OpenSky analysis finds federal tax changes could have major ramifications at the state level

OpenSky analysis finds federal tax changes could have major ramifications at the state level

LINCOLN —  As the U.S. Senate prepares to vote this week on its budget resolution, a key step in the implementation of federal tax changes, a new OpenSky Policy Institute analysis finds such changes at the federal level could have a profound impact on Nebraska and its state budget.

From large decreases or increases in state revenue, to cuts to key services that Nebraskans need, to increased stress regarding property taxes, the potential effect of federal changes could be far reaching, the analysis finds.

However, the analysis notes, the lack of details regarding the possible changes creates tremendous uncertainty about their true effects and this brings the need to for federal and state policymakers to exercise caution when it comes to fiscal policy choices.

“With so much uncertainty regarding the tax changes and their impact on our state and its residents, it will be important for both federal and state policymakers to be sure understand the full effects of any tax plan before making any fiscal policy changes,” said Renee Fry, executive director of OpenSky Policy Institute. “Not doing so could have major unintended consequences for our state and for Nebraska residents.”

The new analysis notes:

• The close link between the federal tax code and Nebraska’s tax code means some of the potential federal changes could automatically create large state revenue losses or gains;
• Programs and services in our state budget that receive federal dollars could be cut significantly if federal tax cuts are offset by federal funding cuts;
• Federal funding cuts could more than offset any state revenue gains that might be sparked by federal tax changes;
• If the tax changes result in state revenue losses, Nebraska lawmakers may need to cut education and other services, find other revenue sources or pass the cost of these services on to property taxpayers where possible;
• The potential elimination of deductions for state and local taxes and for medical expenses could increase stress for Nebraska property taxpayers and those with significant medical expenses; and
• The vast majority of tax savings created by the tax changes would likely go to wealthy households and a lack of detail regarding the changes makes it difficult to tell what, if any, tax savings, might go to middle-class Nebraskans.

Contact Chuck Brown at cbrown@openskypolicy.org or 402-610-1522 for more information.