Tax-Relief Package Likely to Face Filibuster

Date: April 21, 2017

Contentious debate on state budget also expected

NFIB/Nebraska State Director Bob Hallstrom reports from Lincoln on the small-business agenda for the legislative week ending April 21.

Senators will turn their attention to balancing the state budget when they return to work next week. The Appropriations Committee has forwarded its final budget to the full Legislature on a vote of 6-3. Under legislative rules, the budget is required to be advanced to General File no later than the 70th legislative day (April 24), with all appropriations bills to receive final approval by the 80th legislative day (May 10). It is anticipated that initial floor debate on the budget will commence on April 25.

The final budget advanced to the floor of the Legislature by the Appropriations Committee calls for General Fund spending of $4.4 billion and $4.5 billion, respectively, over the next two fiscal years. The proposal provides for an average spending increase of 1 percent.

Under the proposed budget, most state agencies will incur a 4 percent cut in their budgets to allow for slight increases in funding for state corrections and the justice reinvestment project. The proposed budget calls for withdrawing $173 million from the Cash Reserve, or “Rainy Day” Fund, leaving approximately $380 million in the Cash Reserve Fund. The budget proposal also makes about $215 million in transfers of cash funds of state agencies to balance the budget.

Tax-Relief Package

The Legislature commenced first-round debate of a comprehensive tax-relief package (Legislative Bill 461) April 21. The measure contains provisions changing the way agricultural land is valued for tax purposes and reduces individual income taxes and corporate taxes over time. LB 461, as amended, would address the following:

  • AG LAND VALUATIONS – The state, in 2018, would revise its method for valuing agricultural land for tax purposes, by use of an income capitalization method that reflects the agricultural-use value in the ordinary course of trade. Annual aggregate increases in ag land valuations would be capped at 3.5 percent beginning in 2018. The measure would also ensure that capitalization rates result in aggregate agricultural-use values for any class of agricultural land between 55 percent and 65 percent of the actual value that the land has for agricultural or horticultural purposes.
  • TOP INDIVIDUAL INCOME TAX BRACKET – Beginning in 2020, the top individual income tax rate would be incrementally reduced from 6.84 percent to 5.99 percent in eight annual steps, with each reduction only occurring if state revenue growth exceeds 3.5 percent. If the expected rate of growth is not met, the tax rate reduction that would have otherwise occurred will be deferred.
  • TOP CORPORATE TAX BRACKET – The top corporate income tax rate would be reduced from 7.81 percent to 7.59 percent beginning in 2019, with the top rate to continue to be reduced for subsequent tax years in increments of 20 percent each year until the top rate reaches 5.99 percent. Reductions would only occur if state revenue growth exceeds 4 percent. If the expected rate of growth is not met, the rate reduction that would otherwise occur is to be deferred.

A series of amendments have been filed to the bill and it appears that the measure will be filibustered, which will require 33 votes to invoke cloture and vote on the advancement of the bill to Select File.

Prior to adjourning, the body considered a vote on a motion by Sen. Bob Krist (Omaha) to recommit LB 461 to the Revenue Committee. The Krist motion, which would have effectively ended debate on tax relief this session, failed on the following vote of 15-29:

  • Yes (15): Blood, Bolz, Chambers, Crawford, Hansen, Kolowski, Krist, Morfeld, Pansing Brooks, Quick, Schumacher, Vargas, Walz, Wayne, Wishart
  • No (29): Albrecht, Baker, Bostelman, Brasch, Brewer, Briese, Clements, Craighead, Ebke, Erdman, Friesen, Geist, Groene, Halloran, Hilgers, Hughes, Kolterman, Larson, Lindstrom, Linehan, Lowe, McCollister, McDonnell, Murante, Riepe, Scheer, Smith, Stinner, Williams
  • Present – Not Voting (3): Harr, Hilkemann, Watermeier
  • Excused – Not Voting (2): Howard, Kuehn

(A “no” vote was in accord with the NFIB’s support for LB 461.)

State Aid to Schools Formula

Lawmakers debated Legislative Bill 640 on April 18. It is designed to adjust Nebraska’s state aid to school’s formula in an effort to provide property tax relief to rural landowners. Introduced by Sen. Mike Groene (North Platte), the measure would reduce the maximum levy for school districts in 2018 and thereafter from $1.05 per $100 of taxable value to $0.987. While the measure would increase state aid for almost every school district in the state, funding would be provided through use of the $224 million currently provided for property tax relief through the state’s property tax credit fund.

The legislation pitted urban and rural senators as urban districts would see an overall increase in their property tax bills, in exchange for reduced property taxes for rural landowners.

During debate on LB 640, Sen. Tom Briese (Albion) proposed an amendment, similar in nature to his Legislative Bill 312, which would expand the sales tax on services by eliminating existing sales tax exemptions on items such as investment advice, recreational activities, transportation services, interior decoration, parking, storage, moving, bottled water, candy, soft drinks, automobile repairs, cleaning, and home repair services.

NFIB is opposed to the Briese amendment which would expand the sales tax to cover additional services.

Previous Reports and Related News Releases

April 14 Report—Gov. Ricketts, Top Senators Meet With NFIB Members

April 7—Tax Relief Bill Advances to Floor of Nebraska Senate

March 31 Report—Governor Signs NFIB-Backed UI Bill Into Law

March 30 News Release—State Small Business Owners to Convene in Lincoln

March 24 Report—NFIB-Backed UI Reform Bill Passes Nebraska Legislature

March 17 Report—Bill Targeting Unemployment Insurance Abusers Advances

March 10 Report—NFIB Members Rally to Kill Bad Workers’ Comp. Bill

March 3 Report—Senators Given Grim Revenue Forecast

February 24 Report—Nebraska Legislature Designates its Priority Bills

February 17 Report—Legislators Propose Expanding Sales Tax to Sales

February 10 Report—NFIB-Backed Unemployment Bill Advances

February 3 Report—Governor’s Tax Relief Bill Coming Up For First Hearing

January 30 News Release—Comment on Governor’s Press Conference, Today

January 27 Report—NFIB Fighting Habitual Abusers of Unemployment Insurance

January 20 Report—Bill Introduction Period Expires in Nebraska Legislature

January 13 Report—Bill Introductions Less Than Normal in Nebraska Legislature

January 12 News Release—Comment on Today’s State-of-the-State Address

January 6 Report—Nebraska Legislature Opens for Business

[Tile photo of Sen. Bob Krist courtesy of the Nebraska Unicameral Legislature website.]

Related Content: News | Agriculture | Nebraska | State Budget | Taxes

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