Nebraska Watchdog: NE: Ending inheritance tax could pinch counties

By |2018-03-06T14:34:04-06:00December 1st, 2012|News, OpenSky in the Media|0 Comments

Nebraska Watchdog: NE: Ending inheritance tax could pinch counties

By Deena Winter | Nebraska Watchdog

LINCOLN — Lawmakers are looking for a way to eliminate the state’s inheritance tax without requiring counties to increase property taxes to make up for lost revenue.

Nebraska is one of just eight states with an inheritance tax — which hurts its national rankings for retirees — and Gov. Dave Heineman wants to change that. He unsuccessfully tried to repeal the tax last session, but county officials fought the loss of roughly $48 million in revenue. Inheritance tax revenue goes to counties in Nebraska.

A new study by a Lincoln think tank estimates counties would have to increase their property tax by about 7 percent — or $476 per farmer — if the inheritance tax were dumped. The governor’s spokeswoman said counties need to find the money elsewhere.

“Nebraskans and the governor are opposed to property tax increases,” Jen Rae Hein said in a press statement. “The key is to reduce spending to live within their means like Nebraska taxpayers do with their family budgets.”

The Legislature’s Revenue Committee talked Friday about how to end the tax on inheritances — which dates back to 1901 and ranges from 1  percent to 18 percent, depending on how closely related the deceased and beneficiaries are.

Bellevue Sen. Abbie Cornett, chairwoman of the committee, said she’d like to replace the tax revenue but that’s difficult because the amount counties receive varies widely, from none to $10 million annually.

“It’s a delicate balance,” she said.

She floated the idea of compensating counties by giving them motor-vehicle tax revenue that now goes to schools, but that would have to made up in state aid to schools. She also suggested the possibility of a direct appropriation akin to state aid.

Bancroft Sen. Lydia Brasch said rural Nebraska needs to attract companies by improving its national rankings on issues such as the inheritance tax, but Ellsworth Sen. LeRoy Louden doubted many companies look at the inheritance tax when considering locating in Nebraska.

“Personally I think it’s an exercise in futility because I don’t think it makes any difference for the major area of Nebraska,” he said. “All it is is a tax shift.”

The Open Sky Policy Institute, an independent think tank, released a study saying ending the inheritance tax would cause counties to increase property taxes by 7 percent, on average.

Renee Fry, executive director of the institute, said as state support for counties has fallen in the past decade, property taxes have increased drastically — faster than inflation. Inheritance-tax revenue accounts for 7 percent of Lancaster County’s general fund budget. The county has trimmed its budget 15 percent in the past two years, she said.

Read the full article here.

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