Nebraska legislators have agreed to a 44% increase in real estate transaction taxes. The increase, facilitated through Legislative Bill 1363, is intended to help lower the state’s inheritance tax. The reactions to the decision have been mixed, with some residents concerned about the growing cost of real estate transactions.
Despite some unease, lawmakers maintain that this move will benefit the state’s economy in the long run. The plan is set to take effect in the next fiscal year. Noted as a significant step toward tax reform, this decision affects Nebraska’s documentary stamp tax, a primary source of income supporting various social and economic projects.
In 2022, the existing rate of this tax brought in $39 million in revenue, and projections predict this will increase to $41 million next year. Policymakers, who are always looking for ways to expand Nebraska’s social welfare measures, see this uptick as positive.
Initially, State Senator Mike McDonnell proposed a $1.25 increase in the tax rate to support initiatives such as veterans’ mental health services and expanding the state film office. However, faced with community backlash and differing party opinions, McDonnell reduced his proposed increase to a more modest $0.75.
Balancing real estate and inheritance taxes in Nebraska
This revised plan is still expected to generate necessary funds for key initiatives while avoiding excessive tax burdens on residents.
Amid continued resistance, McDonnell reconsidered, and a consensus was reached with Sen. Rob Clements of Elmwood. They agreed to use the funds raised from the documentary stamp taxes to supplement county budgets due to the decrease in inheritance tax. This revised bill, LB 1363, represents a significant shift in state tax policy.
As part of the changes, the inheritance tax for specific categories, including aunts, uncles, nieces, nephews, and unrelated heirs, will decrease from the current rates of 11% and 15% to 8%. Also, selling a $250,000 house will incur an additional $250 documentary stamp tax. This move will potentially have a substantial financial impact on certain groups.
Despite these changes, opposition within the legislative body remains. Senator Robert Dover of Norfolk argues alternative revenue streams need exploration to alleviate burdens on working-class families, rather than potentially applying more financial pressure with this tax increase. This sentiment is echoed by lawmakers sharing Senator Dover’s stance, advocating for more equitable outcomes through diverse revenues and tax structure adjustments.
