Nebraska senators urged to focus tax incentives for businesses on where they're most needed

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LINCOLN, Nebraska — Nebraska lawmakers were urged Thursday to keep the state's tax incentives focused on areas where unemployment is highest and where specific jobs are going unfilled.

The special Tax Incentive Evaluation Committee met at the Capitol to hear from business groups and policy think tanks about Nebraska's tax programs. The committee was formed earlier this year amid concerns that state law is too vague in explaining what each tax break should accomplish.

Lawmakers may want to focus their tax incentives on areas of the state that need them the most, such as those with high unemployment, said Renee Fry, executive director the OpenSky Policy Institute, a tax-policy think tank. Or they might focus on the quality of jobs, or recruiting newcomers to the state. Whatever their intent, she said, lawmakers need to make the goal clear.

"We recognize that tax incentives are an important economic development tool, but the research finds that tax incentives do not tend to pay for themselves," she said. "There is good reason to ensure that Nebraska's tax incentives are not only inducing the intended economic activity, but are also more cost-effective than other policy options."

Sen. John Harms of Scottsbluff, the committee chairman, said some areas of the state also have an abundance of jobs for qualified nurses, information technology specialists and other high-paying professions. Lawmakers may need to change incentives to attract more of those workers to rural areas, he said.

"Outside of the urban areas, Nebraska is undergoing a change," he said. "You just have to make sure your incentives are aligned with that."

Business groups urged lawmakers not to overcomplicate the incentives, which already require companies to submit tax, employment and investment papers and to undergo an audit that can take 9 to 12 months.

In general, the incentives have played a role in attracting businesses that might otherwise have located in another state, said Mark Norman, a senior director for the Greater Omaha Chamber of Commerce. Norman encouraged lawmakers not to place too many requirements businesses.

"I think there is some merit in keeping it simple," he said. "If we tried to get too complicated in the methodology, I think it does tend to muddle things up a bit."

One smaller tax incentive has become so cumbersome that companies stopped taking advantage of it.

Jamie Brewer, a CPA for an Omaha accounting firm, told lawmakers that applying for the Nebraska Microenterprise Tax Credit — an incentive for small businesses — has become too much of a hassle for businesses.

Brewer said her firm, Bland & Associates, charged business clients $500 to apply for the tax credit, which can total up to $10,000. But recent changes to the application process now take up so much time and paperwork that it's no longer worth the firm's effort, she said.

"It's a huge pain for the businesses," Brewer said.

A report released in September by the Legislature's Performance Audit Committee found that state officials don't have enough information to measure how well Nebraska's tax incentives stack up against other states. State programs and economies vary so widely that it's difficult to tell whether Nebraska's tax breaks have given the state an edge, according to report.

In February, the Performance Audit Committee reported that Nebraska has no way to judge whether its tax incentives have succeeded in attracting businesses. The report concluded that the state was spending $43,000 to $235,000 for each job created by the Advantage Act.

Lawmakers are expected to issue their recommendations for changes in December. Harms said lawmakers may have some early written goals by September.

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