Omaha World Herald: Property tax hikes foreseen if inheritance tax dropped
By Paul Hammel
LINCOLN — Nebraska was ranked this fall among the 10 worst states in the country for retirees by Kiplinger, a publisher of personal finance advice.
One factor in the ranking: The state is one of only eight that still levies inheritance taxes.
That’s made the tax a target for Gov. Dave Heineman, who wants to make Nebraska more attractive, tax-wise, and rank better than the bottom 10.
But county officials in Nebraska and a new study from a Lincoln tax think tank say getting rid of the $48 million in annual inheritance tax revenue will be painful for most of the state’s 93 counties, including the two largest, Douglas and Lancaster.
Douglas County, for instance, would have to raise property taxes by 11 percent to offset the $9 million annually it gets from the tax.
Heineman has said that counties can cut spending to offset the loss of inheritance taxes and that Douglas County in particular has some budget fat. Douglas County officials disagree.
Kathleen Kelley, the county’s chief administrative officer, said Douglas County is projecting a $4 million to $7 million shortfall for next year between expected tax revenue and expenses. An additional $9 million loss in revenue, she said, would force either deep cuts in services or always-unpopular increases in property taxes.
“It would be disastrous,” Kelley said, “unless the governor and the Legislature decided they want to take over our spending on the justice system, the county jails, or the poor who don’t qualify for state and federal benefits.”
Alternatives to the inheritance tax will be explored this morning during a hearing by the Revenue Committee of the Nebraska Legislature.
There aren’t many good options, according to county officials and the Open Sky Policy Institute, a Lincoln-based think tank.
“Feeling the Squeeze” is the title of an Open Sky report released Thursday. It concludes that because counties rely so heavily on property taxes — and because spending by counties overall has decreased since 2004, when adjusted for inflation — there would be little room to cut.