LINCOLN — Gov. Pete Ricketts’ property and income tax plan stalled in the Nebraska Legislature Tuesday in the face of attack from all sides.
Lawmakers moved on to other bills before getting to a first-round vote on Legislative Bill 947.
But supporters could muster only 25 votes against a motion that would have killed the bill outright. It would take 33 votes to cut off debate and advance the bill.
State Sen. Jim Smith of Papillion, who introduced the bill on Ricketts’ behalf, held out hope that he can find those votes. He said he is open to making changes in the bill if that would pick up support.
He must show that he has the votes to advance the bill for it to come back for more debate and a first-round vote.
“If we short the taxpayers of Nebraska by not having full and fair debate ... it is a sad day,” Smith said. “I want to keep this discussion going.”
Ricketts, in a statement Tuesday evening, said, “It’s time for everyone to come to the table to work together on real tax relief that doesn’t rely on tax increases. It is unacceptable for senators to fail to deliver property tax relief for the second year in a row.”
LB 947, as advanced from the Revenue Committee, would provide homeowners and agricultural landowners with new income tax credits to offset some of their property taxes.
The credits would be phased in over 12 years and would be worth an estimated $590 million by 2030, when fully implemented.
The bill also would cut the top corporate income tax rate in five steps and boost workforce development funds by $5 million annually. The income tax change would be worth $50 million in 2030.
Sen. Steve Erdman of Bayard led one avenue of attack, calling the plan “too little, too late” for property tax payers, especially those owning agricultural land who have seen a steep increase in their property tax bills.
“This is a joke,” he said. “This is one of the most ridiculous pieces of legislation I have seen in my life.”
Erdman said the new credits would not keep pace with the average increase in ag land and residential property taxes, and would do nothing for commercial property owners.
But Sen. Lou Ann Linehan of Omaha answered that the plan is “better than nothing.” Sen. Robert Clements of Elmwood called it a “responsible way to get some property tax relief.”
“It’s a good start we can afford,” he said. “I hope we can do more in the future.”
Sen. Kate Bolz of Lincoln took issue with the plan’s cost, especially the proposal to take about $40 million from the state’s cash reserve fund to pay for it during the current budget period.
LB 947 does not spell out how the state would handle the loss of tax revenue in future years; Smith has said that economic growth, spurred by the corporate income tax cuts, would offset part of the loss.
Bolz said the tax changes would put other state priorities at risk, including such things as K-12 education, services for seniors and higher education scholarships.
But Smith countered that the bill offers a more responsible approach to cutting taxes than the property tax petition, which would provide Nebraska property owners with an estimated $1.1 billion worth of income tax credits. The petition does not provide for a phase-in of credits.
“The ballot initiative will absolutely be harmful,” he said. “This (bill) may very well be our last and best option this year.”
Others argued that Nebraska can’t deal with property tax relief without addressing school funding. About 60 percent of property taxes go to support K-12 schools.
Sen. Curt Friesen of Henderson said property tax payers shouldered a growing share of K-12 funding as the state reined in its spending on school aid.
Linehan agreed that school funding needs to be addressed but said nothing can be done without looking at school spending.
Sen. John Kuehn of Heartwell argued that the workforce development portion of the bill should not be funded out of the cash reserve, while Sen. Burke Harr of Omaha said the state needs more workforce development to encourage economic growth.