Inheritance Tax Cuts Advance; Private School Scholarships Debated

Jan. 11, 2022, midnight ·

Sen. Lou Ann Linehan debates Tuesday (Photo by Fred Knapp, Nebraska Public Media News)
Sen. Lou Ann Linehan debates Tuesday (Photo by Fred Knapp, Nebraska Public Media News)

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People who inherit money would see their taxes reduced, under a bill advancing in the Nebraska Legislature. And senators began debating a proposal to create tax-credit funded scholarships for kids to attend private schools.

Currently, about $70 million a year is collected by the inheritance tax. That revenue goes to the state’s counties. Tuesday, Sen. Steve Erdman spoke in favor of abolishing the tax altogether.

“One of the things that we need to always keep in the forefront of our mind is the fact that it’s not the counties’ money. It belongs to the individual who passed, and now it belongs to the heirs that he left it to. And I don’t understand why dying creates a tax event,” Erdman said.

Opponents like Sen. Mike Moser objected to what they said would be the result of abolishing the tax.

“If we completely did away with the inheritance tax – totally – there would be a $70 million drop in funding for counties. And where are they going to go to make up that $70 million? They’re going to have to go with the only authorization they have, primarily, property tax. So we complain about property tax, but yet we’re going to do something to increase the counties’ reliance on property tax. That doesn’t make sense,” Moser said.

In the end, senators adopted a compromise amendment. It would raise the amount of inheritance that is exempt from taxation from $40,000 to $100,000 for close relatives, like children. The tax rate would remain at 1 percent, but those under age 22 would be exempt. For relatives like nieces and nephews, the tax rate would be reduced from 13 to 11 percent, and the exempt amount raised from $15,000 to $40,000. And for others, the rate would go from 18 percent to 15 percent, and the exempt amount would rise from $10,000 to $25,000. Senators then voted 41-4 to give the bill, sponsored by Sen.Rob Clements, first-round approval.

Senators also began debate on the current version of a proposal that’s been repeatedly tried in recent years, to create tax-credit-funded scholarships for students to attend private schools. The bill is sponsored by Sen. Lou Ann Linehan, who is proposing to limit the scholarships to students who are eligible for free or reduced-price school lunches. People who donate for the scholarships would have their income taxes decreased dollar-for-dollar of their contributions, up to 50 percent of what they owe in income taxes.

Linehan asked her colleagues to imagine themselves in the place of a low-income parent whose child was struggling in public school.

“Think about if you were a mother or a father and you had a child coming home every day from school crying because they’re getting bullied or they don’t like their school, or they’re failing, and you have no options…we have 244 school districts, a robust -- very robust -- private school system, and if you can afford it, you have choice. And if you can afford it, you have choice. But if you can’t, you do not. This bill addresses that a little bit,” Linehan said.

An amendment to the bill would limit its annual cost to $5 million. Sen. Tom Briese, supporting the bill, compared that to the amount the state provides in aid to public schools under the program known as TEEOSA, which stands for the Tax Equity and Educational Opportunities Support Act.

“We’re talking about $5 million a year here. We dedicate over $1 billion a year here into TEEOSA. So we’re talking about one half of one percent of the amount that we dedicate annually to TEEOSA…This is not going to harm education one little bit,” Briese said.

Sen. Adam Morfeld, opposing the bill, said that was still a problem.

“Regardless of what we want to say, a tax credit takes away money that would otherwise be available to the state for other purposes. And … fundamentally I believe that if we have systemic issues and problems with our public schools, whether it’s in Lincoln Public Schools or Omaha Public Schools or wherever across the state, I think that we should be dedicating that money and those resources to achieving and tackling those problems,” Morfeld said.

Senators adjourned for the day before reaching a vote on the bill. They’re expected to resume debate on the measure Wedneday.

Meanwhile, senators continue to introduce new bills. One, by Sen. Joni Albrecht, would prohibit abortions if the U.S. Supreme Court overturns Roe v. Wade. Sen. Megan Hunt immediately filed a motion to indefinitely postpone the bill, signaling a filibuster if it advances out of committee.

And Sen. Rita Sanders has introduced a bill that would require closed captioning for political ads on tv, and a transcript to be placed on candidates’ websites. Sanders talked about the need for such a bill.

“The deaf deserve to know what the ads are saying as well. I have a son that’s deaf, so I do advocate for the hard of hearing and the deaf,” Sanders said.

And Sanders said deaf people aren’t the only ones who would benefit.

“I think also with the Baby Boomers aging, it’s not just for the deaf community. It’s also for those that are aging, and don’t “hear as well as we used to, to make sure we’re hearing exactly what was said,” she said.

Bill introductions continue through next Thursday.