Measure includes individual and corporate tax rates, agricultural land valuations, tax credits
NFIB/Nebraska State Director Bob Hallstrom reports from Lincoln on the small-business agenda for the legislative week ending April 7.
Lawmakers continued to methodically process priority bills, as over half of the individual, committee and Speaker priority measures have advanced to the second stage of debate. With a tax relief measure being advanced by the Revenue Committee and debate on the state budget just around the corner, a great deal of heavy lifting remains for the final one-third of the 2017 legislative session.
Tax Relief Measure Advanced to Floor
The Legislature’s Revenue Committee, on a vote of 6-2, has advanced the long-awaited tax relief package (Legislative Bill 461) to the floor of the Legislature. The measure contains provisions changing the manner in which agricultural land is valued for tax purposes and reduces individual income taxes and corporate taxes over time. The Revenue Department has estimated that the measure will cost approximately $12 million in the next two-year budget cycle ending June 30, 2019.
Under LB 461, as amended:
- 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 agricultural 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.
- EXPANDED EARNED INCOME TAX CREDITS — Would increase earned income tax credits for low-income taxpayers to 12 percent of the federal earned income tax credits by the year 2020.
- BOTTOM TAX BRACKET CONSOLIDATION — Would combine the first and second individual income tax brackets into a new single bracket with the new bracket establishing the lowest tax rate at 3.25 percent. A new, refundable credit would be created for individuals who do not reach the top tax bracket.
- PHASE-OUT PERSONAL EXEMPTION CREDIT FOR HIGHER EARNERS — Would phase-out the personal exemption credit if adjusted gross income is $300,000 for tax payers filing married filing joint and $150,000 for all other filers, with the credit being extinguished when adjusted gross income reaches $400,000 and $200,000, respectively.
- SUSPENSION OF TAX CREDIT PROGRAMS — The Nebraska Job Creation and Mainstreet Revitalization Act (Historic Tax Credit) and the New Markets Job Growth Investment Act would be suspended, commencing July 1, 2017, through December 31, 2022, when both programs are scheduled to terminate.
Previous Reports and Related News Releases
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 State Capitol rotunda courtesy of the Nebraska Unicameral Legislature website]
