Sen. Justin Wayne's proposal to create a slightly higher state income tax rate for Nebraskans with taxable income of $2.5 million a year or more ran into opposition Friday from business-oriented groups.

"It's ridiculous that someone who makes $29,000 is taxed at the same rate as someone who makes $2.5 million now," the Omaha senator told the Legislature's Revenue Committee.

His bill (LB728) would impose a 7.84 percent rate on the wealthiest Nebraskans, one percentage point higher than the tax rate paid by middle-income and working-class Nebraskans, Wayne said.

The increased rate would still be "the smallest and lowest rate in the country for millionaires," he said.

The proposal would raise an estimated $11.7 million in additional state revenue by fiscal 2019-2020.

The Nebraska State Chamber of Commerce and Industry, Greater Omaha Chamber of Commerce and Lincoln Chamber of Commerce lined up against the proposal during its hearing before the committee.

Reducing taxes would be better policy and "spark the economy," Joseph Young, executive vice president of the Nebraska Chamber, told the committee.

Speaking for the Platte Institute, Nicole Fox said the so-called "millionaires tax" could drive people from the state.

"When high-income earners flee to lower-tax states, this puts more pressure on middle-class families to pay for even more of state government," Fox said.

Renee Fry, executive director of Open Sky Policy Institute, supported Wayne's proposal.

The bill represents "a slight tax hike on the very wealthiest at a time when the state is facing a significant revenue challenge," Fry said.

And wealthy Nebraskans are going to benefit from large tax gains instituted by this year's federal income tax reform law that would far outweigh any increased liability for state taxes, she said.

Sen. Jim Smith of Papillion, chairman of the committee. suggested Wayne consider the possibility of using money raised by his proposed tax hike to "buy down the lower rates" paid by other Nebraskans.

Fry told the committee that another bill (LB1074) introduced by Sen. Tony Vargas of Omaha is constructed in a way to do that.

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