This week the legislature debated two tax reform proposals, LB640 and LB461. I support both pieces of legislation and see LB640 as the first bill to advance from the Revenue Committee in quite some time that can provide significant property tax relief for Nebraskans. If this bill does not pass, most likely no bill will pass with significant property tax relief this year. The bill did not move forward when debated, but it remains on General File and it’s possible it could move forward this year.
Alternatively, other proposals have suggested the solution is to raise sales taxes on hard working Nebraska families, using that revenue to reduce property taxes. I, along with the Governor, do not support this alternative and will support the Governor should that proposal move forward. The Governor has committed to veto a sales tax increase if placed on his desk, and I would uphold a veto.
The major tax reform bill being debated is LB 461. I have had constituents indicate that LB 461 is not the ideal tax reform package, as it does not provide the level of property tax relief they feel is needed, and because it includes an income tax relief component. In order to move any tax relief packages forward, however, we need to build a coalition of State Senators who have a variety of perspectives and interests represented in their constituencies. Urban State Senators tend to hear from their constituents in urban areas the importance of income tax relief, and rural State Senators hear from their areas that property tax relief is paramount. A package that includes components of each has the best chance of advancing and I support working collaboratively on both of these issues to move forward a reform package. Lowering both property and income taxes is good for the State and creates a climate for economic growth and prosperity.
The Nebraska Chamber of Commerce and Industry supports LB461, stating that Nebraska’s reliance on income taxes has grown too large, as 60% of state revenue comes from income taxes. Taxes in Nebraska are high and we have been paying too much for far too long. This bill will provide tax relief for all Nebraska taxpayers, while not shifting the tax burden from one group of citizens to another. LB461 encourages business expansion and retention, and assists in recruiting qualified workers for our growing state. It also protects agriculture at a time when ag property taxes are too high and commodity prices are too low. Simply, LB461 helps working families keep more of their hard-earned money.
LB461 is the most comprehensive tax relief package that the legislature has seen is several years. Amongst other things, LB461 collapses the number of income tax brackets in Nebraska from 4 to 3, reduces the top tax bracket starting at $29,830 per year from 6.84% to 5.99%, and gives more tax credits to low-income families by increasing the Earned Income Tax Credit by 20 percent.
For agricultural land taxes, LB461 caps aggregate ag land valuation growth at 3.5% annually, changes ag land valuation from market-based to income potential-based, and reduces ag land property taxes by 12% statewide.
Opponents are concerned whether the state will be the next Kansas and won’t have the revenue to pay for core government functions such as education, criminal justice, and road maintenance. However, through the use of revenue “triggers,” LB461 is designed to prevent tax cuts from taking place unless ample revenue is also available to fund government services. If state revenue is not projected to grow by the required amounts, the tax cuts will not take effect that year.
LB461 will attract companies and create jobs, help farmers and manufacturers, and protects K-12 education by investing about $30 million annually into the state aid formula and adding equalization aid to about 40 additional school districts. It is time for the legislature to enact tax reform and make this great state even better. If you have additional ideas on how we can fix our tax system, please contact me and share them. We’re always open to ideas on how we can provide tax relief to all areas of our state.
As always, if we can be of assistance to you in any way, please do not hesitate to contact my office. My door is open and I have made it a goal to be accessible to the constituents of our district. Please stop by any time. My e-mail address is firstname.lastname@example.org, and the office phone number is 402-471-2756. David and Katie are always available to assist you with your needs. If I am not immediately available, please do not hesitate to work with them to address any issues that you may need assistance. Please continue to follow me on Facebook at Kolterman for Legislature and on Twitter at @KoltermanforLegislature.