Changes to state income tax brackets proposed

Two bills that would extend or create state income tax brackets were introduced during a hearing of the Revenue Committee Feb. 8.

LB532, introduced by Lincoln Sen. Danielle Conrad, would create a fifth income tax bracket starting Jan. 1, 2014. Conrad said the bill would make the state tax system more progressive and fair.

“If we’re going to be talking taxes in Nebraska, we should be talking about everyone, including those who could be paying more,” she said.

The proposed bracket — $400,000 or more for single persons and $450,000 or more for married couples filing jointly — is taxed at 6.84 percent under the current tax system. The tax rate would be increased to 7.84 percent under LB532.

Larry Scherer, director of bargaining and research for the Nebraska State Educational Association, testified in support of the bill. He said teachers, retired teachers and school staff should be involved in discussions involving a modernization of the tax code.

“We support a tax system that is balanced, fair and responsive to economic growth,” Scherer said. “Any changes made should support funding for education.”

Representing the Nebraska Chamber of Commerce, Ron Sedlacek opposed the bill. He said the chamber would not support any increase in income taxes.

“This bill would bring Nebraska to probably the ninth highest tax rate with regard to income taxes,” he said.

OpenSky Institute executive director Renee Fry testified in a neutral capacity. She said 15 percent of the taxes increased under the bill would be offset by federal tax deductions.

The committee also heard testimony on LB327, introduced by Omaha Sen. Pete Pirsch, which would lower tax rates across all income brackets. Pirsch said his proposal represented the fairest approach to modernizing the tax code.

“This bill does the most good for the most people,” he said

Under the bill, tax rates would be lowered beginning Jan. 1, 2014, to:
• 2.2 percent — from 2.46 percent — for an individual making up to $3,000 or a married couple making up to $6,000;
• 3.2 percent — from 3.51 percent — for an individual making between $3,000 and $18,000 or a married couple making between $6,000 and $36,000;
• 4.5 percent — from 5.01 percent — for an individual making between $18,000 and $29,000 or a married couple making between $36,000 and $58,000; and
• 6.2 percent — from 6.84 percent — for an individual making more than $29,000 or a married couple making more than $58,000.

The committee took no immediate action on either bill.