LB 461, the Governor’s plan for tax relief, failed to receive the necessary votes to end the filibuster and allow a vote on the advancement of the bill. A motion to invoke cloture requires 33 votes, but it only received 27, with 9 senators voting no and 13 senators choosing not to vote.
LB 461 proposed to change the way agricultural land is valued from the current market based approach to a new income-producing approach. The statewide aggregate agricultural property valuation could not have increase more than 3.5% from the previous year. The legislation proposed to lower the top brackets of the individual income tax and the corporate income tax to 5.99% in increments over multiple years, when the expected rate of growth in General Fund receipts grew at least 3.5% and 4.0% respectively. Although there were positive features in this legislation, the bottom line was that it provided approximately $10 in income tax relief for every $1 in property tax relief.
Since I hear overwhelmingly from my constituents that their property taxes are too high, I offered an amendment that would have provided for property tax relief first, before income tax relief would be triggered. My amendment proposed to add $75 million to the Property Tax Credit fund when the expected rate of growth is at least 3.5%. The amount of income tax relief each year was lowered and the triggers increased. This property tax relief would have been in addition to the annual $224 million currently appropriated to the Property Tax Credit Cash fund, offering dollar for dollar tax relief to property owners.
After offering my amendment, I began negotiating with Senator Jim Smith, the chair of the Revenue committee and sponsor of LB 461, and the governor’s office. We came up with a compromise amendment that would have offered a higher ratio of property tax relief than income tax relief.
Although the compromise wasn’t everything that I wanted, I voted in support of the cloture motion because it would have made property tax relief a priority. However, when the cloture motion failed, LB 461 was pulled from the agenda and will not reappear this session. I will continue to work on property tax relief, with the hope that we can still get something accomplished this year.
The Legislature gave the budget bills second round approval this past week. To address the latest decrease in projected revenue of $55 million, the Appropriations Committee recommended approximately $10 million in additional cuts and transfers, as well as lowering the minimum reserve requirement from 3% to 2.5% for this biennium only.
Since the legislative session began, the budget gap grew to about $1.1 billion, as the Economic Forecasting Advisory Board twice lowered revenue projections. The budget was balanced through cuts in spending or cuts in the growth of spending of approximately $700 million, transfers from cash funds of $230 million, and withdrawing $173 million from the cash reserve fund.
My priority bill, LB 44, was discussed during the second round of debate this past week. LB 44 required out-state internet retailers to either collect the sales tax or follow reporting requirements spelled out in the legislation. In 1992, the Supreme Court upheld its 1967 ruling that prohibited states from requiring remote sellers to collect sales tax on sales shipped into their state, as it would place an undue burden on out-of-state retailers. States responded by adopting a comprehensive interstate system to streamline their sales tax rules, called the Interstate Streamlined Sales and Use Tax Agreement. Legislation has been introduced on the federal level for years, to grant states that have complied with this agreement the authority to require remote sellers to collect sales and use tax, but has yet to pass.
In frustration over inaction on the federal level, at least 28 states have introduced over 50 bills in an attempt to recover this sales tax revenue which is owed, but few pay. LB 44 combined the South Dakota collecting law, which was introduced as a vehicle to challenge the outdated Supreme Court ruling, and the Colorado reporting law, which has been upheld in court.
An Attorney General’s opinion was sought on LB 44, which stated that it was likely unconstitutional unless amended. I offered an amendment that satisfied the concerns stated in the opinion and clarified the intent of the bill.
I introduced LB 44 as a matter of fairness for our main street businesses, as it would help level the playing field with online retailers. After several hours of discussion, I did not call for a cloture vote, as I realized that I did not have the necessary 33 votes. The governor had indicated that he would veto the bill, which hindered my chances of success. I will try to work with the governor over the interim and bring this bill back next year.
As we enter the final weeks of this legislative session, I still encourage you to contact me with your opinions on the legislation that is before us. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My email address is firstname.lastname@example.org and my telephone number is (402) 471-2733.
The Revenue Committee advanced a package of tax cuts to the full Legislature on a 6-2 vote after several months of work. However, LB 461 contains approximately $10 in income tax relief for every $1 in property tax relief. Earlier, I had stated that I could only support income tax relief if it provided $1 in income tax relief for every $10 in property tax relief.
The total annual cost for this package in ten years would be approximately $450 million. During the upcoming two years, when the state is facing a significant budget shortfall, any loss in revenue would be countered with the suspension of two tax credits – the New Markets Job Growth Investment Act and the Nebraska Historic Tax Credit.
Beginning next year, agricultural land would no longer be valued using market value based on comparable sales. Instead, valuation would be based on the income-capacity of the land. The legislation would ensure that the capitalization rate established resulted in an aggregate agricultural use value that is between 55% and 65% of its actual value. The state average agricultural use value would be capped at 3.5% over the previous year.
In 2019, the top corporate income tax rate would be reduced from 7.81% to 7.59%. The two lowest individual income tax rates of 2.46% and 3.51% would be combined at a rate of 3.25%. In an effort to help low-income workers, the Earned Income Tax Credit would be increased from 10% to 11% of the federal earned income tax credits, further increasing to 12% in 2020.
Beginning in 2020, LB 461 proposes to reduce the top individual income tax rate of 6.84% and the top corporate income tax rate of 7.59% to 5.99%. This would occur over a number of years if the projected growth in state revenue is at least 3.5% for the individual income tax rate reduction and 4.0% for the corporate income tax rate reduction.
Although not part of the package, the Revenue Committee advanced another bill that deals with property taxes. As amended, LB 640 proposes to cap property taxes at 55% of a school’s general fund revenue. However, the funding for this would come from the Property Tax Credit Fund, which now provides $224 million annually in property tax relief to taxpayers. Although I believe that there is a disproportionate burden on property taxes to fund our schools, particularly in rural areas, I also believe that the Property Tax Credit Fund is a good way to provide dollar for dollar relief to property taxpayers.
I am disappointed with the options that have been placed before the Legislature dealing with tax relief. I will work with other senators to determine if alternative measures can garner sufficient support.
The Governor signed LB 46 this past week, the bill I introduced authorizing “Choose Life” license plates. He emphasized that this is the first pro-life legislation passed in the last 6 years.
The Appropriations Committee is finishing its work on the next biennial budget. This has been a very difficult task due to the significant shortfall facing the state.
As we begin to discuss tax relief measures and budgetary issues, I encourage your input. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My email address is email@example.com and my telephone number is (402) 471-2733.
The Legislature began full-day sessions this past week, debating and advancing numerous bills. Among them was LB 137, which would adopt the Unclaimed Life Insurance Benefits Act. The act requires life insurance companies to compare its insureds with the Death Master File of the U.S. Social Security Administration to identify possible matches and determine whether benefits are due. The insurance companies would be required to try to locate the beneficiary and provide them with instructions on how to make a claim.
People usually purchase a life insurance policy as a means to provide money to family members when they die. However, the family members aren’t always aware of the existence of the policy. Sometimes companies can’t locate the beneficiaries but this isn’t always the case. Insurance officials estimate at least $1 billion in life insurance benefits are unclaimed nationally. More than twenty states have enacted similar legislation to LB 137. I believe it is time that Nebraska joined the ranks, so I signed on as a co-sponsor of the bill. LB 137 received first-round approval on a 31-0 vote.
LB 487 was given initial approval by the Legislature on a 35-4 vote. It proposes to change penalties for persons experiencing or witnessing a drug overdose if they request emergency medical assistance for themselves or another person. For the exemption from charges for possession of a controlled substance to apply, the person must be the first to request assistance, must remain on the scene until help arrives and must cooperate with emergency personnel. LB 487 is similar to legislation passed a couple of years ago that protected minors who called for help for friends experiencing alcohol poisoning.
A bill that was amended into LB 487 through the Judiciary Committee amendments was LB 167. This bill proposes to reschedule cannabidiol in a drug product approved by the FDA into Schedule V of the Nebraska Controlled Substances Act. Currently, cannabidiol (known as CBD) in any form is a Schedule I Controlled Substance with a high potential for abuse and no approved medical use. CBD can be referred to as the “medical part” of the marijuana plant, which is different from THC, the “recreational part” of the plant that gets a person high.
Later this year, CBD in a pharmaceutical formulation will be submitted to the FDA for approval. The drug, called Epidiolex, is an investigational product being studied as a potential anti-convulsive treatment for children with certain types of epilepsy. LB 167 allows Nebraska to proactively reschedule CBD in an FDA approved product, ensuring it will be available to patients in Nebraska as soon as rescheduling by the DEA on the federal level is complete.
The Revenue Committee is continuing to work on a package for tax relief that will be sent to the full Legislature for debate. It appears that it may include an income tax relief provision, which would commit future revenue for this purpose. Therefore, senators who believe that property tax relief needs to be the priority may not be able to support the package. I am disappointed in the direction this legislation is going.
Again, I encourage you to contact me with your thoughts and opinions on legislation that is being discussed by senators. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, Nebraska 68509. My telephone number is (402) 471-2733 and my email address is firstname.lastname@example.org.
Two bills introduced at the request of the Governor were heard before the Revenue Committee in a lengthy hearing this past week. LB 337 was introduced by Senator Jim Smith, who serves as the Revenue Committee chair. It would phase in an income tax reduction for those in the top income bracket. The top bracket would be lowered from 6.84 percent to 5.99 percent over an eight-year period, or by approximately 0.11 percent a year. However, the decrease would only be triggered if the expected rate of growth in net General Fund receipts, as determined by the Nebraska Economic Forecasting Advisory Board’s October forecast, is 3.5 percent or greater. When fully implemented, LB 337 would reduce state revenue by $288 million.
Testifiers representing the business community offered support for the legislation, claiming that LB 337 will help grow the state. Opponents wanted the Legislature to focus on property tax relief and others expressed concern that LB 337 could have a negative impact on funding for local schools and other governmental services.
In October 2015, the Forecasting Advisory Board projected a 3.6 percent growth in revenue, which would have triggered a tax cut in 2016, if LB 337 would have been in effect. However, projections quickly dropped, as the state is now facing a projected $900 million shortfall.
LB 338 was introduced by Senator Lydia Brasch, the Agriculture Committee chair, at the request of the Governor. It creates the Agricultural Valuation Fairness Act. Rather than valuating agricultural land according to sales, which can be influenced by other uses for the land, the bill proposes to assess agricultural land based on its capacity to produce income. LB 338 also places a 3.5 percent cap on increases in valuation of such land from year to year. Under the bill, county assessors are to use a range of incomes for land capability groups and capitalization rates, as determined by the Property Tax Administrator, in calculating the agricultural use value. The income ranges are to be based on the average yield information for the ten prior years published by the U.S. Department of Agriculture.
Although most testifiers were in support of LB 338 and felt that it was a step in the right direction, concern was expressed that it didn’t go far enough in efforts to provide property tax relief. According to an analysis by Nebraska Farm Bureau, if LB 338 would have been in place in 2017, taxable values for agricultural land would have been $2.2 billion lower statewide. This equates to an approximate 2 percent reduction in agricultural land values or about a $20 million reduction out of $3.8 billion in property taxes levied statewide. Agricultural land values statewide increased more than 6 percent from 2015 to 2016 and more than 263 percent over the last decade.
LB 661, introduced by Heartwell Senator John Kuehn, was heard by the Government, Military and Veterans Affairs Committee. This legislation seeks to amend public records laws by providing confidentiality of information relating to the drugs used in carrying out the death penalty. Following the November vote to reinstate the death penalty, the Department of Corrections recently revised the lethal injection protocol in an effort to add flexibility so that the death penalty can be carried out. Originally, the revised protocol authorized the supplier of lethal injection drugs to remain confidential, but this portion was removed after the public hearing where testifiers criticized the secrecy and lack of transparency in the process. This bill seeks to reinstate the confidentiality provision. When introducing the bill, Senator Kuehn mentioned that some of the same drugs used in lethal injections are used in operating rooms, causing him concern about their availability if this bill is not passed. Fifteen of the thirty-one states that have the death penalty withhold information on the identities of those supplying the lethal injection drugs.
This past week before the Revenue Committee, I introduced LB 546 at the request of the Nebraska Department of Revenue and the Nebraska Department of Economic Development. The intent of the bill is to simplify the application and administrative aspects of the Nebraska Advantage Act by amending several areas of the current law that has caused delays in approval of applications and benefits earned under this tax incentive program.
Rob Clements, a banker from Elmwood, was selected by Governor Ricketts this past week to fill the vacancy of Senator Bill Kintner. His district covers all of Cass County, a portion of Sarpy County, and the northeast corner of Otoe County. I look forward to working with him on state issues, as well as issues concerning Otoe County.
As legislative committees continue with public hearings on bills, I encourage you to contact me with your comments and opinions. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My email address is email@example.com and my telephone number is (402) 471-2733.
Earlier this month, the Appropriations Committee heard testimony on a bill that would transfer $40 million from the Cash Reserve Fund to Natural Resource Districts with integrated management plans that have entered into contracts to construct or implement streamflow enhancement projects. Under LB 185, the loan would be repaid by June 30, 2018 with proceeds of the occupation tax. The authority to levy an occupation tax was granted by the Legislature to NRDs several years ago.
Four NRDs (the Upper Republican in Imperial, the Middle Republican in Curtis, the Lower Republican in Alma, and the Twin Platte in North Platte) worked together and purchased 19,500 acres of land. The plan was to take some farmland out of irrigation and to pump water into the Platte and Republican Rivers, in order to remain in compliance with the Republican River Compact (a 1943 three-state compact with Colorado and Kansas) and the Platte River Recovery Implementation Program. The initial financing of the project was planned to be through the issuance of bonds with repayment being the proceeds of the occupation tax on irrigated lands collected by the four NRDs. However, a lawsuit was filed late last year by individual irrigators and two irrigation districts. Since the NRDs are unable to proceed with bonding authority while a lawsuit is pending, legislation was introduced to request a loan from the state.
After overwhelming opposition to the Governor’s proposal to fund the elimination of the individual income tax and the corporate income tax by repealing certain sales tax exemptions, Governor Heineman has asked the Revenue Committee to kill his proposal. This is a good example of the importance of input from the citizens of our state, showing that your opinions do have an impact on state government.
Amid all the opposition, the Governor did bring to light a topic that needs to be addressed. Since our tax code has not changed significantly in approximately 45 years, now is the time to have that discussion. LB 613, introduced by Senator Paul Schumacher of Columbus, was heard before the Executive Board this past week. It proposes to create a Tax Modernization Commission. The intent is to not only look at the income tax, but also study the sales tax, the property tax and other issues affecting state revenue, such as tax incentives. Under the proposal, a preliminary report is to be issued to the Legislature by December 15 of this year, in time for the introduction of legislation in the 2014 session. The legislation envisions an open process for the study, requiring the Commission to hold a tax summit, develop online questionnaires, and conduct public hearings across the state.
One of the bills that the Health and Human Services Committee heard this past week was LB 507, introduced by Senator Kathy Campbell, the chair of the committee. Under LB 507, the Step Up to Quality Child Care Act, the Nebraska Department of Education and the Department of Health and Human Services would be required to develop a quality rating and improvement system for child care and early childhood education programs. The purpose of the legislation is to bring accountability for the public funds invested in such programs. Under the proposal, the system would be available to all child care and early childhood education programs, but participation would be required for programs that receive significant amounts of public funds. In 2012, 43,000 children qualified for publicly-subsidized child care and licensed providers were paid more than $94 million in child care subsidy payments. It is imperative to ensure that the care the state supports is of high quality.
I encourage you to contact me with your opinions on legislation of interest. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My telephone number is (402) 471-2733 and my e-mail address is firstname.lastname@example.org.
Over 12 hours of testimony was presented at the public hearings this past week before the Revenue Committee on the two bills introduced at the request of the Governor to eliminate or reduce the individual and corporate income taxes. Governor Heineman proposed the bills as a way to create higher-paying jobs and keep our young people, retirees and veterans in the state. The loss in income tax revenue would be replaced with increased revenue from the sales tax, through the elimination of certain sales tax exemptions.
There were only a few testifiers in support of LB 405 and LB 406, in addition to the sponsors of the bills, Senators Beau McCoy and Brad Ashford of Omaha, the Governor himself, and the Tax Commissioner, Doug Ewald. However, there was no short supply of opponents. They filled the committee hearing room and spilled into an overflow room nearby. Opponents included the state chamber of commerce, agricultural organizations, health care providers, nonprofit groups, college students, as well as low-income Nebraskans. Furthermore, several businesses have threatened to leave the state if certain sales tax exemptions are repealed.
The hearing on LB 405 lasted until after 11 p.m. on Wednesday evening. Although I am not a member of the Revenue Committee, I did sit in on the hearing for several hours, after finishing up with my committee work. The hearing on LB 406 was held the following afternoon.
Information provided on the projected fiscal impact of LB 405, which eliminates both the income tax on individuals and the corporate income tax, showed a loss in revenue ranging from $171 million to $340 million by fiscal year 2016-17. The intent of LB 405 was to be revenue neutral. The fiscal uncertainty caused testifiers to stress the need for caution when discussing major tax reform.
I have heard from many constituents on the Governor’s proposals and the response has overwhelmingly been in opposition to LB 405 and LB 406. The Revenue Committee has not taken any action on LB 405 or LB 406, but it is doubtful that either bill will advance from committee, as introduced.
As a state senator, I receive information on programs and services offered by various organizations and agencies. From time to time, I will share some of this information with you. One service that I recently became aware of is the Nebraska Senior Health Insurance Information Program (SHIIP), which is a division of the Nebraska Department of Insurance. This program offers free, unbiased counseling and education to older Nebraskans and persons with disabilities regarding Medicare and health insurance. The role of SHIIP is to help people understand their options so they can make informed choices. If you have Medicare questions or would like to arrange a meeting with a SHIIP counselor, I encourage you to call the toll-free hotline at 1-800-234-7119.
I appreciate the input I have received from the constituents of the 1st legislative district. In order to have the opportunity to hear from more of you, I have set up several open houses on Saturday, February 23. At 8:00 a.m., I will hold an open house at Janie’s Confections, 618 Central Avenue in Nebraska City; at 10:00 a.m. at Family Connections, 901 Central Avenue in Auburn; at noon at Schulenberg Bakery, 1713 Stone Street in Falls City; and at 2:30 p.m. at The Gathering Place, 718 3rd Street in Humboldt. I encourage you to stop by on February 23 so that I can get the chance to meet you and to hear your thoughts on issues that are before the Legislature.
My contact information is District #1, P.O. Box 94604, State Capitol, Lincoln NE 68509. My e-mail address is email@example.com and my office telephone number is (402) 471-2733.
The Governor presented his State of the State address to the Legislature this past week, in which he outlined what he thought should be the state’s priorities during his final two years in office. Governor Heineman noted how he and the Legislature had worked together to make a positive difference for Nebraskans.
Governor Heineman spoke of the importance of education and noted that his budget proposal contains a 5% increase in each of the next two years for state aid to K-12 school districts, as well as a 5% increase in special education funding. In respect to postsecondary education, the Governor has been working on an agreement with the University of Nebraska and the Nebraska State College System to help ensure continued affordable access to higher education. The Governor’s proposed budget includes an approximate 4% increase for these institutions. In exchange, the university and state colleges have agreed that they will freeze tuition for the next two years at UNL, UNK, UNO, UNMC, Chadron State, Wayne State and Peru State College. The Governor’s budget also includes a similar increase in funding for community colleges.
The majority of the Governor’s address focused on taxes. He believes taxes are too high and that they impede economic growth. He quoted that a high personal income tax rate raises the costs of working, saving, investing and risk-taking. The Governor also noted that 23 states exempt a portion of or all retired military pay and 43 states exempt a portion of or all social security income from taxation. Furthermore, 42 states don’t have an inheritance tax.
The Nebraska income tax generates approximately $2.4 billion annually. The sales tax brings in an additional $1.5 billion. However, the Governor disclosed that the state allows approximately $5 billion in sales tax exemptions. He envisioned that if half of the current exemptions were eliminated, Nebraska wouldn’t need an individual or corporate income tax, meaning that there would be no individual income tax on working Nebraskans; no taxing of small business income; and no taxation of social security or military retirement income. There would be no taxation of any retirement income. The Governor’s address did not give specifics on his tax proposal, but he hinted that he may support lowering the rates for individual and corporate income taxes as an alternative.
Later in the week, the Governor offered two proposals as his recommendations for changes in our tax structure. Omaha Senators Brad Ashford and Beau McCoy will introduce the legislation on behalf of the Governor. The first proposal would repeal $2.34 billion in sales tax exemptions, which would allow for the total elimination of both the individual income tax and the corporate income tax. The second proposal would do away with approximately $395 million in sales tax exemptions, allowing for the elimination of the corporate income tax and the exemption of the first $12,000 of retirement income for married couples and $6,000 for single individuals. Both bills retain the sales tax exemption for food.
Every tax exemption that exists was fought for and is supported by different sectors of our society. Under the Governor’s broad proposal, sales tax would be collected on medical equipment and medicine; hospital and college rooms; agricultural machinery, fertilizer and chemicals, energy used in agriculture, and seeds for commercial use; business repair parts and services; manufacturing machinery and energy used in industry; and from exempt organizations.
The governor has proposed a substantial change for our tax system. In offering two alternatives, he is giving the citizens of Nebraska the chance to offer their input. I think it is important to have the discussion, as our tax system hasn’t faced a major overhaul in almost five decades. It will be interesting to hear from the public as to whether they agree that the income tax is too high, whether they support the elimination of sales tax exemptions or if they are more concerned with other taxes.
I would be interested in your thoughts and opinions on the Governor’s proposals, as well as other issues that are before the Legislature. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My e-mail address is firstname.lastname@example.org and my office telephone number is (402) 471-2733.