Lawmakers got a taste of this year's imminent fight over tax cuts Monday at the state Capitol.

Immediately after a group of senators met to apply finishing touches on a tax-cut package backed by Gov. Pete Ricketts, Omaha Sen. Burke Harr took to the legislative floor to criticize the pending proposal, calling it fiscally irresponsible.

"This is about starving government," Harr told reporters moments later.

The package of proposed cuts includes phased-in reductions to the state's top income tax bracket and would redo the method counties use to value agricultural land for tax purposes.

All told, the proposals would cut as much as $439 million from the state budget within 10 years.

The package could advance from the Revenue Committee as soon as Tuesday, and would be eligible for debate by the full Legislature right away.

Revenue Chairman Jim Smith of Papillion wouldn't say when he'd like to see the proposal hit the floor.

"I can't say with certainty how we're going to coordinate that," he said.

Changes adopted by the committee Monday are aimed at increasing savings for farmers and ranchers — whose support is critical for the proposal to pass — and eliminating a pair of tax credits to help pay for immediate individual income tax cuts.

It is a massive bill, with about a dozen substantial rewrites of state tax law.

Policymakers in the Legislature and the governor's office are still working through the exact costs and analyzing which taxpayers would benefit most.

In the meantime, Revenue Committee members advanced a proposal by Sen. Mike Groene of North Platte to apply new limits on taxation by local school districts, and reroute all $221 million each year from the state's property tax credit fund to pay for additional state aid to schools.

Credits from the fund currently go to all property taxpayers; Groene's bill (LB640) would shift more of the benefit to rural areas.

An amended version of the bill advanced on a 6-0 vote, with Harr and Sen. Paul Schumacher of Columbus abstaining.

The larger tax package, including Ricketts' proposed cuts, remains in committee.

It would still gradually lower the state's top individual and corporate income tax rates any year the state enjoys a projected revenue increase of more than 3.5 percent over the prior year.

But committee members adopted some significant changes Monday in their working draft of the proposal (LB461):

* The new process for valuing agricultural land based on its ability to generate income, not its market value, would begin next year instead of in 2019 as originally proposed.

* The value of agricultural land that is subject to taxation would be further reduced. Farmers and ranchers currently pay taxes on about 75 percent of their property value; the proposal would change that to 65 percent.

Those two changes are expected to cost the state at least $34 million in additional school aid each year, beginning in 2019.

* Tax credits aimed at boosting investment in low-income areas, and preservation and rehabilitation of historic buildings, would be eliminated. Committee members are also considering eliminating a credit for low-income housing development. Cutting those three credits would save the state about $12.5 million in the 2018 fiscal year.

* The state's earned-income tax credit would be increased from 10 percent of the federal credit to 11 percent in 2019 and 12 percent in 2020.

* Instead of combining the state's lowest two individual income tax brackets at a rate of 3.1 percent, the new rate would be 3.25 percent.

To help cover any tax increase for low-income earners because of combining the two brackets, the proposal would increase the personal exemption credit by $15. 

To be eligible for the personal exemption credit, an individual couldn't make more than $150,000 per year, or $300,000 per year for a married couple.

The package combines elements of bills introduced by Sens. Smith, Lydia Brasch of Bancroft and Brett Lindstrom of Omaha. Committee members will continue discussing the proposal Tuesday.

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Reach the writer at 402-473-7234 or zpluhacek@journalstar.com.

On Twitter @zachami.


Assistant city editor

Zach Pluhacek is an assistant city editor.

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