Governor’s income tax package advances from the Revenue Committee
LINCOLN. On Thursday, a legislative committee introduced a sweeping bill to cut income taxes amid questions about whether the state can afford it.
In a 7-1 vote, the Legislative Assembly’s Committee on Revenue took Governor Jim Pillen’s Major Bill 754 out of committee and tabled it in the full 49-member Unicameral Council.
State Senator John Arch, Speaker of the Legislative Assembly, said he plans to introduce the tax bill and the accompanying bill to cut property taxes “sooner rather than later.”
Halfway through, bills still pending
The 90-day legislative session is now halfway through, and amid a flurry of obstructionists delaying action, no bills have yet been passed.
Elkhorn Sen. Lou Ann Linehan, who chairs the tax committee, said Thursday she believes she has 33 votes to overcome the expected filibuster on the tax bill. She said Nebraska needs to lower income tax rates to be competitive with its neighbors in attracting jobs and keeping people from moving.
Under LB 754, the state’s top personal and corporate income tax rates will be reduced to 3.99% by tax year 2027. The top two rates are now 6.8% and 6.27%.
“We must act,” Linehan said, citing Iowa’s recent decision to adopt a flat income tax rate of 3.9%.
Lincoln Senator George Dungan, the only one to vote no on the Revenue Committee, said he remains concerned that such a drastic income tax cut and the revenue it generates will hurt spending on K-12 education and other government programs. .
“I think we have to be careful,” Dungan said.
Accessibility concerns
Linehan acknowledged after the committee vote that accessibility would be a big point of contention during the debate in the room.
She added that the committee’s next step would be to develop and promote a property tax exemption measure that would provide the same property tax exemption. Farming groups are pushing for property taxes to be cut dollar-for-dollar on any income tax cut.
Pillan’s administration budget officials insist the state can afford the income tax cut — the state’s revenue is projected to fall $735 million a year by 2028-29 — a similar property tax cut and the governor’s $1 billion plan to increase spending on K-12 schools.
The Omaha-based free-market think tank Platte Institute on Thursday hailed the progress of the income tax bill, saying it would “increase growth and prosperity in every corner of the state.”
The Lincoln-based Open ky Policy Institute has raised alarms about the scope of Pillen’s proposed tax cut, saying it would “quickly drain” the government’s budget surplus.
Other bills changed to LB 754.
The Revenue Committee has moved several other bills to LB 754 over the past two days, in part to boost support by providing tax breaks aimed at low-income Nebraska residents.
Among the bills introduced in the tax package were:
- LB 318, which will provide a $35 million tax credit for income-based childcare costs and childcare workers. Sen. Lincoln Eliot Bostar said it would help address the shortage of workers in such facilities and help low-income families pay for childcare.
- LB 641, introduced by Omaha Senator Kathleen Caut, which is phasing out the state income tax on Social Security.
- LB 38 from Bellevue to Senator Carol Blood, which would give individuals who are in the federal pension system – and don’t receive Social Security – the same tax break on their retirement benefits.
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