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Nebraska lawmakers have advanced a proposal to reduce the state’s inheritance tax while offsetting lost county revenue with higher fees, even as the state faces a widening budget shortfall.
The measure, Legislative Bill 468, passed its first round of debate on Tuesday in a 27–10 vote. Sponsored by State Senator Robert Clements of Elmwood, the bill would lower the inheritance tax rate to 1% for immediate family and 3% for distant or unrelated heirs, down from current rates as high as 15%. The plan would keep the tax in place, unlike proposals seeking full repeal.
The move comes as Nebraska remains one of just six U.S. states that still impose an inheritance tax—and the only one that directs that revenue entirely to counties. Much of that funding supports local infrastructure, including roads and bridges.
To replace the lost revenue for counties, the bill proposes a series of fee hikes, including higher charges for vehicle inspections, marriage licenses, and asset seizures, as well as a doubling of the nameplate capacity tax on renewable energy. It also eliminates several business tax incentives, such as data center exemptions under the state’s ImagiNE Act.
The Nebraska Association of County Officials estimates the changes could increase county revenues by $8.9 million, but the state would lose $3 million annually over the next two fiscal years due to the redistribution of insurance premium tax revenue.
Proponents argue the change could improve Nebraska’s competitiveness. “Our inheritance tax contributes to out-migration,” said Clements, citing a net loss of retirees. Critics, however, questioned the proposal’s broader implications, including increased costs to residents and potential risks to school funding and clean energy investment.
State Sen. George Dungan of Lincoln criticized the measure as part of a pattern of “balancing budgets on the backs of working Nebraskans.” Meanwhile, others voiced concern over the rapid expansion of county fees and the fairness of revenue replacements.
Despite internal divisions, lawmakers signaled some willingness to continue reform discussions. Clements said he may introduce amendments to address concerns and reiterated his longer-term goal: full repeal of the inheritance tax.
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