Senators advance income, property tax cuts despite criticism
By Fred Knapp , Reporter/Producer Nebraska Public Media
May 11, 2023, midnight ·
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The Nebraska Legislature gave next-to-final approval Thursday to a sweeping series of income and property tax cuts, despite critics’ warnings that the cuts will not be sustainable.
The first bill up for consideration Tuesday was LB243, a proposal by Sen. Tom Briese. It would increase the funding for two existing programs that use sales and income tax dollars to offset Nebraskans’ property tax bills, at a cost of about $300 million over the next two years. Since schools are the biggest users of property tax dollars, Briese said the bill also tries to limit the total tax dollars schools can collect.
“It puts in place a revenue cap on our schools, but, well, there are several exceptions to that cap. It's an education-friendly cap, in my view. We call it a soft cap,” Briese said.
The bill allows schools an annual increase in tax revenue of 3 percent, but as Briese said, there are exceptions.
“You have 3%, plus those factors relative to enrollment growth, poverty student growth, LEP (Limited English Proficiency) growth. But then you also have the ability of that school board to access additional dollars, again: four, five, six and and seven.
In other words, schools can collect more if they’re fast-growing, have students from poor families, or have students with limited English proficiency. They can also collect between four and seven percent more, on top of the three percent limit, if 70 percent of the school board or sixty percent of the voters vote in favor of doing so.
Sen. George Dungan said getting voter approval should require only a majority of 50 percent.
“Having that set at 60% kind of flies in the face of the general democratic notions that we have in place, both here in Nebraska and elsewhere. And I think that if a majority of the people in a school district want to go over that (tax) asking authority, they should allow that,” Dungan said.
The bill also requires the state to replace funds that community colleges currently collect from property taxes. And it would be required to increase those funds by 3.5 percent per year.
But the bill doesn’t do away with community colleges authority to levy property taxes. In fact, it says they can still do so if the state fails to keep up with supplying the replacement funds.
Sen. Jane Raybould said she approves of shifting the tax burden for schools and community colleges away from property taxes to state funding.
“Those are big deals. Those are big commitments. And I'd like to see that happen. But when you throw in all the other things that we're talking about -- Social Security, and then, of course the individual income tax cuts and the corporate tax cuts, these are things that cannot be sustained or funded,” Raybould said.
Senators voted 41-0 to advance Briese’s LB243. They then turned to LB754, the bill containing the income tax cuts Raybould was talking about.
LB754 would speed up the elimination of taxes on Social Security income. It would also cut the top personal and corporate income tax rates from around 7 percent to just under 4. Those changes are projected to reduce state revenues by about $400 million over the next two years.
Sen. Lou Ann Linehan, chair of the Legislature’s Revenue Committee, said the cuts proposed by Gov. Jim Pillen would benefit every resident of the state.
“This plan by the governor is huge, and it will touch every Nebraskan. We can sit here all day and say that it's only for the rich. That's just not true. Do people who pay more taxes in dollars, do they get a bigger cut in dollars? Right. Because if you pay more… it's a percentage thing,” Linehan said.
Dungan agreed, but tried to put the difference into perspective. Dungan used figures from the Open Sky Policy Institute, which has been critical of the proposed tax cuts.
“A family with an annual income of $70,000 could expect to see a $370 tax cut, while a family in the top 20% who makes $365,000 a year would expect to see a savings of about $6,000,” he said.
Senators rejected amendments to extend more tax cuts to middle income Nebraskans, or to pause phasing in tax cuts in a few years to see how the state is doing fiscally. They then voted 37-4 second-round approval pf :B754.
Senators then adjourned for a four-day weekend. After they return Tuesday, they are scheduled to debate restrictions on certain medical treatments for transgender youth, and proposed restrictions on abortion. That debate is expected to take place Tuesday evening.
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