Nebraska tax cut proposals get mixed reception in committee

January 27, 2022 GMT

LINCOLN, Neb. (AP) — Proposals to cut Nebraska’s top income tax rates for individuals and corporations received strong support Thursday from the business community but were panned by a tax policy think tank that questioned the benefit to the economy.

Business groups argued that the tax cuts would make Nebraska more attractive to companies, especially when compared with neighboring states that are all lower except for Iowa.

“Our top tax rates are the front door when it comes to businesses looking to invest in Nebraska,” Bryan Slone, president of the Nebraska Chamber of Commerce and Industry, said in testimony to the Legislature’s Revenue Committee.

Bud Synhorst, president of the Lincoln Independent Business Association, said the bill would let businesses keep more money that they could then reinvest to grow their operations and pay workers.

“By competing in the tax arena, we send the message that we’re open for business,” Synhorst said.


But the bill faced criticism from the OpenSky Policy Institute, a tax-policy think tank that is often critical of measures that reduce state of revenue.

Craig Beck, the group’s senior fiscal analyst, questioned whether the corporate income tax cut would help the state economy and noted that the state already spends millions each year on tax incentives. Beck said cutting state revenue would “impede Nebraska’s ability to invest in schools, public safety and infrastructure.”

The bills are a top priority of Republican Gov. Pete Ricketts, who has vowed to cut taxes with some of the $412 million in excess tax revenue the state has collected in the last year. They would lower Nebraska’s top rates to 5.84%, down from the current 6.84% for individuals and a 7.25% rate for corporations that’s set to take effect next year.

State officials have said nearly 419,000 Nebraska taxpayers have incomes that rise into the state’s top bracket. However, cutting the top rate would provide a much larger benefit to the highest income earners, who pay more in taxes.

The plan would reduce state tax collections by $178.8 million by fiscal year 2025. Like many other states, Nebraska is flush with cash from a better-than-expected pandemic economy and billions in federal stimulus payments that went to most Nebraska taxpayers.

Lawmakers also considered a measure that would keep the top individual income tax bracket at 6.84%, but add two higher rates for wealthier taxpayers.

The bill by Sen. Machaela Cavanaugh, of Omaha, would eliminate the lowest income tax bracket and merge the next two brackets. One new bracket of 7.75% would kick in for individuals making at least $100,000, and the next bracket would impose an 8.25% tax on single taxable incomes over $1 million.

Cavanaugh said the bill was intended to protect low- and middle-income earners while raising taxes on the state’s wealthiest residents, but called the proposal a “starting point” that’s likely to change. The bill was opposed by business groups and would cost the state an estimated $348 million in lost revenue in fiscal year 2024.


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