- Associated Press - Wednesday, January 18, 2017

LINCOLN, Neb. (AP) - An effort to increase the number of first-time homebuyers in Nebraska faced heavy scrutiny Wednesday from lawmakers who suggested the proposal could lead to abuse.

The measure presented to a legislative committee would allow residents to earmark up to $150,000 to help their children, grandchildren or other beneficiaries to cover a down payment and closing costs on their first home.

Participants could only contribute post-tax dollars to the account, but once the money is deposited, any investments made would be exempt from state taxes until the total amount reaches the $150,000 cap. If the bill passes, Nebraska would join at least eight other states and the District of Columbia with similar programs.

Sen. Joni Craighead of Omaha said she introduced it in hopes that it would encourage young people to settle in Nebraska. Craighead acknowledged that her proposal needs work but argued that it would ultimately help the economy. The bill is backed by the state’s banking and real estate industries, which stand to benefit from more residents buying homes.

“This is a way to keep our kids in the state,” Craighead said in testimony to the Legislature’s Revenue Committee.

Some senators said the bill could favor wealthy families who can afford to contribute money to the accounts, and might help some people avoid paying taxes.

“In the end, the folks who are getting the most out of this are the folks who have fairly well-to-do grandmas, grandpas, moms and dads,” said Sen. Paul Schumacher of Columbus.

Schumacher said the bill could encourage people to invest money in the account, buy a home, and then quickly sell it to dodge their taxes. He also questioned how the state would enforce the requirement that participants withdraw money from their accounts once their value exceeds $150,000.

Sen. Burke Harr of Omaha questioned whether the bill could contribute to inflation by providing buyers with easier access to money. He pointed to college and health care costs, which have soared in part because students can borrow money and patients have little incentive to shop around for medical care.

“If we provide more money into the stream, are we just raising the cost of housing?” he said.

Sen. Mike Groene of North Platte said he would have preferred a bill that lets people deposit pre-tax dollars into the account, which would allow them to pay less in taxes by lowering their taxable income. Craighead, who works as a realtor, introduced a measure in 2015 that would have done so, but it died in committee.

“I don’t see many average working people or young couples doing this,” Groene said.

Craighead said the bill was intended to benefit “normal people” rather than the wealthy. She said she was open to adding income limits to the proposal to keep it focused on middle-class residents.

The measure could help boost Nebraska’s home ownership rate, which has slid to a 50-year low in recent years in part because millennials aren’t buying, said Arla Meyer, a Lincoln-based realtor.

“We’ve got to either get proactive or lag behind and see what ends up coming our way,” she said.

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The bill is LB15

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Follow Grant Schulte on Twitter at -https://twitter.com/GrantSchulte

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