LINCOLN — Nebraska state lawmakers will formally debate a tax relief package Tuesday that includes considering eliminating nearly 70 sales tax exemptions to provide funds for property tax cuts.

A month ago, a draft of a property tax law indicated that the legislature would begin taxing the sale of 120 other goods or services. The number is gradually reduced In successive revisionsand was almost halved at this point.

The suggestion

Some of the main components of the Tax planning contain:

• Reduction The maximum tax rates for school districts for operating expenses to 40 cents per $100 of value for the 2025-26 financial year; 35 cents in 2026-27; and 30 cents in 2027-28 and beyond. The current maximum rate is $1.05.
• Limiting the annual increase in property tax revenues by local and district administrations to the rate of inflation or, in times of deflation, to 0%.
• Credit to taxpayers of property taxes paid to the respective natural resource district (beginning at 50% in the next tax year).
• Reimbursement of county jail costs (beginning at 25% in the next fiscal year).

Finance Committee advances package for property tax relief in the Northeast; debate begins on Tuesday

The majority of the funds will come from restructuring existing property tax reduction programs, such as tax credits and the portion of property tax exemptions no longer needed due to declining school tax rates.

The other major funding source will be new goods and services taxes and increases in “sin taxes” such as those on liquor, cigarettes, oral nicotine pouches, e-cigarettes, cigarettes, keno and cash machines.

Bill No. 34as originally proposed by Senator Tom Brewer of north central Nebraska, would freeze property value increases for four years. He described it as “Backup plan’ or ‘fail-safe’.

“They don’t solve the problems”

State Sen. Brad von Gillern of Elkhorn, vice chair of the Finance Committee, said he was “cautiously optimistic” about Tuesday’s debate after he and committee chairwoman State Sen. Lou Ann Linehan and others “listened to all parties.” Von Gillern said committee members did their best to craft the bill based on the concerns raised.

State Senator George Dungan of Lincoln, the only “no” committee vote on LB 34, said the package was “inherently regressive” and would hurt low-income residents. He said it also would not provide relief to renters, who make up about 50% of the Housing units in Dungan District.

“I understand there are certain parts of it that are aimed at helping low-income people, but overall, when you weigh those against the other parts of the bill, I just don’t think they solve the problems,” Dungan said.

State Senator Eliot Bostar of Lincoln, who was “present but not voting” during Monday’s committee vote, said afterward, “For me, it’s just not time yet.”

Officially, the House is bipartisan, but votes are sometimes split along ideological lines. On Monday, the six Republican committee members supported the package. Dungan and Bostar are Democrats.

Municipalities have raised concerns about the proposed sales tax changes for two reasons. First, the state will receive 12% more sales tax revenue each year. Second, it will affect how businesses will be able to apply for future refunds for economic development and employee incentive programs, such as the Nebraska Advantage And ImagiNE Nebraska Acts.

These tax incentive programs rely on local sales taxes, but because municipalities do not collect the full tax base, some say this could make planning for future refunds even more difficult.

Von Gillern referred to a provision of LB 34, which ensures that towns and villages are not less VAT revenue than in 2023–24, plus an annual increase of 1%.

“The bill provides a lower limit so that they are not harmed in any way,” he said.

“We have to get to 30”

Von Gillern also pointed out Self-study by Ernie Goss, a regional economist and professor at Creighton University. He argues that all taxes are regressive, but high property taxes are the most damaging to economic growth.

“We did our best to remove as many of the impacts on the lowest income people as possible, and I think we did a good job of that,” said von Gillern. “We listened to the opponents and tried to change as much as possible.”

He also pointed to internal legislative models developed for a previous tax package that would have given modest-income families a net benefit. He said that “seems to have been forgotten in this discussion.”

Linehan said she believes she has 31 votes, but reaching 33 votes to break a filibuster on some bills, particularly proposals related to taxation, is “very, very partisan.”

“We need to get to 30,” Linehan said. “I think we’re at about 31 right now.”

Many provisions of LB 34, if passed, would go into effect on October 1. That would require 33 votes not only to end debate, but also to pass the bill so it can go into effect within three calendar months. Sales tax exemptions or repeals can only be implemented on Start of a calendar quarter.

The first debate on the package will begin at 9 a.m. on Tuesday and may last up to eight hours.