LINCOLN, Neb. (Nebraska Examiner) — An attempt to add a major package of income and property tax cuts to a bill providing a tax break on Social Security checks ran into a logjam Friday in the Nebraska Legislature.
In the end, the attempt to create a super-sized collection of tax relief proposals failed, with a vote to stop a filibuster falling one vote short of the 33 necessary.
State Sen. Brett Lindstrom of Omaha, who has made eliminating state income taxes on Social Security a priority, said his proposal is still very much alive, despite Friday’s development.
‘We will regroup’
“We will regroup on Monday,” Lindstrom said, and work to attach provisions of Legislative Bill 825 onto another tax bill dealing with turnback taxes to support sports arenas, such as Omaha’s CHI Center.
That bill could also provide a vehicle for the whopper income/property tax relief proposal.
The Lindstrom bill — which had plenty of support to advance from second-round — would phase out all state taxes on Social Security by 2025. It would benefit an estimated 325,000 Nebraskans who rely on the federal retirement aid.
But the state income tax cuts and an increase in property tax credits proposed in the larger tax bill, LB 939, ran into opposition from some senators who believe it helps mostly rich and not middle-class taxpayers. Because of the opposition, LB 939 was blocked from advancing on Tuesday.
Thus, Elkhorn Sen. Lou Ann Linehan, who introduced LB 939, sought a way to advance her proposal by attaching it to the Social Security measure, which was headed for passage.
Tried ‘the regular way’
“We tried to do it the regular way, but we were stopped,” Linehan said.
Opponents of the move, such as State Sen. Machaela Cavanaugh of Omaha, said it was a brazen attempt to piggyback the less-popular income/property tax bill on the top of a very popular measure, cutting taxes on retirement income.
“We’re looking at bills being amended into this that didn’t have 33 votes to stand on their own,” Cavanaugh said.
It has become the norm that any bill that is controversial needs 33 votes to overcome a filibuster, rather than the typical 25 votes of the 49 state senators to advance a bill.
And during the four-hour debate on the proposal to merge the bills, senators debated whether such a merger was a worthy package that everyone should support, even if they don’t like aspects of it, or whether adding LB 939 was a “poison pill.”
Linehan portrayed LB 939 as essential for the state to keep pace with neighboring states, which all either don’t tax income or have, or will have, lower rates than Nebraska.
It appeared there were conversations underway during the filibuster to seek more compromises that would allow the two bills to be merged and then advance. But the vote to end the filibuster came up one vote short.
‘Go big or go home’
LB 939 seeks to lower the state’s top income tax bracket from 6.84% to 5.58% by 2025 and lower the state’s corporate income tax rate from 7.1% to 5.84% by 2026. In an attempt to attract more support from rural senators, an amendment was proposed to include an increase in state income tax credits against property taxes paid for K-12 schools as well as community colleges.
“This is about go big or go home. It helps all Nebraskans,” said Plymouth Sen. Tom Brandt.
The total tax break provided by the two merged bills was estimated at $900 million, which the state’s top budget watcher, Gering Sen. Tom Stinner, said was affordable within the state budget if, as he proposed, the income tax credits could not rise by more than 5% a year.
But some senators have opposed the income tax cuts, arguing that benefit mostly wealthy Nebraskans, and it should be amended to provide more relief for middle-class families.
The merger proposal included provisions of a bill introduced by Albion Sen. Tom Briese to continue the tax breaks offered in a 2020 law, passed as LB 1107, that created the income tax credit for property taxes paid on K-12 schools, a tax break that has grown to about 25% of those taxes.
Nebraska Examiner is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Nebraska Examiner maintains editorial independence. Contact Editor Cate Folsom for questions: info@nebraskaexaminer.com. Follow Nebraska Examiner on Facebook and Twitter.
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