Nebraska budget squeeze: skill-game taxes and exemption rollbacks advance as lawmakers chase balance
nebraska lawmakers moved Wednesday toward balancing the state budget as the Legislature advanced LB901, a package built around higher taxes on so-called “skill games” and the end of certain tax exemptions. The debate unfolded in the Legislature as senators weighed how to close a projected gap by adding revenue instead of making deeper spending cuts. At the start of the debate, a new estimate laid out how much the bill could contribute over the next two budget years.
Revenue estimate and the projected shortfall
Sen. Brad von Gillern, chair of the Legislature’s Revenue Committee, told colleagues early in Wednesday’s debate that a new estimate showed the bill raising about $25 million in 2026-27 and $28 million in 2027-28, for a total of $53 million. Von Gillern framed that as money that would not need to be found through additional spending cuts and said it would go toward the budget.
With other pending legislation, the bill was discussed as part of an effort that would help eliminate a currently projected $125 million shortfall at the end of the current two-year budget cycle.
What LB901 changes: skill games, fees, and exemptions
LB901 includes a higher tax on profits from “skill games, ” raising the rate from 5% to 10%. The debate described these machines as being located in restaurants, bars, laundromats, and convenience stores across the state. Sen. Teresa Ibach said the number of machines has grown from 300 in 2007 to 6, 000 now.
About $7 million of the increased revenue next fiscal year would come from that higher profits tax. The bill also increases annual licensing fees for skill games.
Courts have ruled the machines are not gambling devices because the outcome does not rely primarily on luck. Still, the debate included warnings about public confusion and impacts that resemble gambling harms.
The bill also targets other revenue by eliminating tax exemptions on items ranging from the sale of game birds to the development of waste treatment facilities. The discussion on the floor said those exemption changes would bring in another $15 million next fiscal year.
Immediate reactions on the floor
Sen. Ashlei Spivey argued that the machines create problems similar to gambling, saying: “An everyday person cannot differentiate between a skill game or a slot machine, and we know that it’s causing compounded issues around addiction. ”
Another flashpoint centered on whether skill-game licensing fees should automatically rise in the future with inflation. Sen. Danielle Conrad objected, saying: “We shouldn’t be abdicating our legislative responsibility because we find it uncomfortable to deal with fees and taxes on an individual and discrete basis. We should not be abdicating our legislative oversight or authority to unelected bureaucrats on autopilot to continually raise more revenue from our citizenry without specific legislative review. ”
Von Gillern replied that automatic “escalators” could prevent repeated future fights over fee adjustments, but he said he understood Conrad’s concern. Senators then voted 43-0 to eliminate the automatic increases.
Quick context and what’s next
Lawmakers are weighing multiple tools to address a projected budget shortfall, combining targeted tax and fee changes with other pending legislation. The action on LB901 unfolded as senators debated how to raise revenue while managing pressure around broader tax policy.
Separately, Sen. Jana Hughes proposed an amendment that would have made larger changes by delaying an income tax cut approved three years ago and scheduled to take place next January. Hughes’ plan would have adjusted the scheduled drop in the state’s top personal and corporate income tax rate—currently just over 4. 5% and set to fall to just under 4%—by lowering it to 4. 35% for two years and waiting until 2029 to go below 4%. Hughes estimated that approach would increase revenues by $270 million over three years, and it also would have increased cigarette and vape taxes and frozen property tax credits at their current level for three years.
Hughes warned that without major changes, nebraska risks losing its ability to use state revenues to offset local property taxes by funding tax credit programs. The next developments will hinge on how senators handle amendments and whether the Legislature coalesces around LB901’s narrower revenue approach or shifts toward broader tax changes.
