The World-Herald’s Statehouse reporters round up news highlights from the Legislature and state government into the Capitol Digest — a daily briefing for the political newshound with a busy schedule.
Corporate income tax cut. A state legislative committee not only wants to decrease property taxes, but also lower the state’s corporate income tax rate and fix an oversight in a 2018 tax fix that delivered an inadvertent $22 million tax increase for owners of high-dollar homes.
On Wednesday, the Legislature’s Revenue Committee discussed advancing two bills that would:
» Eventually lower the state’s corporate income tax rate, which is now 7.81% on income over $100,000, to put it on par with the state’s highest individual income tax rate, which is 6.84%.
Omaha Sen. Brett Lindstrom, who has pushed the idea, said that it’s been a longtime gripe of business that so-called C-corps, which are some of the largest companies in the state, pay a higher tax rate than other “pass through” companies, which are typically smaller businesses. Lindstrom added that if the corporate rate were lowered, the state would save money by having to pay less in tax incentives through programs like the Advantage Act.
It didn’t appear that such a tax decrease proposal was in the plans until this week. It would be funded by a new tax on consulting services and franchise fees done by out-of-state companies — a tax some maintain the state should have been collecting already. The decrease in corporate income taxes would happen in stages under the idea, which didn’t come up for a vote within the committee on Wednesday.
» Reverse a $22 million tax hike. Elkhorn Sen. Lou Ann Linehan said that lawmakers last year failed to hold Nebraska taxpayers harmless, as they intended, from federal income tax changes that were enacted then. One oversight, Linehan said, was not removing a $10,000 cap on local taxes that could be deducted from federal income taxes. She said it resulted in a tax increase for an estimated 37,000 tax filers.
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A home would have to be valued at more than $400,000 in Elkhorn to generate more than $10,000 in taxes. While extending the deduction might bring complaints that this is a tax change for the wealthy, Linehan disagreed: “This is a correction we need to make.”
To offset the $22 million tax cut, Linehan suggested that the state stop indexing state individual income tax brackets by inflation, a tax change enacted by the Legislature in 2014 to modernize state tax policy and prevent “bracket creep.” That is when someone is pushed into a higher tax bracket when their income rises but the brackets do not.
Indexing was hailed as a tax cut back then, and was on track to deliver an estimated $34 million in lower taxes in 2019-20 and $93 million in 2020-21.
The proposed bill would also include one of Gov. Pete Ricketts’ proposals: Give military retirees a 50% reduction in the taxable portion of a veteran’s pension. Linehan said it was a workforce development idea, one that would keep talented, trained veterans from moving to states that offer more generous income tax breaks.
Two policy think tanks that don’t often agree, the Platte Institute and Open Sky Policy Institute, both were lukewarm on the governor’s proposal. Platte urged income tax cuts for everyone, and Open Sky said specialty tax cuts took away from other priorities.
The proposal, which didn’t come up for a committee vote, would also reinstate a Nebraska Additional Tax to come up with enough tax revenue to offset the tax cuts.
Budget split. The Appropriations Committee voted out the state budget package Wednesday, with two members opposing major pieces of the package.
Sens. Robert Clements of Elmwood and Steve Erdman of Bayard voted against the main budget bill, as well as a bill transferring money in and out of various funds and a bill making changes in the current year’s budget.
Clements objected to the committee’s decision not to add as much money to the Property Tax Credit Fund as the governor had sought. He also said he did not like some of the spending on the University of Nebraska.
Erdman said he was unhappy the committee had not provided all the funds sought by Secretary of State Bob Evnen for new voting equipment.
The budget will be delivered to the full Legislature on Thursday, and debate on the package is expected to start May 8.
Assisted living. Lawmakers would continue their probe of care facilities for people with mental illnesses under a legislative resolution introduced by Sen. Lynne Walz of Fremont.
Legislative Resolution 104 calls for creation of a special committee to pick up where lawmakers left off with a 2018 investigation of those facilities.
Walz said the committee found several cases of unsanitary and unsafe living conditions and, at times, an “appalling” lack of accountability and oversight. The 2018 committee called for the oversight effort to continue.
The 2018 committee was created in response to the death of a veteran at a troubled facility in Palmer, Nebraska.