Senator Raybould proposes changes to Nebraska inheritance tax amid budget deficit concerns

During the Nebraska Legislature's Legislative Afternoon Session on April 30, 2025, a heated debate unfolded over proposed changes to the state's inheritance tax, spotlighting concerns about fiscal responsibility and county funding. Senator Raybould introduced a floor amendment aimed at modifying the inheritance tax rates, arguing that the changes would provide counties with a necessary financial cushion amid looming budget deficits.

Raybould emphasized the urgency of addressing the inheritance tax, stating, "This is a genuine attempt to come to some type of good faith solution in dealing with the inheritance tax." He proposed increasing the exemption for children from $100,000 to $150,000 while maintaining the current tax rate of 1%. For nieces and nephews, he suggested raising the exemption from $40,000 to $50,000 but increasing the tax rate from 3% to 6%. Similarly, for non-relatives, he proposed a reduction in the tax rate from 15% to 10%, arguing that the current rates would significantly impact county revenues.

The senator voiced concerns about potential cost shifts from the state to counties, warning that without adequate funding, counties could face increased financial burdens. "There is a high probability that the state will do what they predictably have done... cost shift for our budget," he cautioned.

In response, Senator Clemens expressed skepticism about the amendment, labeling it "not a friendly amendment" and arguing that it would create a "windfall" for counties without addressing the state's fiscal issues. He highlighted that the proposed changes could lead to a significant increase in county revenues, which he deemed excessive and unsustainable.

The debate underscored the tension between ensuring fair taxation and maintaining fiscal responsibility amid a projected budget deficit. As discussions continue, the outcome of Raybould's amendment could have lasting implications for county funding and the state's approach to inheritance tax reform. The legislature's next steps will be crucial in determining how Nebraska navigates its financial challenges while supporting local governments.