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Nebraska lawmakers move toward exempting some Social Security benefits from taxes

March 29, 2018

LINCOLN — Some Social Security beneficiaries in Nebraska would get a tax break under a bill that won initial approval on Tuesday.

Legislative Bill 738, introduced by State Sen. Brett Lindstrom of Omaha, would index for inflation the income brackets on which state taxes of Social Security are based.

Right now, state taxpayers do not pay state income taxes on Social Security benefits if they are a married couple with adjusted gross income of $58,000 or less, or a single taxpayer with income of $43,000 or less. Those thresholds would rise under the inflation adjustments, which would exempt more Social Security recipients from having to pay state taxes.

The bill passed first round discussion on a 36-0 vote.

But at least three senators questioned whether the state can afford the tax break, which is estimated to reduce state revenues by about $4 million by the 2021-22 fiscal year. The revenue reduction would increase in subsequent years.

Under an amendment adopted Tuesday, the indexing would be delayed until 2019, in recognition of the state’s fiscal struggles. But Sen. Paul Schumacher of Columbus called that a trick designed to make current lawmakers feel good “and have the guys and gals down the road deal with it.”