Gov. Pillen, Nebraska legislators propose sweeping tax relief plan

Nebraska Gov. Jim Pillen joined several state lawmakers Wednesday to unveil a tax proposal that would remove hundreds of millions of dollars from the state’s tax rolls, including measures that would slash income and corporate taxes, stop taxation of Social Security income, and restrict taxes on agricultural land.

The bills would be the largest tax cuts in the state's history — $78 million in income tax cuts alone by the end of next year and more than $720 million by 2027, Pillen said at a news conference surrounded by fellow Republicans.

The cuts were billed as necessary to keep and attract people to the state who would otherwise be put off by Nebraska's heavy tax burden, particularly its state income tax.

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"We have to compete better than we have been," Pillen said at a news conference with a handful of fellow Republicans. "These tax cuts, they're not going to get us in the Top 10. But we'll rank No. 15 in the states."

Critics fear the proposed cuts could hurt state coffers and the public programs and infrastructure that rely on tax funding.

"We have serious concerns about the affordability of the tax measures discussed by the governor, especially given his recent commitment to significantly increase public education funding," said Rebecca Firestone, executive director of the Nebraska-based tax policy think tank OpenSky Policy Institute.

Tax rates alone don’t drive people’s decision on whether to live in Nebraska, she said.

"Other factors such as quality of life, access to good jobs and the desire to be close to family rank much higher than taxes in the decisions of businesses and individuals," Firestone said.

The measures would include bills to speed up implementation of a tax cut passed last year to phase in decreases of top individual and corporate tax rates. The new measures would slash individual and corporate tax rates gradually to 3.99% by 2027, far lower than the reduction to 5.84% by 2027 signed into law by former Gov. Pete Ricketts last year.

Sen. Joni Albrecht, of Thurston, unveiled a bill dubbed the Agricultural Value Fairness Act, which would shift farm and ranch land from being assessed at market value and would instead assess it based on its income potential. That potential would be calculated using information from the federal Agriculture Department, the University of Nebraska, land surveys, income reports and other sources, Albrecht said. Increases on agricultural land valuations would be capped at 3.5% annually.

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"Nebraska is an outlier in how we value ag land," Albrecht said. "In states such as Iowa, Kansas and South Dakota, they use the income-based assessment value to their ag land."

The measure would go into effect next year and potentially reduce ag land valuations across the state by $7.5 billion, she said.

Pillen, the owner of a hog farm operation near Columbus, praised the move as a lifeline for family farms, noting he recently received a letter from a farmer whose 123-acre farm had been assessed at $30,000 per acre — its market value during a year when real estate prices have soared.

"He can't make enough income to pay the property taxes," Pillen said. "That's just wrong."

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Another bill would stop taxing Social Security income, estimated to amount to $16.7 million in the next fiscal year, and a bill by Sen. Dave Murman, of Glenvil, would end funding community colleges through local property tax collections and would instead see the state provide funding for community college operations. The bill would start with the funding the two-year colleges currently collect through local taxes and increase that annually by 3.5%, Murman said.