The Legislature’s Revenue Committee heard testimony on a bill Tuesday that would eliminate state income taxes on the first $50,000 individuals earn or $100,000 for a married couple filing their taxes jointly. Nebraska’s top individual and corporate income tax rates would also be reduced to 4.99% by 2028.
State Senator Mike McDonnell introduced LB 1264 and is recommended by Blueprint Nebraska. McDonnell says the tax modernization plan will provide additional revenues raised to offset the loss of those income taxes. He says, “It eliminates a broad range of sales tax exemptions while maintaining the exemption for unprepared food and preventing sales tax from being imposed on additional business inputs. The bill also eliminates itemized income tax deduction and removes most corporate tax credits. This balance of new revenue offsets the cost of reducing income taxes on working and investing in Nebraska.”
McDonnell says this bill will allow Nebraska to compete with any state on income taxes. It also establishes two new student loan relief programs and encourages investments in technology and innovation that can grow opportunities in the state.
There is opposition. Dexter Schrodt is with the Nebraska Medical Association and says they oppose the portion that would implement a sales tax on physician services and the sale of medical equipment. He says if this bill passes, Nebraska will be the second state in the country that taxes medical services. Nebraska also ranks high among the 50 states for median out-of-pocket health care spending and half of U.S. adults say they have have skipped health care services due to costs.
Schrodt says, “The legislation does not take into account how health care billing functions which is sending for reimbursements after each service to insurance, Medicaid, Medicare, and we all know that the payers, the insurers will not pay these taxes either and it will be sent to the patient for the remaining balance. LB 1265 seeks to tax the gross revenue of medical services that physician offices provide. It is no secret when businesses are taxed they shift that tax cost to the consumer in one form or the other. LB 1264 would likely see physician offices start to charge facility fees per visit. These fees would be separate from any co-pay collected at the time of visit in order to absorb this new taxation requirement by the state.”
Other opponents say it would impact health, auto, and home insurance rates.