LB 873 passed and was sent to the Governor this week. As far as tax relief in Nebraska goes, this is the biggest tax cut I have seen since I first came to the legislature in 2017. LB 873 passed because the senators in the revenue committee reached a compromise. There are a lot of different pieces to this bill from Senators Linehan, Friesen, Briese and Lindstrom.

The bill cuts the top income tax rate from 6.84% to 5.84%. It also cuts the corporate income tax rate from 7.81% to 5.84%. Both of these cuts will be phased-in over five years. Nebraska has the highest income and corporate taxes of any state in the central time zone.

This legislation phases out income taxes on Social Security payments by 2025. Nebraska is one of only a handful of states that collect income taxes on social security checks. 

For citizens who pay property taxes, please make sure you claim your refundable income tax credit on your 2021 tax return this month. Last year LB 1107 created this credit to pay for 25% of the property taxes citizens pay to schools. 

Visit:  https://ndr-1107parcel.ne.gov/parcellookup/search.xhtml and look up your place and see how much you qualify for. Senators are being told there is unclaimed money in this fund because it is new and citizens don’t know about it. Please contact your County Assessor for more details. 

LB 873 creates another new refundable income tax credit for that portion of property taxes paid to community colleges. This is a credit you’ll have to claim starting next year on your state income taxes. After that, the credit fund can increase no more than 5% each year. The bill also has a provision which fixes a glitch in the property tax reductions that were in last year’s LB 1107. That income tax credit fund was going to drop $200 million in 2024. LB 873 restores that money to the property tax credit relief fund.

In other tax news, LR 264 CA is Senator Erdman’s proposed constitutional amendment to replace income, sales and property taxes in Nebraska with a single consumption tax. It received seventeen votes during General File debate. It needed 25 to advance. I’m confident he will re-introduce it next session. I strongly support this proposal and firmly believe that if this question is ever put on the ballot for the people to decide, it will pass by a sizable majority. 

I am not surprised this is difficult to pass. This is a transformational idea. This will take a people’s campaign across the entire state, much like George Norris did for the unicameral idea in 1934. 

I think the best thing about the consumption tax idea is transparency and fairness. 

Right now labor is heavily taxed relative to capital, but that isn’t saying the way we tax capital is great either. Taxes should be laid bare, nothing hidden or obscured. No more legislative levers to pull or knobs to dial in the existing tax code. It takes away a special interest’s ability to reward friends and pick winners and losers by lobbying a senator to run a bill through the legislature, hence the huge opposition from virtually every lobbyist in Nebraska.