LINCOLN — Hopes for income tax and agricultural property tax changes died Tuesday in the Nebraska Legislature.
Lawmakers fell short on a motion to end a filibuster on Legislative Bill 461. The motion required 33 votes to pass; it got 27 in favor, 9 against and 13 abstaining.
State Sen. Jim Smith of Papillion, the Revenue Committee chairman and the bill’s chief architect, expressed frustration.
“Obviously I’m going to be as disappointed as many of our taxpayers are,” he said. “It’s a bad day for Nebraska.”
Gov. Pete Ricketts denounced the senators who did not vote for the filibuster-ending cloture motion, accusing the 22 of voting “against taxpayers.”
The bill’s failure represented a defeat for the governor, who had pushed hard for the bill. His efforts included telephone town halls, mailers sent by his campaign committee and appearances across the state.
LB 461 incorporated Ricketts’ proposals for cutting the top individual income tax rate and changing how agricultural land is valued for property tax purposes.
Other provisions would have cut the top corporate income tax rate and increased credits for most taxpayers, including a higher earned income tax credit, a refundable credit that helps low-income working people, particularly parents.
Sen. Burke Harr of Omaha, who led the filibuster, said the measure tilted too heavily toward income tax cuts, while most Nebraskans want property tax relief.
He also called it irresponsible to be cutting taxes at the same time that the state is dealing with a budget shortfall.
“We’re not saying ‘no’ to taxpayers,” he said, “we’re saying ‘no’ to a bad bill.”
The cloture motion failed despite last-minute efforts to reach an agreement that would provide more property tax cuts.
As advanced from the Revenue Committee, the bill would have provided about $10 of income tax cuts for every $1 of property tax relief to agricultural land owners.
Smith announced a compromise proposal that would have slowed the pace of income tax cuts and provided for a $45 million increase in the state’s Property Tax Credit Fund in years when state revenues were projected to grow 3.5 percent.
He said the proposal was an attempt to bring together senators wanting the primary focus to be on property taxes with those who wanted income tax cuts.
That battle between those two taxes has pitted business and free market interests against agriculture and education interests for years.
The failure of the compromise to win over enough votes left Smith sounding pessimistic about the possibility of finding a middle ground.
“It’s hard for me to see a path forward at this point,” he said. “The gap is too broad.”
Some rural senators expressed a willingness to keep working on the bill, despite reservations.
Sen. Matt Williams of Gothenburg raised several concerns about LB 461, including its cost and the lack of demand for income tax cuts among his constituents.
But he said he would vote to keep the bill alive and advance it to second-round debate.
“I believe we owe the state the opportunity to continue discussion on tax reform,” Williams said.
But Harr argued that debate about tax issues would continue even if LB 461 died. He warned against trying to make tax policy changes through hastily crafted amendments.
“This bill should have been better worked out when it came out of committee,” he said.
Sen. Tom Briese of Albion said the measure as advanced from committee would do virtually nothing for property tax relief and would make future property tax measures more difficult by limiting state tax revenues.
“We’re either going to stand up for property tax relief or we’re going to work around the edges,” he said.
Others said the bill could leave Nebraska short of funds to provide necessary services, while directing the bulk of the tax cuts to the wealthiest Nebraskans.
Matt Litt, executive director of Americans for Prosperity-Nebraska, expressed disappointment in the vote’s outcome. He said the organization, which got involved with several legislative races last year, would not forget the vote on LB 461.
“We will continue to advocate for meaningful tax reform and will hold members accountable by educating their constituents on how they came down on this important legislation,” he said.
But Aubrey Mancuso, executive director of Voices for Children in Nebraska, hailed the vote.
“At a time when we are making cuts to child care, services for abused and neglected children and higher education, this bill would have had a devastating impact on community and infrastructure needs for decades to come,” she said.
When fully implemented, LB 461 would have provided an estimated $400 million of individual and corporate income tax cuts, according to the State Department of Revenue.
The pace of implementation was uncertain because the rate cuts would be phased in, with each step triggered by state tax revenue projections.
About $34 million worth of additional state aid to schools would have been required to offset the ag land valuation changes, starting in 2020. State officials estimated that 40 school districts would qualify for the aid.
How They Voted:
A major income and property tax bill died in the Legislature after a filibuster-ending cloture motion failed. The motion required 33 votes to succeed.
Here’s how senators voted on the motion:
Yes (27): Albrecht, Bostelman, Brasch, Brewer, Clements, Craighead, Ebke, Erdman, Friesen, Geist, Halloran, Hilgers, Hilkemann, Hughes, Kolterman, Kuehn, Larson, Lindstrom, Linehan, Lowe, Murante, Riepe, Scheer, Smith, Stinner, Watermeier, Williams.
No (9): Bolz, Chambers, Hansen, Howard, Krist, Morfeld, Quick, Schumacher, Walz.
Abstain (13): Baker, Blood, Briese, Crawford, Groene, Harr, Kolowski, McCollister, McDonnell, Pansing Brooks, Vargas, Wayne, Wishart.