The state legislature is considering a proposal that would eliminate the inheritance tax in Nebraska. The bill, LB 812, is sponsored by Senator Tom Hansen of North Platte.
An opponent to the bill, Larry Dix, executive director of the Nebraska Association of County Officials, says the inheritance tax is one of only a few places where counties can get money.
“The ability for counties to raise revenue is very limited,” Dix says. “It is primarily property tax. There is some inheritance tax money. There are some minor fees, but the burden has been placed so significantly on property tax that we hear it loud and long.”
Dix says counties are bound by the constitution, with a cap of 50-cents on their property tax rate. He says that can only be exceeded by a vote of the people, or if Nebraska would alter its constitution. Dix says that cap has been in place since the 1970s.
Renee Fry, director of the Open Sky Policy Institute, says eliminating the inheritance tax would force counties to do one of two things: eliminate services or increase property taxes. Fry says counties that are already at their property tax cap with low reserves would suffer the most by eliminating the inheritance tax.
“If these counties first turn to replacing the inheritance tax with reserves, they would have on average less than two years before their reserves are reduced below recommended levels,” Fry says. “Not only will this put counties at risk of service lapses but reserves of less than 15% are considered a red flag by credit agencies so that insufficient revenues may cause credit downgrades, leading to higher interest rates on borrowing and bringing even more trouble for county budgets.”
Fry says 26 Nebraska counties are already at their property tax limit and also have low cash reserves. She says counties have also been hurt financially by cuts in state and federal support.
In addition to Hanson’s bill to eliminate the inheritance tax, another measure sponsored by Senator Tom Carlson of Holdrege would decrease inheritance tax rates by about half.
By Doug Kennedy, KWBE, Beatrice