MARCH 30, 2007
Revenue Committee Tax Cut Plan Finalized: A “Little” Something For Everyone
On March 29, the Revenue Committee finalized its tax cut proposal on a 7-0 vote (Sen. White abstaining for reasons explained below). Members of the committee and news reports claim the plan has “a little something for everyone,” with, as you will see below, “little” being the key point for many taxpayers.
The package totals $418 million over the next two years. This amount will have to fit in the budget the Appropriations Committee is currently developing. The plan will be rolled into and presented to the Legislature as LB 367. Key components of the Revenue Committee’s tax cut plan include:
A property tax credit to all landowners equal to 8 cents per $100 valuation in 2007-08 and 4 cents per $100 valuation in 2008-09, or about $80 for the owner of a $100,000 home in the first year ($40 in the second year). The credit will equal $100 million in 2007-08 and $50 million in 2008-09.
In the second year, reduce of school property tax levies from $1.05 to $1 per $100 of valuation; this will cost $60 million in additional state aid to schools. It is estimated that the property tax credit and additional school aid will reduce property taxes by 5 cents per $100 valuation in the second year.
Lower the top income bracket from 6.84 percent to 6.65 percent.
Eliminate the “marriage penalty” by increasing the income tax standard deduction for married couples by $1,800 and increasing the amount of income for married couples in the top income tax bracket (from $50,000 to $54,000). All income tax changes are retroactive to January 1, 2007.
The income tax changes would reduce revenue by $108 million in 2007-08 and by $87 million in 2008-09.
Raise to $2 million (from $1 million) the size of estates subject to the state estate tax. This change would reduce revenue by $2 million in 2008-09.
Repeal the sales tax on labor for commercial construction. This change would reduce revenue by $15 million over the two years.
Creates a tax credit for renewable energy production, the estimated revenue cost of which is $160,000 over two years.
For most low- and moderate-income taxpayers this package provides few benefits. Property tax credits will total less than $100 over two years for most rural non-farm homeowners. The property tax credit will provide greater benefits to farmers and ranchers, and, in fact, provides greater benefits for farmers and ranchers than did earlier versions of the property tax credit that provided a flat amount to homeowners. Depending on the amount of land owned, its value, and one’s property tax obligation, the property tax credit could be in the thousands of dollars for farm and ranch households. Higher income earners will be the chief beneficiaries of the income tax changes, with married taxpayers benefiting from the higher standard deduction and some middle-income married income taxpayers benefiting from a lower rate.
Sen. White abstained from the final committee vote in order to keep open the option of attempting to amend the package to include his $500 tax credit for property taxes paid by homeowners. The tax relief package is slightly smaller than that proposed by Governor Heinemann in January. The Governor proposed about $240 million in tax relief in the first year, mostly in income tax changes and with no property tax relief. However, the Governor seemed to express support for the committee’s plan.
As in the past, we will divide into categories the bills we are working on or tracking. Any bill designated a Priority Bill will also have a “P” attached to its number (for example, LB 123P). The chief sponsor of the bill is listed in parentheses.
The words Support or Oppose after a bill description indicate where the Center for Rural Affairs has taken a position on the bill. If neither word is indicated, the Center has not taken a position at this time.
As bills are killed in committee or become law through floor stages, they will be deleted from the Legislative Update.
LB 232P (Dubas) – Modifications to the Building Entrepreneurial Communities Act. On March 28, the bill was advanced to Select File on a 36-0 vote. Support
LB 498P (White) – Establishes the Business Partnership in Rural Education Program to use donated business tax incentive tax credits to raise funds for projects related to educating students for economic development needs. The bill awaits committee action
LB 567 ((Louden) – Establishes the Recreational Liability Act; generally exempts private landowners from liability for the public use of property for recreational purposes. The bill awaits committee action.
LB 609 (Carlson) – Establishes the Nebraska Recruitment Promotion Act, a grant program for communities, counties, or regions losing population to develop marketing and promotional materials. The bill awaits committee action.
LB 46 (Hudkins) – Would create an assessment on grapes for marketing and promotional purposes. The bill awaits action on General File.
LB 69 (Hudkins) – Modifies the state value-added agriculture grant program. The bill awaits action on General File.
LB 368P (Erdman) – The Limited Cooperative Association Act. Rewrites Nebraska cooperative law. The bill awaits action on General File.
LB 488P (Wallman) – Creates an income tax credit for perpetual conservation easements. On March 27, the bill was advanced to General File by the Revenue Committee on a 5-0 vote. The bill was amended in committee to cap the credits at $5 million per year.
LB 516P (Agriculture Committee) – Establishes the Corporate Farming Policy Advisory Council. The bill is awaits committee action. Oppose
LB 633 (Dierks) – Modifications to the Competitive Livestock Markets Act regulating livestock production and marketing contracts. The bill awaits committee action. Support
LB 177P (Janssen) – Proposed modifications to the Microenterprise Tax Credit. The bill awaits action on General File. Support
LB 331 (Janssen) – The Governor’s $1.06 billion tax cut proposal. The bill awaits committee action.
LB 366 (Janssen) – Would create a $12,000 homestead exemption from property taxes for residence and would reduce to 70% (from 75%) the value of ag land subject to property taxes and would eliminate the authority of community colleges to levy property taxes. The bill awaits committee action.
LB 367 (Janssen) – The Revenue Committee’s tax cut plan (see above).
LB 453 (White) – Creates a $500 refundable income tax credit for property taxes on primary residences. The bill awaits committee action.
LB 511 (Avery) – Would exempt 10% of average assessed value of residences from property taxes and would reduce to 65% (from 75%) the value of ag land subject to property taxes. The bill awaits committee action.
LB 683 (Dubas) – Would increase the earned income tax credit on the state income tax from 8% of the federal EITC to 15% of the federal credit. The bill awaits committee action. Support
LB 684 (Dubas) – Creates a refundable income tax credit for homeowners and ag land when property taxes exceed a percentage of the taxpayer’s federal adjusted gross income; known as a property tax “circuit breaker.” The bill awaits committee action. Support
LB 658P (Raikes) – Would allow for the creation of new Class I school districts anywhere in the state through a reorganization and election process. On March 29, the bill was advanced to Select File on a 29-0 vote.
LB 595 (Kopplin) – Sunsets the current K-12 state aid formula in 2009 and establishes the Task Force on School Funding for Economic Growth to develop a new school funding system to recommend to the Legislature. The bill awaits committee action.
LB 9 (Preister) – Creates an income tax credit for installation or improvements to residences or businesses for energy conservation or renewable energy generation. The bill awaits committee action. Support
LB 343P (Langemeier) – Creates an income tax credit for investments in biodiesel facilities. On March 28, the bill was advanced to Select File on a 40-0 vote. .
LB 444 (Stuthman) – Modifies amount of renewable energy tax credit for electricity generated by new zero-emission facilities by making all such facilities eligible for the credit. The bill awaits committee action.
LB 581 (Preister) – Establishes a system of net metering for customer-generators of electricity from renewable energy sources. The bill awaits committee action. Support
LB 626 (Dierks) – Creates the Biodiesel Fuel Producer Incentive Fund. The bill awaits committee action.
LB 629P (Dierks) – Establishes a program for community-based wind energy development. The bill awaits committee action. Support
LB 648 (Preister) – Exempts from sales tax any personal property used in community-based wind projects; also modifies the renewable energy tax credit for electricity generated by new zero-emission facilities. The bill awaits committee action. Support
LB 672 (Lathrop) – Prohibits the eminent domain condemnation of community-based energy projects by publicly-owned utilities. The bill awaits action on General File. Support
LB 281 (Stuthman) – Appropriates $1.25 million to the five federally qualified community health centers in the state. The bill awaits committee action.
LB 378 (Pahls) – Modifies the Small Employer Health Insurance Availability Act by adding association plans. The bill awaits committee action.
LB 531 (Nantkes) – Creates a $5,000 refundable tax credit for small business employers who offer and pay a portion of an employee health insurance plan. The bill awaits committee action. Support