Recapping the 108th Nebraska Legislature: Taxes

The 108th Nebraska Legislature’s first session was by all accounts historic and sometimes chaotic. The continual disruptions did not deter us from accomplishing a lot for Nebraskans. Over the next few weeks, I’ll be highlighting and breaking down the bills we were able to pass and what they mean for Nebraskans, starting first with our income and property tax packages.

LB243, the vehicle bill for property tax reform, included my bill to amend the property tax levy authority of our community colleges. The community colleges will now receive funding through the state. The state is obligated to give the community colleges an annual increase of 3.5%, and community colleges will only retain their property tax authority if this condition is not met. This will result in a property tax reduction of about 5.5% beginning in the fiscal year 2024-2025, when the state aid is scheduled to begin. This is an appropriate step to take with state revenue coffers running in excess and provides much-needed property tax relief.

Another major piece of LB243 was the bill as introduced by Senator Briese, which establishes a cap of 3% on spending growth on schools. With Governor Pillen’s education funding plan now law, each school will be receiving $1500 per student in state aid. Additionally, every public school can receive 80% special education reimbursement. The legislature expects that most local school boards will recognize this new stream of funding and will take appropriate actions to lessen the property tax burden on their constituents. In the event that a school district is undergoing a fiscal crisis or emergency, there exists a cap override that requires a supermajority support of the school board or a public referendum on the budget increase. LB243 was another great step in lessening the burden on Nebraska property taxpayers. Shifting the balance of taxing to support our schools away from property taxes and toward state support is fairer to Nebraska taxpayers. It also makes it fairer for schools to provide some state support to all schools. Schools have increased assurance of continued adequate support from the state through the generously funded Education Future Fund.

The other side of the tax cuts were the income and social security tax cuts in LB754. Nebraska is always in competition with surrounding states to attract business, workers, and families. I believe Nebraska is the best place in the world to raise a family and start a career. To maintain this status, we need to take appropriate steps to compete with states like Iowa, Missouri, Colorado and Kansas to make Nebraska a business-friendly environment.

Like many states, Nebraska has a progressive income tax bracket. The more income you earn, the higher level of income tax you will pay on those dollars. South Dakota and Wyoming, other border states of ours, enjoy the benefit of having no state income tax. As of 2023, our top income tax bracket rests at nearly 7%. This makes it very important to cut our state income tax rate down to 3.99% by 2027.

As for social security, the state agreed to phase out taxes on social security benefits during the 60-day session of the 107th legislature over a 5-year period. This year, the legislature took the action of phasing these taxes out more quickly, with a 100% exemption by 2024. The taxation on social security benefits was an unfair double tax from the beginning. Social Security beneficiaries should not face a tax on dues they have already paid in to the government.

I still agree with Senator Erdman that the fairest way to tax in Nebraska is the EPIC option, which I voted for this year and will continue to support in the future. Until then, I will continue to advocate for responsible tax cuts that support Nebraska farmers, ranchers, businesses, families, and our state economy.