Long-term income tax relief advances; prison reform endorsed

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March 11, 2014 - 5:44pm

Michael Kenney, Dept. of Correctional Services (Photo by Fred Knapp, NET News)

Nebraskans could pay less income tax in the long run, but chances for immediate relief dimmed today in the Legislature. Meanwhile, a prison reform package is moving ahead.

Currently, state income tax rates don’t account for inflation. But in the future, they would, under a proposal by Sen. Galen Hadley, chairman of the Revenue Committee. Sen. Jim Scheer of Norfolk said that would help everyone who pays the tax. “This is helping not just the wealthy. It’s helping everyone. Because when the tax brackets creep up with inflation, even those with lower income -- it moves up incrementally and pretty soon, as we’ve noticed, most of the Nebraska population is at the highest level that we have,” he said.

Right now, Nebraska’s top tax rate kicks in for married couples with income above $58,000. If tax brackets had been indexed for inflation since for the last two decades, the highest rate would apply only to income above $84,400. Next year, the bill might save such a couple around $50. But in ten years, if inflation continues at 2 percent a year, it could save them more than $500 a year.

The cost of the bill to the state treasury also gets bigger over time. For the fiscal year that starts July 1, it would cost the state about $8 million. Three years later, that cost would top $50 million. Sen. Norm Wallman of Cortland predicted that would have bad results. “We are cutting our revenue. So how are you going to pay for our schools? How are we going to pay for health care? How are you going to do it? Local entities will say ‘Whoops, we’ve got mental health issues here. We’ve got to take care of this. We’ll have to raise the property tax,’” Wallman predicted.

The bill also raises how much Social Security income is exempt from taxation. Senators voted 36-1, with only Wallman opposed, to give the bill first round approval.

Meanwhile, Omaha Sen. Burke Harr, chief sponsor of a bill that would have cut income tax rates said it would probably be better to wait until next year. “In order to do anything substantial, you have to phase it in over five years. And I’m not sure if that’s fair to put a tax regime on a new governor for the first term. So what we’re looking to do is to say ‘We’ll have a new governor next year. We’ll have some money. And let’s try to come up with some substantial changes next year,’” he said.

On another subject, the Judiciary Committee endorsed a package of prison reform measures, including $5 million to expand mental health services, $3.8 million for new reporting centers for newly released inmates to check in with, and $5 million for vocational and life skills education. Judiciary Committee Chairman Sen. Brad Ashford said the package is significant. “It’s a pretty big change in how we’re looking at mental health as a significant factor in recidivism, that mental health plays a role, and that vocational pathways to a job, which has been identified as the other major obstacle to successful reentry, we’re addressing it,” he said.

In a hearing on whether or not he should be confirmed as director of Correctional Services, Michael Kenney, nominated as director by Gov. Dave Heineman, said he would welcome additional funds for vocational education, so long as they were spent on the right kind of education. “I remember an occasion when I was a parole officer when an inmate was certified in truck driving. But this inmate had a DWI conviction. We wasted that inmates time and we wasted our time, because no insurer was ever going to allow that person to drive a truck commercially. It was a mistake,” Kenney said. “I don’t want to make those mistakes. I can’t identify those jobs that well need. But we want them to be sucessful and we want to tailor that, if we are able to expand our vocational programs, we want to do that the smart way,” he said. The committee took no immediate vote on confirming Kenney.

In other action, the Legislature gave first-round approval to the Appropriations Committee’s budget recommendations, with no changes, by a vote of 37-2.




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