Premium ContentMouse over Home then click on Premium Content for information.LINCOLN — Gov. Dave Heineman's plan to eliminate the last "death tax" in Nebraska ran into a firing squad of opposition Thursday from county officials.
Other parts of his three-part tax cut proposal, to reduce individual and corporate income taxes, also drew fire.
But the big guns were aimed by county board members, county health workers, sheriffs and surveyors from across the state. They filled a State Capitol hearing room to object to losing $40 million to $48 million a year in revenue from inheritance taxes.
Such a cut for already cash-strapped counties, they said, would lead to reductions in county jobs and services and probably to higher property taxes, which they said would nullify any cosmetic advantage to eliminating inheritance taxes and shift the load to all taxpayers instead of the few who inherit property or businesses.
Several said they rarely hear complaints about inheritance taxes, but they get earfuls about high property taxes.
"Property tax is the cause of a lot of high blood pressure at every family meal," said Lincoln County Sheriff Jerome Kramer, whose family has a 15,000-acre ranch.
Kramer said he'll be hard-pressed to make more cuts in the budget for his office, which is already down two deputies and dealing with a 125 percent jump in jail inmates in the past seven months.
"I have no more rabbits to pull out of a hat," Kramer said. "Where is the money going to come from?"
Lancaster County Board member Deb Schorr said the $6 million loss in inheritance tax revenue translates into 120 jobs, about 14 percent of the county's workforce.
Heineman, who appears infrequently at legislative hearings, vigorously defended his tax cut package during a four-hour Revenue Committee hearing. He said the package was aimed at "the hard-working middle class" and making the state more attractive to new businesses.
State Sen. Abbie Cornett of Bellevue, committee chairman, urged her colleagues to "keep an open mind" about the cuts.
"There were a lot of points touched on today that need some clarification," Cornett said, arguing that the tax cut plan would change how businesses view Nebraska.
Legislative Bill 970 would deliver about $131 million in individual and corporate state income tax cuts in the first year, and about $326.6 million over three years. That is on top of the elimination of inheritance tax.
A married couple with two children whose adjusted gross income was $75,000 would see a $255 decrease in state income taxes, about an 11 percent reduction. A similar couple with $100,000 in income would see $290 in savings, a 7 percent cut. Corporate income taxes would drop 13 percent for businesses with incomes of over $100,000.
After a tax cut package pushed by Heineman in 2007, Nebraska climbed from No. 45 to No. 30 in the business tax climate rankings of the conservative Tax Foundation (the state was 29th until this week).
"That's good progress, but Nebraska is still in the bottom half of all states," Heineman said.
Four years ago, the state ended its estate tax, cutting state revenue by $115 million a year.
"We didn't complain. We didn't cry. We didn't raise income or sales taxes. Working together, we controlled our spending," he said, in comments clearly aimed at the county officials.
He rejected the notion raised by some state senators that the state shouldn't cut taxes until the economy and state revenue have recovered more solidly. The state, he said, can afford it within the projected 3.3 percent growth in state revenue as long as it rejects "special interest" spending and requests by the University of Nebraska for millions to build new laboratories.
"I would love to do a bigger tax package, but I wanted to make sure we could afford it," he said.
Lincoln tax authority John Cederberg testified on behalf of the Nebraska, Omaha and Lincoln Chambers of Commerce. He said passing the tax cuts would show confidence in the economy and help persuade businesses to begin investing the unprecedented amount of cash they now hold.
Other business and conservative organizations said the governor's plan would improve Nebraska's standing compared with neighboring states, all of which except Iowa rank better in business tax climate.
But groups including AARP, the state teachers union, the Democratic Party and advocates for children and the poor said the tax plan would lead to cuts in services for schools, the poor and the elderly. They said the proposal's timing was bad and that it would help the rich more than the middle class.
Nancy Fulton, president of the Nebraska State Education Association, said LB 970 would cut taxes by $42 for a family of four with a federal adjusted gross income of $30,000.
"That's not even a tank of gas per year," she said.
A new state tax research group, the Open-Sky Policy Institute, said more than half of the income tax cuts would go to the wealthiest 20 percent of Nebraskans, while 20 percent of the cuts would benefit those making less than $57,000 a year.
"LB 970 does little to lower the taxes of Nebraska's middle class," said the group's director, Renee Fry.
Open Sky's board includes Howard Buffett, the grandson of Omaha billionaire Warren Buffett; former State Tax Commissioner Don Leuenberger of Omaha; former State Sen. Joel Johnson of Kearney; and Dick Campbell, a Lincoln businessman and husband of Sen. Kathy Campbell. The group promised its own tax plan this spring.
Contact the writer: 402-473-9584, paul.hammel@owh.com
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