Attempt to repeal Nebraska sales tax law rejected

LINCOLN, Neb. (AP) -- Lawmakers on Monday rejected an attempt to repeal a new Nebraska law that lets cities raise their local option sales tax rates as long as they secure voter approval.

The law gives cities the power to ask voters for an increase to as high as 2 percent, up from the current 1.5 percent lid imposed by the state. Lawmakers voted not to reconsider a measure filed by Sen. Ernie Chambers that would have ended the law.

Supporters of the law argue that any increase would require majority support from local residents, and cities would have to designate a specific use for the money. They also pointed to recent cuts in state aid, which have strained municipal budgets.

Chambers, of north Omaha, has argued sales taxes disproportionately affect the poor, who pay a larger share of their income when buying goods and services. He also voiced opposition to a provision that allows the city of Lincoln to use some of the revenue for private development projects.

Sen. Bill Avery, of Lincoln, said he supported the law because it sets a high threshold for cities that might want to use it. A sales tax increase beyond 1.5 percent requires 70 percent support from a city council to appear the ballot, and then voters have to approve it.

"If they decide they want to tax themselves, then so be it," Avery said. "They at least are part of the decision. The city's job will be to convince the voters that the tax they are proposing is in fact needed."

Voters in the cities of Sidney and Alma and the village of Waterloo already have approved sales tax increases since the new law went into effect, while Nebraska City and Bellevue voters have rejected them.

Lawmakers passed the law last year and narrowly overrode the veto of Republican Gov. Dave Heineman, who argued it would lead to tax increases. Chambers wasn't in the Legislature at the time, having sat out for four years because of term limits, but he returned this year after being elected again.

Chambers introduced the repeal bill earlier this year, but it was held in committee. Last week, he filed a motion to attach his measure to another tax bill pending in the Legislature. Lawmakers fell short of the 25 votes they needed to add his amendment onto the bill, and Sen. Beau McCoy, of Omaha, filed a motion to reconsider the vote.

Nebraska has 530 cities. When the initial law passed, 86 of out of 194 cities that impose sales taxes had reached the 1.5 percent maximum, according to the League of Nebraska Municipalities.

Sen. Mark Christensen, of Imperial, said giving the cities greater taxing authority, even voter support, would only encourage them to spend more.

"I guarantee you, if you give the cities the right to put on two more cents, they'll take it. They'll find a way to spend it," Christensen said. "I've never seen a government yet that couldn't spend more money."

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The bill is LB308. The amendment is AM1413.