Social security taxation discussed in legislature

Governor Ricketts signed the budget bills this past week with no line-item vetoes. He praised the legislature for passing a budget that limited spending growth and placed an emphasis on increased funding for property tax relief measures.

The legislature gave first-round approval to LB 64, which addresses the taxation of social security benefits. LB 64 was introduced by Omaha Senator Brett Lindstrom and prioritized by Seward Senator Mark Kolterman. Only 13 states tax social security benefits.

Currently, the social security benefits of individuals with incomes less than $43,000, and couples with joint incomes of less than $58,000, are exempt from taxation. Under LB 64 as introduced, the taxation of all social security income would be phased-out over a five-year period. The committee amendments extended the phase-out period to 10 years. Because the elimination of taxation on social security income would reduce state revenue by more than $130 million per year when fully implemented, Norfolk Senator Mike Flood offered an amendment that would cap the phase-out provisions at a certain income level in an effort to lessen the fiscal impact. Under the amendment, which contained the provisions of LB 237, the social security tax exemption would only be available to individuals with a federal adjusted gross income of less than $80,000 ($95,000 for those married filing jointly), with individuals making less than $60,000 ($75,000 for those married filing jointly) getting a full exemption by the fifth year. Senator Flood withdrew his amendment after a pledge was made to work on an income cap prior to the next stage of debate. The amount of the income cap may be increased, depending on the outcome of the Economic Forecasting Advisory Board meeting on April 29. After this agreement was made, LB 64 advanced on a 47-0 vote.

LB 364 would adopt the Opportunity Scholarships Act. Introduced by Elkhorn Senator Lou Ann Linehan, it would allow individuals and corporate taxpayers to qualify for a non-refundable tax credit equal to the amount the taxpayer contributed to a scholarship-granting organization. Donors can contribute up to 50% of their state income tax liability. The scholarship-granting organization would provide education scholarships to eligible students to attend private schools. Eligible students are defined as those that qualify for free or reduced price lunches. As introduced, the credits would be capped at $10 million annually.

The Revenue Committee amendments reduced the amount of credits to $5 million and eliminated the annual increase in the amount. The committee amendments also contained the provisions of LB 531, introduced by Albion Senator Tom Briese. LB 531 creates the Nebraska child care Contribution Tax Credit Act. As amended, this program would be capped at $5 million as well. A taxpayer who makes a qualifying contribution to a child care or early childhood program may apply for a nonrefundable income tax credit equal to either 50% or 75% of the contribution made, not to exceed $100,000. The credit would be available for the next five years.

Those in support of LB 364 pleaded that all parents, regardless of their income, should be able to choose between a public and private school, based on what is in the best interest of their children. Opponents argued that state funding should not be directed to private schools and were concerned that private schools don’t accept all students, including those with special needs.

After eight hours of debate, a cloture motion was offered by Senator Linehan. A cloture motion requires 33 votes to end debate and allow for a vote on the advancement of the bill. However, the motion for closure fell four votes short, meaning that the bill will not be debated again this year.

LB 388, which was introduced at the request of the governor, would adopt the Nebraska broadband Bridge Act. The act provides $20 million in grants annually to increase access to high-speed broadband across the state. LB 388 received first-round approval this past week on a 44-0 vote.

I was excited that LB 406 received first-round approval on April 29 with a 42-2 vote. Norfolk Senator Mike Flood and I worked on an amendment to LB 406 to appropriate funding for a consultant to study economic development in northern Knox County. The study will look at recreational and tourism opportunities and what public investment is necessary to enhance economic development in the area.

As the legislature enters the last few weeks of this legislative session, I encourage you to contact me with your thoughts on the issues before us. I can be reached at District #40, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My email address is [email protected] and my telephone number is (402) 471-2801.