Tax Relief for Homeowners
By Governor Dave Heineman
July 3, 2006
Dear Fellow Nebraskans:
I write to you this week with good news on the financial front. The fruits of negotiations this spring have ripened into a sizeable tax break for anyone investing in the long-term value and upkeep of an existing home. During the last legislative session, I had the pleasure of signing LB 968 into law. In addition to providing income and property tax relief, LB 968 also repealed an unpopular tax on home-repair labor.
That repeal was part of my original tax-relief proposal, and it was championed by a number of senators. It affects people who care about their communities. I had an opportunity in recent days to visit with a Lincoln homeowner who had needed more space in her kitchen. She and her husband and their children had outgrown the space they had, but they liked their home and loved their neighbors, so they remodeled.
They only needed to add about six feet to their kitchen space, and their new design made excellent use of the space. Unfortunately, the sales tax on the labor for those kitchen changes added a significant amount of money, more than $2,000, to their total repair bill. Had they built new, they would have paid no sales tax on the labor. That's why I and others have called the sales tax on home-repair labor an unfair and unnecessary tax.
I also had a chance while visiting with her to speak with the contractor who had worked on the Lincoln family's home. He told me about the number of people over recent months who have had to cut back on the number of changes and features they wanted to add. The effects can also be seen elsewhere, with roofers, heating and air conditioner repair specialists, and even in the upkeep of older homes.
I agree with both of them that hard-working Nebraskans who care about the appearance and quality of their existing homes should not be penalized for improving them. Thanks to the tax-relief package advanced by the Revenue Committee and passed by the Legislature last session, the sales tax on home repair labor expired on July 1.
Over the course of owning a home, most of us have had to replace a roof or a furnace, improved a basement or remodeled a kitchen or bathroom. Some examples of the types of previously taxed home projects that will now be freed from the sales tax on labor are repairs to air conditioning and heating units, painting projects, roofing repairs, carpet replacement, wood floor finishing, laminate laying, and room remodeling.
I know there are a good many projects being planned for later this summer and fall because this gave Nebraskans the confidence to make the choice to pursue the improvements we might otherwise have had to put off. This repeal will put approximately $30 million a year back into the pockets of Nebraskans. I am pleased for Nebraska families that we were able to deliver this relief, and we are far from done.
I have said repeatedly that in order to reverse a 15- to 20-year trend of tax creep we need an intense, laser-like focus on improving our tax climate. We need to cut taxes whenever appropriate so that we can improve our national and international competitiveness, and taxpayers have a right to expect government to tighten its belt.
No one person is responsible for the success of this endeavor. It was a collaborative effort that included homeowners, neighborhood associations, contractors, and elected officials. I want to personally thank each and every person who helped us achieve this outcome, because pride in homeownership is one of the most important facets of community, and Nebraska has always been enriched by the strength of our quality of life.