Thursday’s Unicameral session brings tax changes

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March 28th, 2014

Lincoln, NE – It was not a day for stirring debate or impassioned rhetoric in the Nebraska Legislature. But a lot was getting done:

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Assistant Clerk Dick Brown read the title of a bill quickly, then Speaker Greg Adams called for a vote.

“All provisions of law relative to procedure having been complied with, (the) question is, shall LB987 pass?” Speaker Adams said. “All those in favor vote aye, all those opposed vote nay.”

When the votes were tallied, the bill passed 44-0. LB987 ties Nebraska’s state income tax brackets to inflation. Currently, if your income goes up at the same rate as inflation, you could pay a greater percentage of your income in taxes, even though you had no increase in real purchasing power. Under the bill, you would continue to pay the same percentage in taxes. Sen. Galen Hadley of Kearney is chairman of the Revenue Committee, which sponsored the bill:

“That’s a huge deal,” Sen. Hadley said. “In the past, the Legislature’s had kind of a quasi-tax increase, without having to call it a tax increase.”

Senators watch as votes are tallied in the Nebraska Legislature Tuesday (photo by Fred Knapp, NET News)

Senators watch as votes are tallied in the Nebraska Legislature Tuesday (photo by Fred Knapp, NET News)

Hadley estimates the change will save taxpayers $10 million the first year. But as time goes on and inflation accumulates, so will the tax savings, which he estimates at $100 million a year 10 years from now. Others say that may be a conservative estimate. At any rate, the historical growth of state revenues at about five and a half percent a year may go down. The bill also eases taxes on Social Security and military retirement. Another bill would exempt Ag machinery repair and replacement parts from sales tax. And homestead exemption property tax breaks for older and disabled Nebraskans were expanded.

In the past, Hadley has argued the Revenue Committee’s job is to set taxes at a level to fund the spending decisions of the Appropriations Committee and the Legislature as a whole. Thursday, he was asked what these tax changes mean for future spending decisions:

“Everything we did will affect the amount of money Nebraska has to spend,” Sen. Hadley said. “That’s just going to happen. But we also hope the economy does grow, that will give us funds for programs. But we’re not going to do it completely on the back of taxpayers through inflation in their tax brackets or taxing the lower income social security or things like that.”

Among dozens of other bills passed Thursday was a measure dedicating tax revenues from sales or leases of boats, personal watercraft  all terrain and utility vehicles to help catch up with deferred maintenance at state parks. Another bill establishes a system of public guardians to handle the legal and financial affairs of people unable to take care of those things themselves. Another bill expanded behavioral and mental health programs. And a bill allowing university cultivation of industrial hemp for research was also approved. The governor has five days, not counting Sunday, to sign, veto, or let the bills become law without his signature.

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