Proposals would cut Nebraska taxes on Social Security

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January 30, 2013 - 5:39pm

Nebraskans would have to pay less income tax on their Social Security benefits, under proposals heard by the Revenue Committee Wednesday.

Most states don’t tax Social Security benefits. Nebraska does, but Wednesday, the Revenue Committee heard three proposals, LB17, LB74, and LB238,  to reduce or eliminate those taxes.

Advocates said the proposals would benefit many people who struggle to get by on a low, fixed income. Roger Rea, president of the retiree’s affiliate of the Nebraska State Education Association, said it would also benefit the state by keeping retirees here to spend their money. Rea said there were about 360,000 people at an age where they were deciding where to retire.

"If 10 percent of them leave this state, as has been the trend in the past, some 36,000 people will take their retirement incomes, and their talents, to other states. At a modest $35,000 per capita income, that translates to a loss of $1.25 billion – money that would have been spent in Nebraska if we had held on to those retirees," Rea said.

Rea said it wasn’t just retirees leaving. "The truth of the matter is, there’s an outmigration in every age category. Nebraska’s lagged the nation in every age category. There’s a larger outmigration around the time they retire than any other time."

"And this is due to a few hundred dollars in taxes?" asked Columbus Sen. Paul Schumacher.

"I don’t know what it’s due to," Rea replied.

"And that’s my point," Schumacher said. "We don’t know what it’s due to. And magically in the last few days we’ve been attributing it all to taxes."

Schumacher also quizzed Mark Intermill of AARP, another supporter of the reduction on where the revenue loss should be made up. "If we give up that money, if we don’t cut any programs, what do you see from your perspective would be the likely place that we should target to pick up $30 million a year?

Intermill said Nebraska tax receipts are improving, and suggested that perhaps no other changes would be needed. "We think that there is a possibility that we could fit that into the revenue structure that we have currently," he said.

The proposals are among many the Revenue Committee will be juggling.

Next Wednesday, there will be a hearing on Gov. Dave Heineman’s proposal to eliminate individual and corporate income taxes by repealing $2.4 billion worth of sales taxes exemptions.

The next day, a hearing will be held on a much smaller proposal that would eliminate corporate income taxes and exempt the first $6,000 of retirement income for single people, or $12,000 for a married couple, from taxation.

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