- Associated Press - Wednesday, April 5, 2017

LINCOLN, Neb. (AP) - Gov. Pete Ricketts’ plan to lower Nebraska’s top income tax brackets and expand tax credits for low-income residents cleared a major hurdle Wednesday despite continued opposition from senators who doubt it will stimulate the state economy.

The proposal advanced Wednesday would lower Nebraska’s top individual income tax bracket in phases, from 6.84 percent to 5.99 percent, in years when state revenue growth exceeds 3.5 percent. It also would reduce the state’s top corporate income tax bracket in phases, from 7.81 percent to 5.99 percent. The state’s earned income tax credit would increase to benefit low-income residents, and the state’s bottom two brackets would be combined.

Members of the Revenue Committee advanced the measure to the full Legislature with a 6-2 vote. Ricketts has named the tax package as one of his top priorities in this year’s session.

The vote sets the stage for a contentious debate and an almost certain filibuster to try to stop the bill. Sen. Jim Smith of Papillion, the Revenue Committee’s chairman and a leading proponent of the package, said the proposal provides benefits for a large swath of Nebraska residents but he still expects it will face resistance.

“Now the fun begins,” he said after the committee’s vote.

In a statement, Ricketts called the vote “great news” for growing the state economy.

“These reforms will bring much-needed tax relief to hardworking Nebraska families, small businesses and entrepreneurs,” he said.

Opponents said they still weren’t convinced the package would promote economic growth and noted that wealthy residents would see a much larger tax break than middle- and low-income people. Sen. Burke Harr of Omaha, a Revenue Committee member, said the package could make it harder to invest in health care, education and other services in the future.

“We have to have a talk about what are the effects of that,” he said.

Harr said he supports tax reform but wants to see it targeted at the kind of industries that are likely to grow and diversify the economy.

For farm and ranch landowners, the bill would change the way agricultural property is valued so that it more closely reflects a farmer or rancher’s potential income. It also would cap how quickly taxable land values can grow.

The bill would partially pay for the cuts by suspending tax credits for historic properties and groups that provide business services to low-income communities.

Nebraska faces a projected $288 million revenue shortfall in its upcoming two-year budget. Even though the income tax cuts would take effect until 2020, if state revenue recovers, opponents said they haven’t seen evidence that the budget outlook will improve.

“This tax package is irresponsible policy,” said Renee Fry, executive director of the OpenSky Policy Institute. “It does little to help the middle class but will force year over year cuts to higher education, K-12 schools, public safety and other vital services.”

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