2018 State of the State

Gov. Pete Ricketts and first lady Susanne Shore shake hands with state lawmakers Jan. 10 after Ricketts delivered his State of the State address.

Gwyneth Roberts, Lincoln Journal Star

LINCOLN — A revised gubernatorial tax reduction plan focusing increased attention on property tax relief was tossed into the legislative ring Wednesday, prompting more sparring than slugging from some state senators who reacted warily to the evolving proposal.

Although the revised plan is more likely than not to attract majority support in the Legislature, it faces a struggle to gain final enactment.

Sen. Jim Smith of Papillion, chairman of the Legislature's Revenue Committee, described the proposal as "a work in progress," which he will attempt to guide to enactment along "a clear, but very narrow, path to success that will require 33 votes."

That's the number required to break a filibuster in the 49-member Legislature.

"We're going to have some nips and tucks along the way," Smith said, "but it will be recognizable at the end."

The plan seeks to provide increased property tax reduction by restructuring the state's current property tax credit fund into a new, refundable income tax credit available only to owner-occupied households in Nebraska and agricultural landowners who live in the state.

Those property owners would receive a credit on their state income taxes equal to 10 percent of the tax bill on their home or farm. The credit for homeowners would be capped at $230.

Additional property tax relief would be pumped into the program in the future during any years when state revenue exceeds forecasts.

Personal and corporate income tax rates would also be reduced under the new tax proposal:

• The top personal rate — paid on income of more than $29,830 for single taxpayers and $59,660 for couples — would drop from 6.84 percent to 6.75 percent in 2019, then to 6.69 percent in 2020.

• And the top corporate rate — paid on income of more than $100,000 — would drop from 7.81 percent to 6.75 percent in 2019, then to 6.69 percent in 2020.

The proposal will replace the governor's previous tax plan (LB461) that was trapped by a filibuster last year.

"It's time to pull agriculture and nonagriculture interests together for the common good," Smith said during an interview.

"We have to find a path to unite their interests and make Nebraska more attractive for business to want to expand in the state."

The new bill would provide "greater certainty for property tax relief," Smith said.

"Property tax relief grows as the economy grows," he said.

Sen. Steve Erdman of Bayard, the sponsor of a competing proposal (LB829) that would provide $1.1 billion in property tax relief through state income tax credits and refunds equal to 50 percent of local school property taxes paid, deferred reaction to the governor's new plan until he's had an opportunity to study it more.

"I haven't seen the bill," he said. "I'll look at it."

The Nebraska Farm Bureau Federation, an influential player in the property tax arena, said it was encouraged by the governor's increased emphasis on property tax relief, but still open to an initiative proposal that would be submitted to Nebraska voters on the November general election ballot if the Legislature does not enact Erdman's bill.

"We will keep all options on the table for our members, including a ballot measure that would give Nebraskans the opportunity to vote and demonstrate their desire for property tax relief," Farm Bureau President Steve Nelson said.

Sen. Bob Krist of Omaha said he'd like to see the Legislature also consider some opportunities to increase revenue without hiking tax rates as it struggles with a revenue shortfall.

One way would be to collect state sales taxes already owed by Nebraskans for purchases on the internet, he said.

Krist, a former Republican who will be a third-party candidate for governor in November challenging the Republican governor's re-election, said the Ricketts administration has "not moved" to try to collect that revenue at a time when state government is experiencing fiscal distress.

In addition, Krist said, the Legislature should be open to elimination of "some sales tax exemptions and give-away programs" to meet the state's fundamental budget needs.

Sen. Burke Harr of Omaha, a member of the Revenue Committee, said he was pleased to see Ricketts appear to be "much more conciliatory and less partisan" in his State of the State address to the Legislature.

"I think the tax plan is introductory," he said. "I believe he's willing to work more on common ground. He realizes there have to be compromises."

Harr, a Democrat in the nonpartisan Legislature, enthusiastically agreed with the governor's stated priority of workforce development as one of his 2018 legislative initiatives.

Ricketts included a proposal for an additional $10 million in workforce development funding over the next two years as part of his State of the State address.

During a briefing with news media Tuesday night previewing his speech, Ricketts said he expects the revenue trigger built into his tax bill could result in increased property tax relief six out of 10 years.

Ricketts said "we are still talking" with supporters of the alternative billion-dollar property tax relief proposal to seek agreement.

"Maybe we're not there yet," he said, "but if we can come to agreement with agriculture, they might not see a need for the initiative."

Smith said he will schedule a series of meetings to focus on strategy and develop working coalitions to prepare the ground for consideration of the revised tax plan later this session.

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