Jim Vokal’s Weekly Email: Inheritance Tax Update

Jim Vokal’s Weekly Email: Inheritance Tax Update

Dear Friend,

Last week, senators gave final approval to Sen. Rob Clements’ LB310, which cuts Nebraska’s county-levied inheritance tax. Here are the provisions that would take effect in 2023:

  • Reduces the top inheritance tax rate from 18% to 15%. Reduces the middle rate from 13% to 11%. The exemption amount for the 15% rate will be $25,000 of property. The exemption for the 13% tax will be $40,000 of property.
  • The 1% inheritance tax rate on near relatives will be unchanged (spouses are already exempt), but the exemption amount will be increased to $100,000 of property.
  • Heirs age 21 and under will be exempt from all inheritance tax.

Our team worked hard on this bill and supported it at every turn. But I’m not telling you that for the sake of taking a victory lap.

Frankly, passing LB310 should be just the first of several steps to ending Nebraska’s county inheritance tax. At the Platte Institute, we aren’t going to stop until that happens.

Issues like the inheritance tax are the reason I sign off my emails saying we need to stop the status quo and make Nebraskans proud.

It doesn’t get more status quo than hanging onto a tax almost every state has already ended. And Nebraskans are certainly not proud of the inheritance tax—78% of us want to see it repealed, including a solid majority of voters in every party.

And even if Nebraskans loved the inheritance tax, it would still be a detriment to attracting residents from outside the state.

County governments are the only entities in Nebraska that collect inheritance tax, so the ball has always been in their court to offer a vision for a future without it. Unless they’re pushed, that future will never arrive.

Now, it’s not my goal to depict the counties as villains, because I don’t think they are. Besides, their complaining about losing inheritance tax, sometimes while sitting on substantial pots of money, does a better job of making them look like Boss Hogg than I ever could.

But Nebraska’s county officials have literally had decades to wake up to the reality that inheritance taxes are going away all over the United States. Congress eliminated federal tax credits for state death taxes in the early 2000s, and the number of states enacting repeals took off, reaching 45 last year with Iowa joining the list.

It isn’t in the public interest to keep a tax with statewide economic consequences just because it would be easier for counties.

If any compromise is needed on inheritance tax in Nebraska, it’s figuring out how to end the tax in the least disruptive way for counties and the most helpful way for Nebraskans, not dragging our feet until we’re the only state to have an inheritance tax.

One part of LB310 might suggest a smart way to wean counties off of this revenue.

Because the Legislature exempted people 21 and under from inheritance tax, younger people will be able to receive money for an education, a home, or assets to run a business, and start adult life without extra taxes taking away what their loved ones wanted them to have.

Next year, senators could change one word in the inheritance tax statutes by exempting people under 35 from inheritance tax. Then, they could come back the following year and exempt people under 50, then under 65, and so on, until they’re ready to give the inheritance tax its last rites.

There are certainly other solutions out there, too. But our challenge is often not a lack of solutions, but a lack of vision for being a different and better version of ourselves.

Thanks for reading,

Jim Vokal, CEO of the Platte Institute and host of Nebraskanomics
It’s time to stop the status quo. Let’s remove economic barriers and make Nebraskans proud.

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