Direct payments to Nebraskans – as proposed in AM 2414 to LB 939 – would be a more direct way to help Nebraskans – and particularly low- and middle-income residents – than the corporate and personal income tax cuts proposed in the currently amended version of LB 939.

The amendment would have the state use $400 million for a one-time distribution of $200 prepaid debit cards for each Nebraska resident. That means a family of four earning the state’s median income of $61,439 would receive $800 from the state. Under the personal income tax cuts proposed in LB 939, this family would receive no tax reductions.

Nebraska – like several other states – has flush coffers, thanks in large part to the influx of federal dollars that has occurred since the pandemic started. We also would not be alone in enacting a direct-payment program to get surplus dollars to residents in the pandemic economy. Eighteen other states are considering or have enacted similar initiatives to provide direct relief to residents.

Direct payments could provide a helpful jolt to the state’s economy as they could be released and spent quickly. Moody’s Analytics has found that every dollar of benefits redeemed under the Supplemental Nutrition Assistance Program – also a form of direct payment – created $1.70 in economic activity during the Great Recession while other forms of federal stimulus, including corporate tax breaks, were less effective.[1]

The amendment also would lower the rate of Nebraska’s third personal income tax bracket from 5.01% to 4.01%. This rate reduction would apply to state taxable income of $20,590 to $33,180 for single filers and $41,190 and $66,360 for married couples filing jointly. Institute on Taxation and Economic Policy (ITEP) analysis shows that 55% of this personal income tax cut would go to Nebraskans earning less than $125,000 while Nebraskans with the highest 5% of incomes would receive 12% of the tax cut. This rate cut would reduce revenues by $97 million annually, ITEP data show.

[1] Mark Zandi, “The Economic Impact of the American Recovery and Reinvestment Act,” Jan. 21, 2009, https://www.economy.com/ mark-zandi/documents/Economic_Stimulus_House_Plan_012109.pdf (accessed August 19, 2019).