A bill that would let Nebraska cities increase their sales tax rates by as much as a half-cent with voter backing won final approval from lawmakers on Thursday.
The bill by Omaha Sen. Brad Ashford advanced out of the Legislature on a 30-15 vote. Gov. Dave Heineman has vowed to veto the bill, saying it could lead to higher taxes in Omaha and other cities. He has five days to act.
“We've been lowering taxes in this state, creating a more competitive environment for jobs in our state,” said Gov. Heineman. “It’s working, we have the second lowest unemployment rate in America. If you increase taxes, it's going to hurt our competitveness."
If the governor does veto the bill it goes back to the Legislature for an override, which would happen with 30 votes, exactly the number of supporters it had on Thursday. If that happens and the bill becomes law, a 70 percent majority of a city council is needed to then place the issue on the ballot during a primary or general election.
Two Omaha City Council members told Channel 6 News they'd vote against it, two said they were undecided and one said he was in support of sending it to a vote of the people. Two others have not gotten back to Channel 6 News. Five council members would have to vote yes for it to move on to the voters.
The proposal would allow cities (with voter approval) to set a local sales tax rate 2 percent higher than the state rate of 5.5 percent. Omaha has already tacked on an extra 1.5 percent so our sales tax could only go up a half-percent. Under the bill, Omaha’s current 7 percent rate could go to 7.5 percent.
At Michael’s at 11th and Harney in Omaha’s Old Market, talk over the lunch table turned to taxes, specifically a possible raise in the city sales tax. "I would support it, I mean we have infrastructure to pay for and that makes sense to me,” said A.J. Haas of Omaha.
If an increase was approved, the current 2.5 percent restaurant tax would go away. "I think it's just shifting taxes around and I think it's okay because it takes the burden off the restaurants and it's equally distributed."
Michael’s manager and co-owner Brandon Henery agrees. "Quite frankly, that's blatantly unfair and that's the reason why most restaurant owners and bar owners were so up in arms about it. They were like why are you isolating our business and our customers to pick up the tab on this when wouldn't it be fairer if we spread it all out throughout the community?"
The current restaurant tax generates an estimated $22 million per year. A half-percent increase in the sales tax would bring in double that, an estimated annual $44 million because everything would be taxed, not just restaurants.
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