Nebraska Legislature Revenue Committee

Gov. Pete Ricketts talks about his plan for an income tax cut during a Nebraska Legislature Revenue Committee hearing at the Nebraska State Capitol in Lincoln on Wednesday, Feb. 8.

LINCOLN — Business and free market groups squared off against agriculture and education groups over a major income and property tax package Thursday.

Friday, the battle will shift to the Nebraska Legislature when state senators begin debate on Legislative Bill 461.

The measure incorporates Gov. Pete Ricketts’ proposals for cutting the top individual income tax rate and changing how agricultural land is valued for property tax purposes.

Other provisions would cut the top corporate income tax rate and increase credits for most taxpayers, including a higher earned income tax credit, a refundable credit that helps low-income working people, particularly parents.

Ricketts touted the package at a press conference Thursday.

He called it “the most comprehensive tax bill” to emerge from the Revenue Committee in decades and one that could unite urban and rural senators.

“I think this is an important bill to get behind to demonstrate your support for Nebraska families,” he said.

Ricketts described opponents of the bill as “big government spenders.”

“They don’t want to see money for tax relief because they want more government spending,” he said.

Opponents argued that LB 461 does not answer Nebraskans’ demands for significant property tax relief.

In a telephone press conference, Farm Bureau President Steve Nelson said the bill would provide minimal tax relief for farmers and ranchers, and relief would be uneven across the state.

In addition, he said, the proposal would worsen the imbalance of taxes used to support state and local government.

“When we look at a bill that has a 10-to-1 ratio of money going to income tax cuts, we think it’s backwards,” Nelson said.

The Farm Bureau is among 18 agriculture, education and property taxpayer groups that have come together as Nebraskans United for Property Tax Reform and Education.

Speaking for the group, Mike Lucas, superintendent of York Public Schools, said the goal of tax reform should be to reduce Nebraska’s heavy reliance on property taxes while adequately funding education.

“LB 461 doesn’t provide meaningful, long-term property tax reform that many of our elected officials have promised,” he said. “Property tax reform is the No. 1 issue we hear citizens asking for.”

Other opponents said the bill would jeopardize Nebraska’s ability to take care of state needs.

“It is irresponsible to be talking about a bill that will cut taxes for the wealthiest and raise taxes on some middle-income families at a time when we face a large budget shortfall that will result in cuts to services that Nebraskans rely on,” said Renee Fry, executive director of the OpenSky Policy Institute.

On the supporters’ side, Ricketts was joined by 19 of the 49 state senators, as well as representatives of state and local business groups, Americans for Prosperity-Nebraska and the Platte Institute for Economic Research.

Barry Kennedy, president of the Nebraska Chamber of Commerce and Industry, said LB 461 would begin to address the chamber’s long-sought goal of income tax relief.

He said it would make Nebraska more competitive and help the state attract new residents and businesses.

“Probably everybody would like to have more, but it’s definitely a very positive step in the right direction of providing tax relief to all Nebraskans,” Kennedy said.

The lone agricultural representative standing with the governor was Steve Wellman of the Governor’s Agriculture Advisory Committee.

He hailed the proposal to switch from a sales-based approach to valuing agricultural land to one based on the land’s income potential.

But Jay Rempe, senior economist with the Farm Bureau, said LB 461 would use a method that differs significantly from the income-based approach in other states.

One key difference is that it would still measure valuations against market sales. The bill would require that valuations statewide end up between 55 percent and 65 percent of market value.

The bill also would cap statewide increases in value at 3.5 percent per year.

When fully implemented, LB 461 would provide an estimated $400 million of income tax cuts, according to the State Department of Revenue.

The rate cuts would be phased in, each step triggered by state tax revenue projections. If revenue is projected to grow at least 3.5 percent, it would trigger an individual income tax rate cut. A projection of at least 4 percent growth would trigger a corporate rate cut as well.

Starting in 2020, about $34 million worth of additional state aid to schools would be required to offset the ag land valuation changes. State officials estimate that 40 school districts would qualify for the aid.

Martha Stoddard keeps legislators honest from The World-Herald's Lincoln bureau, where she covers news from the State Capitol. Follow her on Twitter @StoddardOWH. Phone: 402-473-9583.

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