LINCOLN, Neb. (AP) - A tax cut package backed by Nebraska Gov. Pete Ricketts stalled in the Legislature on Tuesday amid opposition from progressives who said it favored the wealthy and rural senators who argued it didn’t do enough for farmers.
Supporters failed to overcome a filibuster, which prevented senators from voting on the measure. Lawmakers voted 27-9 to end legislative debate, six short of what was needed. In a statement after the vote, Ricketts thanked the 27 supporters by name and said the other 22 senators “voted against Nebraska taxpayers.”
Sen. Jim Smith of Papillion, who sponsored the bill, said the vote was “disappointing, to say the least” and acknowledged that his proposal is effectively dead for this year’s session. Ricketts had identified the package as one of his top priorities this year, and called on senators to stand against “big government spenders” who oppose it.
“It’s a sad day for Nebraskans,” Smith said after the vote.
The plan would have lowered Nebraska’s top personal and corporate income tax rates, adjusted the way agricultural land is valued for tax purposes, capped statewide property tax growth and expanded the earned income tax credit for low-income residents. The personal income tax rate of 6.84 percent would have ratcheted down each time projected state revenue grew by more than 3.5 percent annually until it reached a new low of 5.99 percent.
Supporters said the income tax cuts would benefit small businesses, many of which pay the state’s top individual income tax rate because of how they’re structured. Business groups including the Nebraska Chamber of Commerce and Industry endorsed the measure.
Opponents said they haven’t seen evidence that cutting the top rate will stimulate the economy. Some also voiced concerns that the so-called income tax “triggers” would come at a time when the state needs the money for a crisis.
“This bill isn’t ready for primetime,” said Sen. Burke Harr of Omaha. Harr said lawmakers should “hit the pause button” on the legislation until they learn how tax cuts proposed by President Donald Trump and a Republican Congress might affect the state’s finances.
The bill would have given a larger benefit to wealthy residents who pay a larger share of their income at the top tax rate. Supporters said the income tax portion was largely aimed at small businesses that would promote job growth and diversify the economy.
Critics said the package doesn’t do nearly as much for middle- and low-income residents. An analysis by the liberal-leaning Institute on Taxation and Economic Policy found that residents making $43,000 to $67,000 a year would see $53 in tax savings, while those making $509,000 annually would save nearly $6,000.
Nebraska’s leading farm groups objected as well, saying it doesn’t do enough for farmers who have faced soaring property taxes.
The current bill does “virtually nothing” to address the underlying problem, said Sen. Tom Briese, an Albion farmer. Briese said he would normally support efforts to reform the state’s income tax, but property taxes are a more pressing concern.
“We have to show Nebraskans we’re serious about property tax relief,” he said.
Some lawmakers acknowledged the bill didn’t provide as much as farmers and ranchers had hoped but said it deserved to advance in the Legislature. Sen. Lydia Brasch of Bancroft, who sponsored the property tax portions of the bill, said the measure would help urban and rural areas alike.
“It would be a good thing for blue jean country and blue collar country,” she said before the vote. “It would be good for all Nebraskans.”
Sen. Sue Crawford of Bellevue noted that the tax cuts are triggered when state revenue is projected to grow, instead of when actual growth occurs. State forecasters have overestimated state revenues in the six of the last 14 years, she said, which would have meant an automatic tax cut when revenue comes in lower than expected.
“There is no mechanism in this policy to stop a trigger if the revenues don’t meet those projections,” Crawford said.
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