Income tax hike for millionaires gets lukewarm reception from some Nebraska lawmakers

Income tax hike for millionaires gets lukewarm reception from some Nebraska lawmakers
The Platte Institute says “sticker shock” from Sen. Tony Vargas’ bill would cause wealthy Nebraskans to move. He disputes that. REBECCA S. GRATZ/THE WORLD-HERALD

LINCOLN — Increasing income taxes on millionaires may be popular in polls, but the idea got only a lukewarm reception Wednesday with the committee that determines tax priorities in the Nebraska Legislature.

When told that 78 percent of Nebraskans, in a recent opinion poll, favored raising taxes on millionaires to help stabilize funding for schools and other priorities, one senator on the Revenue Committee remarked that probably 99.9 percent of all people favor raising taxes on someone else.

Another lawmaker quoted the oft-repeated line about taxation: “Don’t tax you, don’t tax me, tax the fellow behind the tree.”

“But I’d rather pay a high income tax than a high property tax,” said State Sen. Curt Friesen of Henderson, a farmer who, like many others, is pushing for property tax relief in the 2019 session.

The comments came as Omaha Sen. Tony Vargas presented his proposal, Legislative Bill 50, to increase state income taxes on the wealthy. The marginal tax rate for single taxpayers who earn more than $100,000 a year, and married couples earning $200,000-plus, would rise by 1 percentage point, to 7.84 percent. An additional 1 percent tax would be applied to income in excess of $1 million. And an extra 2 percent tax would be paid on income over $2 million.

Vargas’ proposal would also adjust state income brackets for low- and middle-income families, delivering a tax reduction for many. The bill, he said, is estimated to generate $478 million in new revenue over the next five years, providing fiscal stability for the state, which has seen budget trims in higher education and other programs in recent years.

“This is part of the solution to a larger problem,” the senator said. “It is politically feasible. It is responsible.”

One supporter, Renee Fry of the Open Sky Policy Institute, added that a bill passed by the Legislature last year, LB 1090, delivered an unanticipated tax cut to Nebraska’s most wealthy residents.

“The impact (of LB 50) won’t even be noticed,” she said.

But that opinion wasn’t shared by representatives of the Nebraska Chamber of Commerce and two other groups, the Lincoln Independent Business Association and the Platte Institute.

They said that raising taxes on millionaires hasn’t delivered the expected revenue in other states, would harm small businesses that file as individual taxpayers, and would cause high earners to leave Nebraska for a lower-tax state.

Sarah Curry of the Platte Institute said that if LB 50 were passed, Nebraska’s income taxes would jump from 16th highest in the nation to No. 5.

“This is bad tax policy,” Curry said, because it would create “sticker shock” and inspire wealthy individuals to relocate.

Vargas, though, disputed that. He passed out a study done in 2016 by Stanford University that concluded that millionaires, because of their ties to family and local communities, were less likely to move than others. Only about 2 percent of moves by millionaires were linked to tax hikes, the study said. The senator also said that because the average small business in the United States earns $57,000 a year, most would avoid tax increases under his bill.

The committee took no action on LB 50 after its public hearing. At least three senators on the eight-member Revenue Committee expressed clear opposition to the proposal.

Bill would require voter approval for public building commission bond issues

A bill proposed in the Nebraska Legislature would require public building commissions in the state to submit bond issues to the people for a vote.

State Sen. Tom Briese of Albion said his LB 20 is not directed at a controversial Omaha-Douglas Public Building Commission proposal to borrow $120 million to build a justice center. Because of the timing, it’s unclear if the proposal would be affected if the bill were to become law. Briese said he thought it likely would not affect the Douglas County proposal.

“I’m not aiming at it,” Briese said Wednesday. “But it happens to be in the crosshairs at the moment.”

Currently, public building commissions can issue bonds with a vote of their members. Briese’s bill would require approval by voters. It’s scheduled for a hearing Thursday afternoon before the legislature’s Government, Military and Veterans Affairs Committee.

Briese, who has introduced a number of property tax-related bills, said LB 20 is “essentially a property tax relief bill.”

“This bill is an effort to create additional transparency and accountability in the expenditure of property tax dollars,” he said. “From my standpoint, the problem lies with what I would see as a loophole in the law, allowing tens of millions of dollars to be spend without voter approval.”

But Douglas County Board Member Clare Duda said the Legislature gave public building commissions that authority specifically so they could build projects such as the county’s proposed courthouse annex and juvenile detention center.

He said the main reason for the proposed project is the Douglas County Juvenile Court, a state function that the county provides space for, has outgrown its space in the Douglas County Courthouse, exacerbated by the Legislature’s assigning additional judges to the court.

The Lincoln/Lancaster Public Building Commission “has used (the bond issue law) umpteen times,” Duda said. “The first time we try to use it, they say, what are you doing?”

State senators introduce a total of 739 bills this year, the most since 2005

» That’s all, folks. Nebraska lawmakers this year proved more prolific than any state senators dating back to 2005. In total, they introduced 739 bills and seven constitutional amendments through Wednesday, the last day to introduce bills for this session. During the last long session two years ago, lawmakers introduced 667 bills and four constitutional amendments.

» Milk and meat. Bellevue Sen. Carol Blood introduced a new proposal aimed at ensuring that food products are not labeled as meat if they do not come from livestock or poultry. Legislative Bill 594 would add such misrepresentation to the existing state law banning deceptive trade practices. Blood withdrew LB 14, which took a different approach to the issue.

Meanwhile, Sen. Dave Murman of Glenvil, a former dairy farmer, introduced a resolution urging the federal government to reserve terms such as milk, cheese, yogurt and butter for products derived from cow’s milk. LR 13 seeks to distinguish dairy products from similar plant-based products.

» LGBT discrimination. Job discrimination based on a person’s sexual orientation or gender identity would be banned under LB 627, introduced by Sen. Patty Pansing Brooks of Lincoln. Pansing Brooks, who has a gay son, described the measure as a way to recruit and retain workers in the state.

Omaha Sen. Machaela Cavanaugh would ban housing discrimination based on a person’s sexual orientation, gender identity or citizenship status in her LB 689. The measure would address rental situations as well as housing sales and purchases.

» Roadside memorials. LB 612 would allow the Nebraska Department of Transportation to erect blue triangular signs at sites of fatal crashes along Nebraska highways. The signs would list the names of victims and a photo, and include warnings like “Seat Belts Save Lives.” Drunken drivers who die would not be eligible for the signs under the bill introduced by Sen. Steve Erdman of Bayard. Several states use such memorials to emphasize highway safety and as an alternative to the informal memorials created by family and friends.

» Medicaid expansion. Tobacco taxes would more than triple to pay for the voter-approved expansion of Medicaid under LB 710, introduced by Cavanaugh. Her proposal would increase the taxes to $2.14 per pack of cigarettes, up from the current 64 cents. A quarter of the increase would go toward Medicaid expansion, with the rest going toward a variety of health-related programs.

LB 631, introduced by Sen. Adam Morfeld of Lincoln, would create a special task force to oversee the state’s implementation of Medicaid expansion. Morfeld led the petition drive to get the expansion question on the ballot. Medicaid expansion will provide health coverage for an estimated 90,000 more low-income Nebraskans.

» Hemp farming. The new federal farm bill opened the way for farmers to grow hemp legally, and LB 657, from Omaha Sen. Justin Wayne, would allow it in Nebraska. Some farmers say Nebraska is an ideal state to grow hemp, a cannabis plant variety that is low in tetrahydrocannabinol, the chemical that produces the marijuana high. Hemp can be used in production of fabric, food and medicines. Growers would have to register yearly. A second Wayne bill, LB 659, would legalize cannabidiol, or CBD, one product of hemp.

» T-shirts for everyone. Folks across the country might soon be able to buy coffee mugs or T-shirts emblazoned with Nebraska’s new tourism slogan — “Honestly, it’s not for everyone.” LB 637, introduced by Sen. John Stinner of Gering, would allow that. Right now, the Nebraska Tourism Commission is barred from selling such items. Money raised from the sales would go toward promoting tourism in the state.

» Overcrowding emergencies. Omaha Sen. Steve Lathrop brought a bill to clarify the meaning of a state “prison overcrowding emergency,” which state law requires the governor to declare in July 2020 if overcrowding isn’t reduced below 140 percent of capacity. It’s now over 160 percent.

Ricketts administration officials recently maintained that the current law doesn’t mean inmates must be paroled from prison. LB 686 makes it clear that the governor must do so to reduce overcrowding. The bill gives prison officials a year to get the overcrowding to 125 percent of capacity, which is considered a manageable number in corrections circles.

» Secret ballots. Votes for legislative leaders will continue to be done by secret ballot, after state senators rejected a proposed rules change Wednesday. Sen. Mike Groene of North Platte introduced the proposal, which he argued would make the Legislature more transparent and in line with the vision of George Norris.

Opponents, including Sen. Megan Hunt of Omaha, said it would make senators subject to bullying by political parties and lead to more vote-trading. The proposal died, with 25 senators voting against it and 22 voting for it. All those in support were Republicans. The opponents included a mix of Democrats, Republicans and Omaha Sen. Ernie Chambers, the lone independent in the body.

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