Gov. Pete Ricketts finds himself battling a competing tax-cut proposal as he pushes his top agenda item this legislative session.
Ricketts proposes converting the property tax credit fund into a combination of property tax and income tax cuts. Ricketts knows some senators oppose any tax cuts in a down budget year. But he also faces opposition from senators who back a bigger, billion-dollar tax cut plan.
Ricketts says the biggest difference between the two plans is that his can fit in the current budget.
“In a way that we lay out how it fits within the budget of this year and how we’re going to manage those costs going forward, which is what I think people are looking for: is to be able to have that tax relief and do it in a way that it doesn’t create budget disruptions or massive tax increases,” Ricketts tells reporters during a conference call.
Ricketts says both tax-cut packages have the same goal: provide property tax relief. He says his can be approved without disrupting services or raising other taxes.
The governor’s proposal, LB 947, is sponsored by Sen. Jim Smith of Papillion, chair of the Revenue Committee
Under the governor’s proposal, the legislature would convert the Property Tax Credit Relief Fund to provide refundable tax credits for agricultural property owners as well as homeowners. A modification made by the governor prior to a legislative hearing would start the tax credits at 12% with a cap of $280 for homeowners. The credits would increase by 2% every other year until they reached 30% in 2031. The residential caps would rise $50 with each increase.
Most of the money for the current fiscal year would come from the property tax relief fund, but the governor acknowledges up to $45 million would have to come from the state Rainy Day fund.
The plan calls for $200 million in property tax relief for agricultural and residential property as well as $40 million in cuts to individual and corporate income taxes. The top individual and corporate income tax rate would drop to 6.69% in two steps on the condition that state revenue rises adequately.
The proposal also calls for $5 million annually to be used for workforce development.
Sen. Steve Erdman of Bayard has drawn considerable interest in his $1.1 billion property tax cut proposal.
LB 829 would provide a 50% income tax refund or credit for each dollar of property taxes which go toward the funding of public schools. Typically, 60% of the property taxes paid in Nebraska fund public education.
Erdman emphasizes his proposal would not affect local governmental funding. It would be the obligation of the state to make up the $1 billion cost of his proposal. And Erdman favors the legislature making budget cuts to pay for it.
Erdman has said he will seek to place the proposal on the November ballot if the legislature fails to pass it.
AUDIO: Brent Martin reports [:50]