Inheritance Tax a Likely Issue at Legislature this Session

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Nebraska's inheritance tax is something Governor Dave Heineman says he'd like to get rid of, but county officials across the state say it provides money they can't do without.

State senators like Mike Gloor, District 35, believe it's an issue they'll likely explore sometime during this session.

Gloor says there are just fewer dollars to go around at all levels.

"The state has had to reduce some of the dollars that we allocate to the counties to provide programs and services as we've had dollars from the federal government reduced to the state," he says.

That means some counties have had to rely on inheritance tax money to make their budgets work. Senator Galen Hadley, District 37, says that's why just getting rid of the tax isn't simple.

"From a tax policy standpoint, I'd like to get rid of it because it's not a good tax," says Hadley. "But we also have to look at the ramifications to 93 counties and the fact that they're allocating $45 million off of that tax."

Hadley, the new chair of the Legislature's Revenue Committee, says some counties use inheritance tax to help lower other taxes.

"For example, Lancaster County is using it for property tax relief. Are we willing to do away with inheritance tax and raise property taxes? That'll be the big question that we have to answer," says Hadley.

But Senator Greg Adams, District 24 and the new speaker of the Legislature, says there might be other option besides cutting the tax completely or keeping it as is.

"There may be a way that we can deal with the inheritance tax where we can change thresholds possibly or change rates, maybe there are some trade offs that can be made where the state picks up some of the county services in lieu of them having the inheritance tax, I'm not sure," says Adams.

All three senators believe abolishing the inheritance tax is likely to come up sometime during this session, but may not make it out of committee. They do expect there to be a lot of discussion about inheritance tax versus property tax.