nebraska, and we're going to be putting up barriers around the state for bringing industry in."

A third new tax incentive law sponsored by Cornett is designed to attract data centers to Nebraska and encourage expansions, including one by internet search engine Yahoo! in LaVista, an Omaha suburb.