Nebraska Governor Dave Heineman Proposes Ending State's Income Tax

OMAHA, Jan 15 (Reuters) - Nebraska Governor Dave Heineman on Tuesday became the second Republican governor in the last week to propose ending his state's income tax, saying he wants to make Nebraska more competitive with its neighbors by eliminating the tax on both individuals and corporations.

Heineman said that if a complete elimination of the two taxes could not be passed, he would push to lower rates on both individuals and corporations. He promised to make up the lost revenue by reducing business exemptions to the sales tax.

Last week, Louisiana Governor Bobby Jindal said he wanted to eliminate all personal and corporate income taxes in his state. Louisiana's personal income tax rate is 3.9 percent.

Nebraska's personal income tax rate is 6.84 percent, higher than every one of its neighbors -- Iowa, Kansas, Missouri, Colorado and Wyoming -- according to a table accompanying Heineman's remarks.

Heineman's fellow Republicans control Nebraska's single-house legislature.

Most U.S. states tax both individual and corporate income, according to the Tax Foundation, a nonprofit and nonpartisan organization that measures federal and state taxes.

But seven states -- Texas, Florida, Washington, Alaska, Nevada, South Dakota and Wyoming -- do not tax individual income, according to the Tax Foundation.

Two others -- New Hampshire and Tennessee -- do not tax the earned income of individuals, but do tax interest and dividend income.

Three states -- Nevada, South Dakota and Wyoming -- have no corporate income taxes, according to the Tax Foundation. Three others -- Ohio, Texas and Washington -- have no corporate income tax but tax the gross receipts of businesses.

Other states in the country's midsection, including Oklahoma and Kansas, have also recently considered lowering taxes.