Local Officials Have Concerns On Pillen’s Inheritance Tax Stance

By Gordon HopkinsAlthough he has not yet taken office, some of Governor-elect Jim Pillen’s positions are already receiving notice from local officials. One of those is Pillen’s stance on inheritance tax.Pillen met with members of NACO (Nebraska Association of County Officials) in Kearney on Friday, December 23. According to County Commissioner Mark Schoenrock, Pillen talked about eliminating inheritance tax, “That was almost the first words out of his mouth.”On Friday, February 11, 2022, the Nebraska Legislature passed a bill into law intended to cut inheritance tax rates and increase exemptions. Legislative Bill (LB) 310 was introduced by Senator Robert Clements (District 2) of Elmwood during the previous session. According to Clements, Nebraska is one of only six states with an inheritance tax, making it, in his words, a “bad place to die.”Clements said the bill would drive economic growth by keeping more retirees in the state.After the bill was passed, Jefferson County Commissioner Gale Pohlmann expressed concern that it would not be the last cut, “The main thing is they don’t come back next year and try to take another bite!”Pillen has expressed a desire to see the inheritance tax eliminated entirely.Commissioners met with State Senator Tom Brandt (District 32) at a meeting on Tuesday, November 15. It was then that Brandt informed commissioners Pillen would like to do away with the inheritance tax altogether, “While we’re talking about finances, I know Governor-elect Pillen would really like to get rid of the inheritance tax.”The problem for many counties is that they depend on that money to operate. Some local officials are concerned that, by reducing or eliminating this source of revenue, they would then be forced to raise tax levies.Brandt indicated he has spoken with Pillen and explained the hardship this would place on counties, “I had a nice discussion for about 20 to 25 minutes. I don’t think anybody else explained it to him quite the way that I did. I said, ‘You’re going to raise my property taxes four or five cents, because now you’ve taken that element out of there.’”“I’m not real thrilled about having to pay this someday,” said Brandt. “But this is all of these counties, these four counties down here, use this as an emergency fund, when we need to repair storm damaged roads, for example, or we just have to close some roads or we have to raise the levy next year to fix this.”Commissioner Mark Schoenrock said, “Yeah, a lot of counties use it to keep down the levy. We took quite a bit out of ours to keep down our levee. If we didn’t have that there, we would have had to erase it. quite a bit more than that four percent.”Earlier this year, the county raised the tax levy 4.6 percent. Commissioners said they tried to find ways to avoid raising the levy but, given inflation and increased wages to combat an ongoing worker shortage, they were unable to find a way that did not involve cutting services. Had they not had the inheritance tax fund, they indicated they would have had to raise the levy even more.Brandt said he did not object to eliminate the inheritance tax as long as there was a way to pay for the tax cut.Local government entities have long been frustrated by what they call unfunded mandates, the term for laws, regulations or other requirements imposed by a higher level of government on a lower one, but without accompanying appropriations to cover the cost of compliance. Rather than reducing taxes as intended, if there is not a way to replace the lost revenue, it would simply shift the tax burden someplace else.Last year, Senator Carol Blood (District 3) of Bellevue, who also ran for governor, introduced a bill intended to eliminate unfunded mandates by requiring the state pay the full costs of new programs or increased levels of service, either through general fund appropriations or an increase in state distribution of revenue to the impacted political subdivision. That bill did not advance. Schoenrock said, “We didn’t get that out of committee last year.”Brandt said, “I’m all for it, if the state kicks money back to the counties to cover that cost, (otherwise) all you’re doing is, you’re raising the property taxes of everybody in these counties.”Regarding other possible approaches to keeping taxes down, Commissioner Michael Dux said, “I know he (Pillen) talked about a two percent growth in property tax, max.”Brandt said, “That’s been tried several times in the past several years in the legislature. If it’s the same thing, it probably will not advance the legislature and particularly in light of eight, nine, ten percent inflation. It’s very difficult to tell, you know, the county board or the school district that you only have two percent.”Commissioners further discussed the issue at a meeting on Tuesday, December 6. Schoenrock said, “I have initiated an effort with our NACO (Nebraska Association of County Officials) state board to meet with Governor-elect Pillen so that we can present to him the concerns of county government as he’s starting his new administration. And then we’re also going to have a similar effort to meet with the new members of the legislature.”Schoenrock said, “So we want to make sure he understands the role that inheritance tax plays in the funding of county government.”Commissioners indicated they are not optimistic about the future of the inheritance tax. Pohlmann said, “I think it’s going to happen.”Schoenrock concurred, “If you take that away, then it’s going to put county government in bind.”

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