Last year, the Nebraska Legislature passed the largest tax cut package in state history, committing $3.4 billion in state revenue over six years.
This week, as the Legislature begins debate on a new round of proposed individual and corporate income tax cuts, OpenSky Policy Institute is disseminating a new report that details the cuts passed in 2022 as part of LB 873.
“Giving Money Back to the People? Understanding Nebraska’s 2022 Tax Package” explores the implications of LB 873 on the state’s finances as well as the economic conditions that ushered in the surplus funds leveraged to enact it.
Last year’s legislation cuts the top personal and corporate income tax rates incrementally over several years, exempts all Social Security benefits by 2025 and commits funding to a tax credit for property taxes paid to public schools and community college systems.
The first-year impact was modest at $116 million, but its annual impact upon full implementation will approach $1 billion. Modeling indicates that the tax benefits will largely flow to wealthy Nebraskans and out-of-state corporations.
Proposals in LB 754, this year’s income tax package, seek to expand on last year’s cuts, with wealthy Nebraskans and out-of-state corporations again seeing the largest reductions in taxes. The cost of further cutting the top income tax rate, from 5.84% as approved last year to 3.99% under this year’s bill, is $700 million a year.
The tax cuts in 2022 that would be expanded this year are the result of the state’s strong financial position, built in large part due to federal stimulus. By further restricting the state’s ability to raise revenue, Nebraska may find it difficult in the future to support vital services such as K-12 education, health care and public safety that provide a foundation for shared prosperity for all.