Hughes: Lawmakers reaching limits of available funding

Friday, April 30, 2021

McCOOK, Neb. - Negotiations to scale back spending are likely as the legislative session wraps up, State Sen. Dan Hughes told constituents at Thursday’s regular Zoom meeting.

“We’re spending a lot of money, or we’re passing a lot of bills that require spending,” Hughes said.

“We’re down to less than $2 million of the $211 million that we started with.” He anticipates that there will be “negotiations” toward the end of the session, to scale back bills.

Some of the “spending” has come in the form of tax cuts and exemptions, which may have to be phased in over time so that there is more time to compensate for the tax cuts with growth in the state’s economy.

LB64, which phases out state income tax on Social Security benefits passed on first reading, although Sen. Hughes said it will be amended in future rounds. “It will be scaled back because it is a very big number. The forecasting board meets today (Thursday) in Lincoln. So when we get those numbers of what the potential revenue for the State is moving forward, we’ll have a little bit better idea of what we can afford of that tax break.”

The Legislature also gave first-round approval to LB26, which provides a sales tax exemption for residential water usage, although the infrastructure (and maintenance to that infrastructure) to deliver the water is still taxable. Most municipalities, with the exception of Omaha, do not break out the actual water from the infrastructure on billing statements. Sen. Hughes said the loss of revenue to the state was minimal, although McCook City Councilman Gene Weedin told Sen. Hughes in March that he estimated it would cost the City of McCook $134,000 annually. Sen. Hughes did not vote on the bill.

The Revenue Committee’s tax bill was given first-round approval Monday. Among other things, the bill provides a cut in the corporate tax rate to 6.84 percent, the same as the state’s top individual income tax rate, beginning Jan. 1, 2022. Sen. Hughes told constituents that decreasing the rate would attract new business to Nebraska.

“The counter-argument to that is that most corporations do not pay the effective rate anyway.”

First-round approval was also given to LB595, which provides a sales tax exemption on some of the inputs used in the ethanol industry. An amendment to the bill was also approved that specifies that header trailers, head haulers, header transports, and seed tender trailers are specified as agricultural machinery and equipment, thus not subject to sales tax.

Legislators were unable to put a cap on property tax request growth (LB408 failed after a cloture motion); and declined to create a tax credit scholarship program for private school students (LB 364 also failed after a cloture motion).

A motion to pull LR14 from committee also failed. LR14 is a resolution to Congress calling for a convention of the states to propose amendments to the U.S. Constitution. Sen. Hughes said there is still a chance that the committee will advance the resolution so it can be discussed on the floor.

Sen. Hughes anticipates that a special session in September will approve re-districting lines, and that the deadline for filing for elected office will be moved from Dec. 1 to Jan. 1 because of the delays in the federal census information.

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