Legislative Testimony for LB377: Change inheritance tax provisions

Legislative Testimony for LB377: Change inheritance tax provisions

Good morning, Chair Linehan and members of the Revenue Committee. I’m Sarah Curry, Policy Director at the Platte Institute and I am testifying in support of LB377.

In the Platte Institute’s report, “Death and Taxes,” we discuss many of the reform options available to modernize the inheritance tax, while also reducing the burden on Nebraskans. One of those reform options is to consolidate the brackets of the tax, the policy included in LB377.

The rationale for the brackets (classes) has a long history that explains why LB377 is needed to modernize Nebraska’s tax. When originally established by states during the early and mid-1800s, the inheritance tax was a flat rate tax. Illinois decided to levy the nation’s first progressive inheritance tax in 1895 as a result of the progressive movement’s influence.

At the time, there was no income tax, and many argued for a nationwide and state-level inheritance tax to break up large fortunes and promote wealth redistribution. This rate structure was challenged before the U.S. Supreme Court in 1898 and was upheld, declaring that discrimination based upon a person’s relationship to the decedent was not a violation of the equal protection clause. In 1901, Nebraska used the Illinois tax as its model when creating its inheritance tax.

Since its inception, Nebraska’s inheritance tax has been levied in three different progressive brackets determined by the relationship of the beneficiary to the decedent. Ironically, even economists that argue in favor of the tax over the last century disagree with the idea of a progressive inheritance tax based on relationship.

Those that favor wealth distribution, and support that tax because it can break up large fortunes, believe the progressive rates should be imposed on the amount of wealth. Under this logic, those with no relation or in distant relations to the decedent should have the lowest tax – the opposite of Nebraska’s current inheritance tax structure.

We recently conducted a poll of Nebraskans and asked them:

“Nebraskans who inherit property from relatives or friends other than their spouses may have to pay county inheritance tax. Nebraska is one of only six states that collects an inheritance tax. Based on this information, how important do you think it would be for Nebraska to reduce or eliminate its inheritance tax?”

The responses:

  • 64% said VERY IMPORTANT
  • 5% said UNSURE

It is important to note than an overwhelming 79% of those questioned believe reform or elimination of this tax is important.

LB377 does not effectively eliminate or reduce the inheritance tax, but it does help by reducing the current brackets from three to two and reducing the overall burden on family members.

We have ideas for other, more aggressive reform options to modernize and reduce the burden of this tax, but LB377 is a good step in the right direction and we encourage the committee to advance this bill to General File.

Thank you and I’m happy to take any questions.

Break down of inheritance tax polling question. Methodology: 862 likely Nebraska voters between Monday, January 25 and Saturday, January 30, 2021; margin of sampling error ±3.34%.

Total vote:

Eliminate Inheritance Tax
Very Important 64%
Somewhat Important 15%
Somewhat Unimportant 8%
Very Unimportant 7%
Unsure 5%


Vote by political party:

Eliminate Inheritance Tax
  Rep Dem Ind
Very Important 76% 51% 57%
Somewhat Important 15% 15% 17%
Somewhat Unimportant 3% 14% 13%
Very Unimportant 3% 13% 9%
Unsure 4% 7% 5%


Vote by age:

Eliminate Inheritance Tax
  ≤ 44 45 – 64 65 +
Very Important 64% 66% 63%
Somewhat Important 10% 17% 17%
Somewhat Unimportant 13% 6% 7%
Very Unimportant 7% 7% 7%
Unsure 5% 4% 6%


Vote by gender:

Eliminate Inheritance Tax
  M F
Very Important 65% 64%
Somewhat Important 13% 17%
Somewhat Unimportant 8% 9%
Very Unimportant 10% 4%
Unsure 4% 6%


Summary: All state residents believe it is important to reduce or eliminate the inheritance tax (net +64%). An overwhelming 79% think this is important, including 64% who think it is very important, compared to only 15% who think it is unimportant. While all demographic subsets show strong support, the strongest support comes from Republicans (net +85%) and the weakest from Democrats (net +40%), with independents a little below the average but still very strong (net +52%).

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