Inheritance taxes can cancel the dreams of Nebraskans and newcomers
Do you remember Bless This Mess? The ABC sitcom took place in the fictional town of Bucksnort, Nebraska, and was canceled after two seasons.
I started watching, thinking someday it might inspire an article. Here goes.
While the show found its detractors, I stuck around for its Parks and Rec-like zaniness. It follows urban millennials Mike and Rio Levine-Young, who decide to move out of New York City after Mike’s great aunt dies, leaving them a neglected farm.
They’re apparently unaware of the property’s condition (and that Ed Begley Jr. lives in their barn), since they U-Haul their way out to Nebraska sight unseen.
A big source of the comedy is the Levine-Youngs adjusting to farm life and fixing up their property. Of course, it wouldn’t have been as funny if the plot revolved around Mike and Rio struggling to figure out how to pay their property tax bills on their land, buildings, and farm equipment.
But one aspect of their story has always bothered me: in real life, Nebraska’s county inheritance tax may have made Mike and Rio’s move financially unfeasible.
Nebraska is one of only six states to impose an inheritance tax. Thankfully, spouses are exempt from the tax, but the inheritance tax can be as high as 18% of the property value over $10,000 for people unrelated to the decedent, or who are more distant relatives.
Great aunts like Mike’s are one of the distant relatives whose bequests are subject to what is the country’s highest possible inheritance tax rate.
UNL’s Department of Ag Economics says average 2020 farmland value was $2,725 an acre, and the Nebraska Department of Agriculture says the average farm operation is 980 acres.
Let’s cut both figures in half, assuming the Levine-Young farm is smaller than average and has poor soil quality (which is kind of mentioned on the show). At 490 acres, valued at $1,362.50 an acre, you’ve got a land value of $667,625.
Knock $10,000 off the taxable value, and Mike and Rio would owe $120,172.50 just to take possession of the property and have the privilege of paying more taxes later. This figure doesn’t include their legal fees, which can often be 1-2% of the value of the inheritance, adding another $6,000-$13,000 to their total bill.
Mike admits in the show that he actually didn’t triumphantly quit his music journalism job in New York and declare he was moving to Nebraska. He was laid off, like a lot of people in media these days. Rio, being a therapist with some clients in New York, might have been the breadwinner.
But given the cost of living in Manhattan and the other financial struggles they face in the show, even in Nebraska, it’s unlikely they had $120,000 in the bank just to get their adventure started.
Why, if Nebraska leaders say they want more people—especially young people—to live and work here, do we have uncommon policies like the inheritance tax, which can take away the next generation’s chance to put property to productive use, start a business, or have an affordable place to live in our state?
Revenue for counties might be an obvious answer, but some may enjoy sticking out-of-state residents with heavy tax bills, in hopes that it will reduce local taxes for them, or allow property to be purchased on favorable terms from people who can’t afford the taxes.
Others might like the idea of using taxes to keep folks like Mike and Rio out of Nebraska!
But this isn’t the case for most Nebraskans. A new Platte Institute poll shows 79% of likely voters think reducing or eliminating Nebraska’s inheritance tax is very or somewhat important.
It may be impractical for the inheritance tax to simply disappear overnight, but senators are working on two bills this legislative session that would spare more Nebraskans, and potential Nebraskans, from the most extreme impacts of the tax, providing more people the opportunity to make the most of Nebraska’s Good Life.