{"id":23560,"date":"2018-03-08T15:02:16","date_gmt":"2018-03-08T21:02:16","guid":{"rendered":"http:\/\/update.legislature.ne.gov\/?p=23560"},"modified":"2018-03-08T15:02:16","modified_gmt":"2018-03-08T21:02:16","slug":"state-personal-exemption-credit-standard-deduction-advanced","status":"publish","type":"post","link":"https:\/\/update.legislature.ne.gov\/?p=23560","title":{"rendered":"State personal exemption credit, standard deduction advanced"},"content":{"rendered":"

Senators advanced a bill March 8 intended to prevent a rise in taxes on Nebraskans as a result of recent changes to federal tax law.

\"Sen.
Sen. Jim Smith<\/figcaption><\/figure> <\/p>\n

Congress made several changes to the federal tax code in December with the Tax Cuts and Jobs Act. Papillion Sen. Jim Smith, sponsor of LB1090, said that because Nebraska\u2019s tax law is tied to the federal code in several places, automatic changes to the state\u2019s tax code would generate more than $220 million in additional state revenue this year.<\/p>\n

\u201cLB1090 is an attempt to hold as many Nebraskans harmless as possible and prevent large tax increases due to what happened at the federal level,\u201d he said. <\/p>\n

One major change is the repeal of the federal personal exemption. The change would effectively repeal Nebraska\u2019s personal exemption credit, which is tied to the federal exemption. To offset this change, LB1090 would create a new $134 state personal exemption credit that individuals could claim for themselves and each of their dependents beginning in 2018.<\/p>\n

Congress also made changes to itemized deductions, exemptions for capital expenditures and the federal standard deduction. To offset those changes, Smith said, LB1090 would establish a Nebraska standard deduction of $6,750 for single taxpayers, $9,900 for head of household filers and $13,000 for those who are married filing jointly. <\/p>\n

The bill also would adjust individual income tax brackets, the personal exemption credit and the standard deduction based on the Consumer Price Index for All Urban Consumers instead of the new federal indexing method.<\/p>\n

The state Department of Revenue estimates that the bill would reduce state tax revenue by $326 million in fiscal year 2018-19 and a further $257 million in FY2019-20.<\/p>\n

Sen. Merv Riepe of Ralston spoke in support of the bill. If the Legislature does not act, he said, Nebraska families and businesses will not enjoy the full impact of the federal tax cuts, and the state\u2019s economy would not grow as it otherwise would have. <\/p>\n

\u201cFederal tax reform is not intended to be a windfall for the Legislature, and it is not a tool to help this body avoid difficult spending decisions,\u201d he said. \u201cThese dollars are not revenue for spending and belong to the hardworking men and women of Nebraska.\u201d<\/p>\n

Omaha Sen. Bob Krist introduced an amendment that would create a similar state-level personal exemption credit but would limit eligibility to those earning no more than $100,000 if filing as an individual and no more than $200,000 if married filing jointly. It also would use some of the additional revenue due to the federal changes to make a one-time payment of $20 million to the state\u2019s property tax credit fund.<\/p>\n

Krist said the proposal\u2014which is based on Omaha Sen. Burke Harr\u2019s LB1048\u2014would ensure that low- and middle-income Nebraskans are held harmless while giving the state a cushion if the state Department of Revenue erred when estimating the federal changes\u2019 impact. <\/p>\n

\u201cI want to make sure that we in the long term do not create a bigger hole in our general fund by overreacting and not allowing the federal tax changes to come to fruition so that we can evaluate how much money we do and do not have available,\u201d he said.<\/p>\n

Sen. Kate Bolz of Lincoln supported the amendment. She agreed that the Legislature should adjust to the federal tax code changes to avoid tax increases on Nebraskans, particularly low- and middle-income Nebraskans. <\/p>\n

\u201cBut I also think it\u2019s our responsibility to make sure that the tax policy changes we\u2019re making don\u2019t have inappropriate effects on our long-term ability to budget,\u201d she said.<\/p>\n

Smith opposed the amendment, saying that it effectively would raise taxes on the state\u2019s highest earners by $66 million this year. <\/p>\n

\u201c[LB]1090 keeps everyone whole,\u201d he said. \u201c[Krist\u2019s amendment] does not further benefit low- and middle-income tax earners more than LB1090.\u201d<\/p>\n

Columbus Sen. Paul Schumacher also opposed the amendment. He said Smith\u2019s proposal is not perfect but is intended to be a \u201cquick and fair fix\u201d to offset the federal tax changes. Limiting the personal exemption credit to those at certain income levels would be more complex than is necessary, he said, and the effects of the federal changes on those earning more than $100,000 are unclear. <\/p>\n

\u201cMy suggestion … would be at this point to do what is simple,\u201d Schumacher said.<\/p>\n

The Krist amendment failed on a 12-24 vote.<\/p>\n

Senators then voted 38-0 to advance LB1090 to select file. <\/p>\n","protected":false},"excerpt":{"rendered":"

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