Larry Gerlt

Larry Gerlt of Ralston, the past state commander of the Veterans of Foreign Wars Department of Nebraska, testifies Thursday in favor of an enhanced state income tax break for retired veterans.

LINCOLN — A parade of military veterans, many wearing VFW or American Legion hats and at least one using a cane to walk, testified Thursday in favor of Gov. Pete Ricketts’ proposal for a bigger and better income tax break for military retirees.

But despite the show of strength, two of the state’s leading organizations that track tax policy urged caution about Legislative Bill 153.

A representative of the Platte Institute — which Ricketts helped launch — testified that lawmakers need to be focused on overall tax reform.

“We would argue that lower taxes for everyone, not just veterans, could fill (vacant) jobs” in the state, said Sarah Curry of the Platte Institute.

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Renee Fry of the Open Sky Policy Institute struck a similar tone, telling the Legislature’s Revenue Committee that granting more tax breaks for special groups could harm funding for other state priorities, like schools and roads.

“An incredibly small percentage” of people make decisions based on tax policy, Fry added. Most often, people decide to move or stay in Nebraska because of the quality of life here, she said.

The comments come in a year in which state lawmakers have made reducing the state’s historically high property taxes a top priority.

So has Ricketts, but he told the committee on Thursday that there was room to do both: help retired veterans and provide some property tax relief for all.

LB 153, he said, would replace a “clunky” and inadequate tax break that is now provided to military veterans in Nebraska. The current law, passed in 2014, applies only to those who retired in 2012 or later, and requires retirees to chose one of two options. There are about 14,000 veterans in the state, and the current law provides about $390,000 a year in income tax breaks.

By contrast, LB 153 would provide a 50 percent reduction in the taxable portion of a veteran’s pension, amounting to an estimated $13 million in tax breaks a year.

Both the governor and State Sen. Tom Brewer of Gordon, a decorated military veteran who introduced the bill, said that LB 153 was really a “workforce development” proposal. They said it would keep highly trained veterans in Nebraska after retirement, filling vacant jobs here and bringing many benefits in terms of paying other taxes and contributing to their communities.

“They not only have earned and deserved special treatment, it is a benefit to Nebraska,” said Brewer.

Ricketts said that three of his best managers when he worked at the family business, TD Ameritrade, were retired military veterans. Some veterans, he said, retire as early as age 38, then enter second careers in the state they choose to locate.

“This bill is about retaining these veterans in Nebraska,” the governor said.

Brewer said that Nebraska’s neighboring states all have more generous tax breaks for military retirees and that retirees from Offutt Air Force Base near Omaha can easily choose to commute from Iowa, where there are no income taxes on their pensions.

But at least two members of the Revenue Committee, Sens. Curt Friesen of Henderson and Mike Groene of North Platte, said property tax relief is what their constituents are seeking. Groene added that Nebraska’s high property taxes are probably the reason some Offutt retirees are choosing to retire in Iowa.

Curry, of the Platte Institute, said Maryland and Connecticut both saw reductions, rather than increases, in the number of veterans in their states after enacting tax breaks on military pensions. She added that if lawmakers believe that a bigger tax break for military retirees is a top priority, they ought to eliminate some other tax exemptions to accomplish it.

Omaha Sen. Lou Ann Linehan, who is one of 11 co-sponsors of LB 153, said it would be a win-win for the state if it can retain retired veterans. She said she expects the bill to advance to debate by the full Legislature.