LINCOLN — A state legislative committee gave a preliminary "no" Monday to one of Gov. Dave Heineman's tax-cutting proposals.
The eight-member Revenue Committee, in an informal discussion, said it could not support elimination of the state's inheritance tax because it could translate into an increase in local property taxes.
Between $40 million and $48 million a year is paid to counties in inheritance taxes.
County officials have complained en masse that losing that revenue would eliminate an important funding source and force them to increase a much more unpopular tax, the property tax.
But Heineman, during his call-in radio show later Monday, disagreed that property taxes would have to rise, and said it appears counties would be able to cut spending to offset the loss in inheritance tax revenue.
He pointed to a story in Sunday's World-Herald about Bill Green, a former county commissioner and county engineer who is being paid $51 an hour by Douglas County to work as a part-time deputy in the Engineer's Office. The pay for the 85-year-old Green is the highest for any part-time worker for the county.
"I've served in local government," Heineman told a caller on the radio show. "You can reduce spending."
The elimination of the inheritance tax has drawn the most widespread criticism among the governor's three-part proposal to reduce taxes.
His plan would also decrease individual and corporate income taxes, which are paid to the state.
Bellevue Sen. Abbie Cornett, the Revenue Committee chairwoman, asked her colleagues Monday for an informal reading on the inheritance tax proposal.
Most senators on the eight-member committee said that counties could not absorb the loss of the inheritance tax income and that they hear few complaints about the tax. A 1 percent tax is placed on inheritance by the closest relatives, such as children, though that rate is much higher for unrelated people who inherit property or money.
State Sen. Galen Hadley of Kearney said that in his district, Buffalo County officials have told him that eliminating the inheritance tax would mean a 5-cent increase in property taxes and that he had no reason to doubt them.
Hadley added that it didn't make sense to him to eliminate inheritance taxes, which are paid by a small percentage of people, and shift the burden to property taxes, which are paid by many.
Lexington Sen. John Wightman has proposed an alternative to the governor's plan that would make modest reductions in inheritance taxes rather than eliminate them.
Cornett has introduced another alternative: Eliminate the state alternative minimum tax.
She said Nebraska is one of eight states that still levy state alternative minimum taxes, and said eliminating them might give the state just as large a boost in tax rankings as eliminating inheritance taxes.
The conservative Tax Foundation says Nebraska ranks 30th in best business tax climate in the country. While the ranking has improved dramatically in the past five years, Heineman has said that No. 30 is still too low and hurts the state's chances of attracting new companies.
Contact the writer: 402-473-9584, paul.hammel@owh.com
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