Legislative Update- Week 16

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May 12, 2025
 
Strong Businesses. Strong Communities.
 
May 12, 2025
 

State Budget Clears First Round

Oppose Income Tax Hike
 
Last week, the legislature was consumed with debate over the budget. LB261 and LB264, which together make up the bulk of the state budget package, both saw General File debate last week. The Legislature is expected to conclude the budget by this Thursday, May 15.
 
We expect that following the budget debate, a large tax package will be scheduled either Wednesday of this week or early next. Here are the details: 
  • LB169, LB170, and LB712 will likely be combined, with one of those bills serving as a “vehicle” for the other two bills.
  • LB169 would remove sales tax exemptions on over a dozen services not currently subject to sales tax. 
  • LB170 and LB712 would together increase “sin taxes,” specifically on cigarettes, vape, and alcohol.  
  • All three bills are expected to raise revenues just north of $100 million a year. 
  • It’s expected this package will also include language that'd direct these new tax revenues toward increasing the “Tier 2” School District Property Tax Credit, which is currently slated at $780 million this coming fiscal year, and $808 million the next fiscal year.
 
In short, this tax package is yet another reiteration of similar "tax shift" proposals that have failed to clear the Legislature in the last few sessions.
 
Most concerning, though, are discussions of amendments to this package that would either
1) fully freeze the scheduled income tax cuts from taking effect this year, or 2) add time to the “tail” of income tax rate reductions.
 

Other Bills of Interest

LB660, which was amended to include Sen. Conrad’s bill for slashing unnecessary agency regulations (LB29), was advanced after a second round of debate on Select File this week. If enacted, the bill would codify regular review of agency regulations, ensuring that the administrative burden placed on Nebraska businesses and consumers is thoughtfully tailored and not disproportionate to the benefits rendered.
 
After much back and forth within the General Affairs Committee, LB677, Sen. Hansen's bill for regulating medical marijuana, advanced out of committee and was placed on General File to end the week. The Chamber engaged on the bill in order to ensure flexibility for employers in enforcing workforce standards that comport with reasonable safety precautions and federal regulations. The bill will likely face an 8-hour filibuster on General File.
 
 
 
 
What can you do to help? 
 
We’d urge you to write your senator strongly requesting that they oppose an income tax increase on over 2/3rds of Nebraskans. The top individual tax bracket of 5.2% applies to any individual making more than $30,000 per year.
 
The fact is that, compared to other taxes, reducing income taxes has the most positive impact on economic growth. Nebraska has made great strides in recent years to keep our tax competitiveness on par with neighboring states (Iowa just lowered their top rate to 3.8%).
 
Contact your Senator to push for their red light vote on this income tax increase.