Bill to cut state income taxes, corporate taxes runs into immediate filibuster

 LINCOLN — State lawmakers traded one filibuster for another Wednesday as debate began on a major proposal to reduce state income taxes.

State Sen. Lou Ann Linehan of Elkhorn said that Legislative Bill 939 would make Nebraska more competitive when it comes to individual and corporate income taxes and that the state’s surplus of tax revenue means some money should be returned “to the people.”

Right now, Nebraska’s top income tax rate, 6.84%, is higher than any neighboring state, and Iowa’s governor is proposing to reduce its higher top bracket to a flat 4% by 2026.

“We are simply not competitive with our surrounding states,” Linehan said. 

Under LB 939, the top income tax rate would be reduced gradually to 5.84% by tax year 2025. It would affect individuals who make more than $32,210 and families whose combined income is $64,430 and higher.

An amendment to the bill would lower the state’s corporate income tax rate from 7.1% to 5.84% by tax year 2026.

Linehan said that would provide “parity” for businesses that pay their taxes as individual income tax and those corporations that pay corporate taxes.

Lincoln Sen. Mike Hilgers, the Speaker of the Legislature, said LB 939 provided “one of the broadest based” tax benefits of any proposal.

But opponents to the bill, led by Omaha Sens. John Cavanaugh and Megan Hunt, said it would mostly benefit the richest Nebraskans and might serve to erode state revenue to the point that it threatens the social “safety net” for the poor.

Cavanaugh said there’s no proof that lowering taxes results in more businesses and workers coming to Nebraska. Hunt said young people look at other things, including social policies of a state, before locating there.

Cavanaugh said more than half of Nebraska taxpayers earn less than $70,000 — thus not getting a lower rate under LB 939. He said a better approach would be to increase the earned income tax credit provided to those who earn less than $50,000 per household.

OpenSky Policy Institute, a Lincoln-based think tank, said that 83% of the corporate tax breaks flow to out-of-state entities and that someone would have to earn $80,000 or more to benefit from LB 939. 

OpenSky has also questioned whether the state can afford another tax break, since it appears that a tax cut on Social Security income and a bill increasing the state’s tax credit on property taxes paid to K-12 schools are headed for approval this session.

The debate on the income tax proposal appears headed for a filibuster by opponents that could last into next week.

Earlier Wednesday, state lawmakers overcame another filibuster against a proposal by Blair Sen. Ben Hansen to clarify that persons with religious objections or health conditions can opt out of COVID-19 vaccination requirements by employers.

An amended version of LB 906 had gained support by the state’s health care groups. It advanced from first-round debate on a 36-2 vote after a long discussion that centered mainly on whether COVID-19 shots work to stop and spread infections and whether some senators were spreading “misinformation” or not.

Dr. James Lawler, an infectious disease expert at the University of Nebraska Medical Center, told KETV on Tuesday that getting fully vaccinated improved your protection against getting infected by 50%. Vaccination also reduces the severity of any infections and reduces the time someone is infectious, Lawler told the station.