State of the State address

Nebraska Gov. Dave Heineman delivers the State of the State address in the legislative chamber of the Capitol on Thursday, Jan. 12, 2012. (GWYNETH ROBERTS/Lincoln Journal Star)

GWYNETH ROBERTS/Lincoln Journal Star

The Nebraska Farm Bureau and Nebraska Cattlemen on Monday endorsed Gov. Dave Heineman's call to eliminate Nebraska's inheritance tax, part of his plan to give tax relief to middle-class Nebraskans.

Representatives of the two groups said the inheritance tax placed younger generations who are beginning their stewardship of farm and ranch operations and land in a difficult position.

"Death should not be a taxable event," said Michael Kelsey, executive director of Nebraska Cattlemen. "It's a tax on a generational transfer, and our members are very much opposed to that concept because we want to keep family farmers and ranchers in their livelihood."

Nebraska counties, however, have relied on the tax, which is charged against the shares of certain beneficiaries of an estate. They say they face the possibility of raising property taxes to make up for the loss of the inheritance tax.

Steve Nelson, president of the Nebraska Farm Bureau, said property tax relief was the highest priority when it came to tax concerns, and the growth in property valuations is more than adequate to cover the needs of counties.

Since 2000, he said, property taxes collected by counties have gone up.

"So it just appears to me and to our members that it's possible to make this work," Nelson said. "There shouldn't be any reason that the counties would have to … make the shift to property taxes in order to cover this."

Local governments need to look at how they control their spending, Heineman said.

The state has lost $115 million during the past four years since the estate tax, which is based on the value of an entire estate, was eliminated, Heineman said.

"We reduced our spending. We prioritized what we were funding in this state. We didn't cry. We didn't complain. We did what was the best tax policy for this state," he said.

Nelson said farmers and ranchers require a lot of land that on paper carries a high value. But many times, he said, the profit margin on the land is small.

They work their entire careers to build their operations so they can pass them along to family members, but the inheritance tax makes it more costly.

Nebraska is one of only eight states that has the inheritance tax.

Counties draw millions from it to support their budgets. Lancaster County will collect $6.8 million this year. Douglas County will collect $8 million.

The loss would be on top of revenue lost last year when the governor proposed and the Legislature approved eliminating aid to cities and counties.

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