Stating that the opportunity to provide tax relief is now, Gov. Dave Heineman proposed a three-pronged tax cut during his State of the State address this morning.
Heineman proposed lowering individual income tax rates and expanding the brackets, lowering the top corporate tax rate to equal the top individual rate and repealing the inheritance tax.
The $326.6 tax package over a three-year period is the highlight of the legislative agenda outlined by the governor in his address to the Unicameral. Sen. Abbie Cornett will carry the tax cut legislation.
The proposal would expand the first bracket of the individual income tax from a maximum income of $4,800 to $6,000 and lower the rate paid from 2.56% to 2.42%. The second bracket would expand from a maximum yearly income to $35,000 to $36,500 and lower the rate from 3.57% to 3.4%. The third bracket maximum income would expand from $54,000 to $60,000. Its rate would drop from 5.12% to 4.9%. The top bracket maximum would expand to over $60,000 with the tax rate dropping from 6.84% to 6.7%.
Heineman called the Nebraska income tax system unfair to middle class families. He stated that families need more discretionary income to take case of their families. In proposing the elimination of the inheritance tax, Heineman noted that Nebraska is one of only eight states that still have the tax dubbed the “death tax” by opponents.
Reducing the corporate income tax rate, according to Heineman, will help small businesses grow.
The governor mentioned child welfare, yet endorsed none of the recommendations made by the legislature’s Health and Human Services Committee in its report delivered last month.
“Reforming Nebraska’s child welfare system is complicated and complex with no single simple solution. We didn’t get into this situation overnight, and we won’t get out of it overnight,” Heineman stated.
Heineman conceded his administration’s move to privatize the child welfare system “…hasn’t been implemented as well as anyone would like, but I don’t want to return to the failed practices of the past.”
Heineman said he would work with the legislature to develop a more collaborative, more coordinated and more comprehensive approach.
The governor vowed that the state will not default to the federal government on creating a state health insurance exchange under the new federal health care law. Still, Heineman hesitated to say Nebraska needs to move until the United States Supreme Court rules on the constitutionality of the law.
“The simple truth is it would be a costly mistake to spend millions of taxpayer dollars to begin implementing Obamacare until the United States Supreme Court makes its decision,” Heineman told the legislature.
Heineman called his proposal to merge the Department of Labor into the Department of Economic Development a “critical issue” for the legislature to consider this year.