Personal and corporate income tax cut bills being heard by the Revenue Committee on Thursday morning would largely benefit the wealthy, out of state residents and corporations and leave the state vulnerable to large service cuts or tax increases should we run into future fiscal trouble.

The measures are:

• LB 804 – which would accelerate corporate income tax cuts passed in 2022;
• LB 806 – which accelerates personal income tax cuts passed last year; and
• LB 754 – which would phase in tax changes that would ultimately result in Nebraska’s top personal and corporate income tax rates being lowered to 3.99% by 2027.

Enacting ongoing changes based on temporary conditions could create future problems

Given the state’s current strong fiscal condition – with a projected  $1.9 billion available for new legislation this session – it’s understandable that policymakers would look to get dollars into the hands of Nebraskans as we continue to recover from the COVID-19 pandemic.

The on-going nature of the tax cuts, however, is concerning given the temporary nature of our current fiscal condition – which was largely the result of $24 billion of federal funds that have come into the state since the onset of the pandemic. While Nebraska can shoulder the immediate cost of the tax cuts proposed in the bills, the revenue impact of the measures will grow over time, even after the federal dollars have all been used up. With federal funds slowing, the threat of recession, a tightening of federal monetary policy and now a potential federal government default, these tax cuts could create major fiscal problems in the future.

Measures provide biggest benefit to the wealthy, corporations, non-Nebraskans

It’s important to note that the tax cuts would predominantly benefit high-income Nebraskans, corporations and out-of-state taxpayers. For example, Institute on Taxation and Economic Policy analysis of LB 754’s corporate and personal income tax cuts shows:

• Nearly 80% of the tax cuts would go to the wealthiest 20%;
• The wealthiest 1% of taxpayers would get an average annual tax cut of $1,382 while the lowest-earning 20% would receive no tax cut; and
• About 83% of the corporate tax cut would flow to out of state taxpayers because of the way Nebraska taxes corporate income.

Proven investments would be a better use of available funds

Rather than passing ongoing measures that provide the biggest benefits to the wealthy and corporations, policymakers this session could look to enact proven initiatives that empower hardworking Nebraskans to support their families and their communities.

The hearings on the bills starts at 9:30 a.m. and will be streamed live by Nebraska Public Media.