The Nebraska Legislature resumed debate Tuesday on phasing out the state’s inheritance tax by 2028.
The inheritance tax is collected by counties and brings in about $70 million annually despite applying to only about 12,000 people a year.
When a Nebraskan dies and leaves property to a son or daughter, the first $100,000 is exempt with the rest taxed at 1%, Nieces and nephews are taxed at 11% on amounts over $40,000 while non-relatives are taxed 15% on amounts over $25,000.
Counties oppose eliminating the tax, saying it could force them to raise property taxes on everyone else, but State Senator Steve Erdman of Bayard said yesterday that he wanted to end it even when he was a former Morrill county commissioner..
Erdman said the legislature should have killed the inheritance 2 years ago when counties got lots of federal money as part of the COVID and post-pandemic stimulus.
Senator Mike Moser opposed the bill, saying that as taxes go, he thinks inheritance taxes are “relatively painless” compared to a lot taxation.
Omaha Senator John Cavanaugh said he could support doing away with the inheritance tax if the state also took away some of the costly responsibilities mandated by the state to counties – such as courts and jails.
Cavanaugh said if the state relieved Douglas County of the expense of arresting, prosecuting, and housing people for state offenses, it could probably “substantially reduce” property taxes.
Bill sponsor Rob Clements, who’s made it his priority measure, defended it as a matter of fairness with 1.8-million Nebraskans using county services and only 12,000 per year paying the inheritance tax. He called it “a redistribution of wealth situation.”
The Legislature adjourned for the day without reaching a vote on the bill. Debate is expected to stretch into tomorrow before a vote is taken.