Social Security tax exemption advances; property tax relief to follow

The Legislature's Revenue Committee on Wednesday advanced a bill to speed up full exemption of Social Security income from the state income tax by 2025 on a 5-0 vote. 

And not far behind will be a bill designed to secure an estimated $200 million in additional property tax relief for Nebraskans in 2024 by eliminating an earlier $375 million annual floor in the refundable income tax credit created in 2020.

That proposal, LB723, introduced by Sen. Tom Briese of Albion initially failed to advance to the floor of the Legislature despite a 4-0 vote, but the bill was later advanced when Sen. Mike Flood of Norfolk called in the fifth vote.

The Social Security income tax exemption contained in LB825, introduced by Sen. Brett Lindstrom of Omaha, would be phased in over the next four years, beginning with a 40% exemption in 2022 that would grow in 20% increments until full exemption is achieved in 2025.

The loss in potential state revenue was estimated at $40 million in fiscal 2022-2023, rising eventually to $73 million. 

Both tax reduction proposals were opposed by Tiffany Friesen Milone, speaking for Open Sky Policy Institute, who warned that the bills would obligate the state to revenue reductions without knowing if state government can afford it.

The state's revenue flow is "now propped up by federal funding," she told the committee during a public hearing.

And an increasing ratio of older Nebraskans may shift more of the tax load to future working Nebraskans with subsequent pressure on the state budget, she said.

Lindstrom, who is a candidate for the Republican gubernatorial nomination, has been working on reduction, and eventual elimination, of Social Security income tax liability throughout his two terms in the Legislature.

"This thing needs to go away," he said.

Delores Tonack, president of NSEA-Retired, said "it's an unfair tax on retirement benefits" and its removal will "enable Nebraska to be more retirement-friendly."

Briese said his bill would correct an oversight that would restore the intent of earlier legislation to provide additional direct tax relief through a rebate on school property taxes.

Mark McHargue, president of the Nebraska Farm Bureau, urged the committee to support the measure.

While acknowledging that the Legislature has provided "substantial property tax relief," he said work still needs to be done to create balance among property, sales and income taxes.

Property taxes now represent about 42% of the total, he said.

Also on Wednesday, a total of 102 bills and resolutions were introduced, including:

MEDICAL ABORTION: Lincoln Sen. Suzanne Geist introduced a bill (LB1086) prohibiting doctors from providing abortion-inducing drugs to pregnant women after seven weeks of gestation. Doctors who do provide medication abortions would be required to file a report with the state.

DUAL ENROLLMENT: Sen. John Stinner of Gering wants to appropriate (LB1087) $15 million to Nebraska’s community colleges to expand opportunities for high school students to get college credit.

NUCLEAR STUDY: Sen. Bruce Bostelman of Brainard sponsored a bill (LB1100) appropriating $1 million in federal stimulus funds for a feasibility study for new nuclear reactors throughout Nebraska.

ENVIRONMENTAL CLEANUP: The Environmental Response Act (LB1102) proposed by Bostelman would provide the director of the Nebraska Department of Environment and Energy more power to take action to clean up pollutants and assess penalties. It would also create a cash fund to pay for expenses incurred by the state.

AUTISM PLATES: Nebraskans would be able to purchase an Autism Awareness license plate under a bill (LB1105) from Sen. Jen Day of Gretna.

ELECTIONS: A bill (LB1121) from Sen. Joni Albrecht of Thurston would require employees of the Secretary of State to inspect vote-counting devices before each election to ensure they aren’t connected to the internet. Sen. Steve Erdman of Bayard brought a bill (LB1123) that would prohibit election commissioners from counting any ballots before all polling places in the state have closed.

CONTRACEPTIVES: Lincoln Sen. Adam Morfeld introduced legislation (LB1129) requiring the state to provide free contraceptives to any woman who requests one.

COMMUNITY CORRECTIONS: More inmates eligible to be placed in community corrections or transitional houses would be allowed to do so, under a bill (LB1154) from Omaha Sen. Terrell McKinney.

SCHOOL MATERIALS: Sen. Rita Sanders of Bellevue introduced a bill (LB1158) that would allow parents and guardians to request textbooks, websites or other curriculum materials, including teacher training materials, and request their children be excused from certain instruction.

NITRATES: Lincoln Sen. Anna Wishart brought a bill (LB1160) that would tag $10 million in federal stimulus funds for the Nebraska Department of Environment and Energy to provide grants for reverse osmosis systems to small and rural communities with high nitrate levels in drinking water.

INTERNSHIPS: Sen. Mike Flood of Norfolk is seeking $30 million in federal funds to create an internship program under the Nebraska Department of Economic Development and $20 million in federal funds to create a Department of Labor grant program to retain workers.

TEACHER PAY: Morfeld also sponsored a bill (LB1131) to give teachers, child care workers and health care workers in Nebraska a $1,000 bonus from federal stimulus funds. A bill (LB1169) by Sen. Lou Ann Linehan of Elkhorn would use federal stimulus money to provide $5,000 grants to teachers in their first four years of their careers earning less than $75,000 annually.