Legislature Hears Testimony on Inheritance Tax Bill

By Gordon Hopkins On Thursday, March 16, 2023, the Nebraska Legislature's Revenue Committee heard testimony regarding LR23CA, a constitutional amendment that intends to, at the general election in November of 2024, have voters decide whether the state and any political subdivision thereof shall continue to levy an inheritance tax.Governor Jim Pillen has made clear his desire to eliminate inheritance tax. Introduced by Senator Merv Riepe of Ralston,the amendment does not actually eliminate inheritance tax but gives the decision to the voters. Jim Smith, Chief Strategy Officer for the Platte Institute, said, “First and foremost, we believe LR23CA allows the voters of Nebraska to fully express their opinions on the inheritance tax, and by doing so, removes the burden on this body to make that, to make what is a very difficult decision.” Smith said, “But there are other compelling reasons for eliminating this tax method. Nebraska is one of only five states to still have an inheritance tax, and then only one west of the Mississippi. And we know very well that being an outlier in this regard is not promising for Nebraska. With so many options for retirees and the workforce, the inheritance tax is one of many factors that taxpayers have used and will use to decide to remain or become a resident of Nebraska.”Among others who testified in favor of the bill was Doug Kagan, who indicated he was representing an organization called Nebraska Taxpayers for Freedom, “Our members say don't be caught dead in Nebraska, because they believe this tax has a negative effect on the willingness to accumulate wealth through their hard work, savings and investing. Our inheritance tax appears a grim reaper form of double taxation. We already pay tax on our income and property.”However, the concern among many government officials is that LR23CA offers no replacement for any funds lost by terminating inheritance tax. Joey Adler Ruane, Policy Director with Open Sky Policy Institute, said, “Eliminating the inheritance tax would deprive counties of one of their few revenue sources forcing many counties to choose between cutting vital services that residents rely on or raising property taxes.”Ron Peterson, chair of the board of Hawk County Board of Commissioners, said, “This legislative resolution is a threat to the viability of Hawk County's financial well being unless a legislature is willing to replace the revenue provided by the inheritance tax. Eliminating it will severely cripple the county's ability to serve our constituents.”Local officials have also made their opposition known to the legislature. Jefferson County Commissioner Mark Schoenrock wrote a letter to the Revenue Committee opposing LR23CA, which stated in part, “Nebraska county governments from across the state depend on inheritance tax revenue to supplement our property tax revenue to fund essential services to Nebraska citizens, and also utilize it for an operational reserve rainy day fund to pay for unforeseen expenses and emergencies. We are the level of government closest to our citizens, are responsible in our budget management, and interact with those who elected us every day. These Nebraska citizens are our voters, and your voters.”The following is the tax asking, levy rate and inheritance tax revenue for Jefferson County the past three budget years:2019-2020: 6,038,191; .32000; 384,8622020-2021: 6,219, 645; .342767; 901,6252021-2022: 6,310,270; .342767; 484,6972022-2023 6,571,157 .35000; xSchoenrock wrote, “Given our average annual county valuation the past three budget years, each point on our levy equates to an average of $185,000. Our average inheritance tax revenue the past three years equates to $590,000, or 3.18 levy that we did not have to raise because of inheritance tax revenue.If inheritance tax revenue is eliminated with no revenue source to replace it, and with costs of all aspects of our budgets significantly increasing, county government across Nebraska is going to be faced with very painful choices to eliminate or vastly reduce essential services to our citizens, services that they depend on every day essential to their lives.”As others who testified in opposition to LR23CA, Schoenrock emphasized that an alternative source of funding to prevent the elimination of inheritance tax from being an undue burden on counties, “If inheritance tax revenue is eliminated as a source of revenue to county government, there will need to be another source of revenue identified to fill that void I would propose in an amount equal to the rolling average inheritance tax revenue for each county.”

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