The wealthiest Nebraskans — those making more than $2 million a year — paid just 3.82% of their income in state income taxes in 2018, well below the state’s top statutory rate of 6.84%, a tax burden study released recently by the Nebraska Department of Revenue shows.
On average, Nebraskans at all income levels paid less than the highest income tax rate that year, regardless of income, with those making less than $69,305 — representing 70% of Nebraskans — paying 1.91% of their incomes in state income taxes (see tables 13 and 14).
“This tax burden study shows — as it has in the past — a significant gap between what the wealthiest Nebraskans are actually paying in income tax and the top statutory rate,” said Renee Fry, executive director for the OpenSky Policy Institute. “The Legislature has clearly created pathways to reduce income tax liability for Nebraskans, including through generous business tax breaks that, as the report says, are more likely to benefit the wealthy.”
The report also looked at the potential impact of cutting income and sales taxes by $100 million. It found that cutting income taxes by that much would not generate enough economic growth to pay for itself, resulting instead in a net loss of nearly $95 million in tax revenue (see table 9). The benefit would also largely go to those Nebraskans with the highest incomes, the study found.
Nearly half of the benefits of the hypothetical income tax cut (46%, see table 10) would go to the wealthiest 9% of households in the state, or those making more than $150,000 (see table 3). Meanwhile, the 77% of Nebraskans who earn less than $100,000 would see less than a third of the benefits.
The study also found that a $100 million sales tax cut would actually generate more economic activity than an income tax cut of the same size but also would not come close to paying for itself in terms of increased state revenue.