Tax debate highlights generational divide, relevance questions

Debate in the Nebraska Legislature over inheritance taxes Wednesday showed a generational divide, and raised questions about whether senators were debating things that are irrelevant to many Nebraskans.

It was the third day of debate on abolishing Nebraska’s inheritance tax. That tax ranges from 1 percent on what children inherit over $100,000, to 15 percent of what non-relatives inherit over $25,000.

Sen. John Lowe spoke in favor of abolishing the tax.

“It is the cruelest tax that we have. Families are dealing with loss -- loss of a family member. And here government wants to come in and take some money. That's cruel,” Lowe said.

Sen. Mike Jacobson agreed with the sentiment, but not the solution.

“I disagree with having inheritance tax -- want it to go away. Now, with that said, I said before when this bill was first introduced: What do I hate more than inheritance taxes? Property taxes,” Jacobson said.

Jacobson predicted property taxes would go up if senators abolish inheritance taxes without replacing the revenue they provide to counties.

One proposed amendment to the bill would increase state payments to counties to house prisoners by about $4 million a year. But inheritance taxes provide counties about $70 million a year.

Sen. Lou And Linehan said that amount has increased substantially in recent years. She attributed that to people having more money left when they die, but said those amounts aren’t as much as they might sound like.

“You don't have to have very much anymore to have a million dollars: a farm, an 80 (acre plot) a house, a couple of cars,” Linehan said.

Sen. John Cavanaugh scoffed at that.

“To say that a million dollars is not a lot of money is -- I apologize -- it's laughable, and actually made me laugh,” Cavanaugh said.

But Linehan, who’s 68, contrasted her perspective with that of Cavanaugh, who’s 43.

“When you're young, and your children are (at that) level, that is a lot of money. I understand that. But I was coming from the perspective of when you are 65 or 70 years old, and you've worked all your life and you've paid taxes, and you've paid for your home… You have to think about how you're going to live after you can't work anymore -- after you can't get up in the morning and go to your job. And hopefully you want to live a long time after that. So you have to have some money in the bank,” she said.

A Federal Reserve study last year found the median net worth of American households headed by someone aged 35-44 was about $136,000, while for households headed by someone 65-74 it was 410,000.

Linehan questioned Cavanaugh about how much money he would need when he retired.

“Have you thought about how much money you need to have, whether it’s stocks, bonds, a home, so your family wouldn’t have to end up where now you’ve lost everything and you’re now on Medicaid?” she asked.

“Have I thought about this specific dollar amount? I have not thought about that specific dollar amount? No,” he replied.

“Do you have an idea of what it costs to stay in a nursing home when you’re paying their full bill?” Linehan asked.

“I don't know how much that is, no,” Cavanaugh said.

“So you’d probably be surprised to think it’s at least, I would say, $10,000 a month,” Linehan said.

Cavanaugh did say that’s around what he would have guessed. And Sen. George Dungan, a former public defender, said the whole discussion about retirement savings was irrelevant to many Nebraskans.

“There are plenty of people out there who will never in their lifetime see a million dollars at once. There's people out there who are never going to see $100,000 at once. And I have worked for years with certain populations where $100 can make or break somebody's entire life. And it becomes very evident when you start talking to somebody about whether or not they're going to have enough money to get a bus pass to make it to the job interview to see if they can actually get a job, because they just lost their job previously because of some sort of cuts that happened,” Dungan said.

And Dungan suggested inheritance taxes aren’t the only issue the Legislature debates that seems out-of-touch with the lives of many people.

“I think sometimes in the Legislature -- and I know this from the outside looking in, before I was here, when I watched -- the issues that we talk about are important. The issues we talked about are real. But they don't always encompass the day-to-day issues of real life Nebraskans,” he said.

After Wednesday’s discussion, senators still have about three hours of debating time left before Sen. Rob Clements, sponsor of the bill, can move to cut off debate and get to a vote. Clements said after the debate that Speaker John Arch has agreed to pull the bill off of Thursday’s agenda to give Clements more time to try and work out a compromise with opponents.