Talk of eliminating the inheritance tax has resurfaced at the Capitol with lawmakers considering how counties might cope if that source of income is taken away.
Revenue Committee Chairwoman, Senator Abbie Cornett of Bellevue, says county officials need to consider how best to cope with the loss of the inheritance tax. She predicts the legislature will consider proposals to get rid of the tax either during the upcoming session or in the future.
Gov. Dave Heineman proposed eliminating the inheritance tax in his tax cut during the last legislative session. Lawmakers backed off of the proposal under pressure from county officials who say they use inheritance tax revenue to pay for capital improvements or to build emergency funds.
Revenue from the tax fluctuates, but can bring in just under $50 million for the counties.
Nebraska Association of County Officials Executive Director Larry Dix tells a legislative committee convened by Cornett there simply aren’t any other tax sources that could make up for the elimination of the inheritance tax.
“You could look at giving ordinance authority to counties to set their own fees,” Dix suggests. “Now, I would tell you, we could double, triple, quadruple, ten times, a hundred times the fees that we have and it would not replace the $48 million hole that would be created by this.”
County officials have stated they would have trouble making up the revenue lost if the inheritance tax is eliminated.
In fact, Open Sky Policy Institute Executive Director Renee Fry says there really isn’t any way to make up for the loss of income.
“Really, the only legitimate alternatives counties have are to cut services, dip into their reserves or raise property taxes,” Fry says.
The governor argues the tax makes Nebraska less competitive with other states and notes that most states have eliminated the inheritance tax.
Doug Kennedy, KWBE, contributed to this story.