Increased taxes on skill games, end to some exemptions advance in Legislature

By Fred Knapp , Senior Reporter/Producer Nebraska Public Media

March 18, 2026, 5 p.m. ·

Sen. Brad von Gillern in debate Wednesday (Fred Knapp/Nebraska Public Media News) — Sen. Brad von Gillern in debate Wednesday. (Fred Knapp/Nebraska Public Media News)

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The Nebraska Legislature continued to inch toward balancing the state budget Wednesday, advancing a bill that would increase taxes on so-called “skill games” and end certain tax exemptions.

Near the start of Wednesday’s debate, Sen. Brad von Gillern, chair of the Legislature’s Revenue Committee, said he had some good news for his fellow senators – a new estimate of how much the bill they were considering (LB901) would raise.

“It shows about $25 million to the good in 2026-27 and $28 million to the good in 2027-28. That's $53 million that we don't need to cut in additional spending that will go towards the budget,” von Gillern said.

Combined with other pending legislation, that would help to eliminate a currently projected $125 million shortfall at the end of the current two-year budget cycle.

About $7 million of the increased revenue next fiscal year would come from increasing the tax, from 5% to 10%, on profits from so-called “skill games.” Those are machines found in restaurants, bars, laundromats and convenience stores across the state that Sen. Teresa Ibach said have increased in number from 300 in 2007 to 6,000 now.

Courts have ruled the machines are not gambling devices, because the outcome does not rely primarily on luck. Nevertheless, Sen. Ashlei Spivey said they create many of the same problems.

“An everyday person cannot differentiate between a skill game or a slot machine, and we know that it's causing compounded issues around addiction,” Spivey said.

The bill also increases annual licensing fees for skill games. Originally, those fees would have automatically increased in the future based on inflation. But Sen. Danielle Conrad objected to that idea.

“We shouldn't be abdicating our legislative responsibility because we find it uncomfortable to deal with fees and taxes on an individual and discrete basis," she said. "We should not be abdicating our legislative oversight or authority to unelected bureaucrats on autopilot to continually raise more revenue from our citizenry without specific legislative review."

Von Gillern relented on the point.

“It seems to make sense to build those escalators in there, so that future legislators don't have to revisit this issue all the time as far as adjusting fees. But I do understand what Sen. Conrad is saying, is that it creates an obligation that may not be wise for us to do at this time,” he said.

Senators voted 43-0 to eliminate the automatic increases.

The bill would also bring in another $15 million next fiscal year by eliminating tax exemptions on items ranging from the sale of game birds to the development of waste treatment facilities.

Sen. Jana Hughes proposed an amendment that would have brought in much more money. Hughes’ amendment would have delayed an income tax cut, approved three years ago, that’s scheduled to take place next January.

Currently, the state’s top personal and corporate income tax rate is just over 4.5%. That’s scheduled to drop to just under 4% in January. Hughes’ amendment would have dropped it to 4.35% for the next two years, and waited until 2029 to lower it below 4%. She estimated that would increase revenues by $270 million over three years.

The amendment would also have increased cigarette and vape taxes and frozen property tax credits at their current level for three years.

Sen. Jana Hughes (Photo courtesy Nebraska Legislature) — Jana Hughes

Hughes warned that without such major changes, Nebraska risks losing its ability to use state revenues to offset local property taxes by funding tax credits.

“If things get bad in a year, two years, three years, that's where we're going to have to pull the money back from. If we pull money back from those property tax credits, that is automatically an increase on people's property tax,” Hughes said.

Sen. Dan Quick supported Hughes’ amendment, saying the state needs revenue to avoid budget cuts that hurt needed programs.

“I just want to make sure that we have the revenue there in the future, so we're not looking at making more cuts, or maybe we have to come back and do a vote on a tax increase of some kind. And so we’ve just got to be really careful about what we do and making sure we're not harming people going into the future,” Quick said.

But Sen. Mike Jacobson suggested such concerns were misplaced. Jacobson predicted an economic rebound from setbacks, including the wildfires that are blackening grazing lands in western Nebraska.

“It will be an economic impact to our cattlemen out west, and that will go on for two or three years, until those pastures all come back. We'll also be seeing some federal aid that will come in that will offset some of that as well, and the rest of the general economy will grow,” Jacobson said.

Hughes conceded her amendment, AM2650, did not have enough support to be adopted.

“AM2650 does not have the votes today to get through. But I just I wanted it on record that where we're at today. I hope I'm wrong, and I hope in two or three years, I don't look back on this day and say, ‘Darn it. I feel like we should have done that,’” she said.

Hughes withdrew her amendment before it reached a vote. Senators then gave the tax bill second-round approval on a voice vote.