The Nebraska Legislature gave final approval Thursday to a $6.4 billion dollar tax relief package with measures for income tax cuts, hikes in state property tax credits, a tax credit for child care and a boost to school funding to offset property taxes
Gov Jim Pillen had campaigned last year on many of the proposals, including changing the state aid to education formula to establish a baseline level of aid – $1,500 per student – that ensures state taxpayers are delivering significant funding to every public school district in the state.
The income tax changes, especially its emphasis on lowering the tax rates of top earners by more than those in other brackets, received the most pushback. For tax year 2023, the income tax rate for the top bracket – individuals making over roughly $37,000 and couples over $74,000 – is 6.64%.
LB 754 will cut that 3.99% by 2027. The bill eventually cuts the second tax bracket rate, currently 5.01%, to 3.99% by 2027.rate to 3.99% by 2027. Senator Wendy DeBoer of Bennington said people in the middle class shouldn’t have to wait until 2026 for a modest tax cut and watch the people in the highest bracket see relief right away.
DeBoer called it “a tax cut for the wealthiest in Nebraska, and eventually, if we have enough money … then maybe we’ll get some middle-class tax cuts. I don’t think that’s fair.” At full implementation in 2027, three-quarters of the tax cut benefits will go to the top 20% of income earners.
Opponents worried that the state risks cutting taxes too deeply and spending so much on tax credits and tax offsets that it puts future funding for state services at risk, but Sen. Tom Briese disagreed.
He said the package is based on very conservative revenue projections that revenue increases would fall below historical averages for five years in a row, when in fact, the longest they have lagged behind is for three years.
The largest remaining piece of the tax relief package yet to pass is LB 727, a combination of about 30 tax credit proposals, including one for major investment in retail aimed at turning the Nebraska Crossing mall into a major tourist destination. That bill is headed for final reading next week.