The Revenue Committee has advanced several priority bills this session that could pack a delayed but heavy fiscal punch if ultimately approved by lawmakers.
The bills — which are listed here — have the potential to deplete state revenues by nearly $300 million in the upcoming budget cycle.
A look into the following biennium, however, shows the cost of the priority measures would likely increase rapidly — rising to nearly $590 million. The cost of the measures would then likely grow to exceed $385 million annually once they are fully implemented.
The analysis of these measures does not account for the potential effects of two other priority measures advanced by the committee: LR 11CA, which would replace all other forms of taxation in Nebraska with a consumption tax; and LB 84, which would add nuclear energy electricity production as a qualified activity for ImagiNE tax credits.
LR 11CA has no fiscal note but LB 133, a legislative bill that would create a 10.64% consumption tax, shows the tax would annually deplete revenues by nearly $4 billion by FY 26-27. According to its fiscal note, LB 84 is projected to have a $414 million fiscal impact between FY 29 and FY 32.
The fiscal impact of the priority measures advanced by the committee could be exacerbated even more depending on federal guidance regarding the use of American Rescue Plan (ARP) dollars. A stipulation in the ARP notes that states that use federal dollars to directly or indirectly offset revenue reducing measures like tax cuts between March 3 of this year and Dec. 31, 2024 will have to provide the U.S. government a dollar-for-dollar refund for the amount of revenue they cut.
Guidance from the U.S. Treasury is forthcoming about whether states with revenue surpluses can use those dollars to cut taxes and avoid returning ARP funds. If the guidance shows surplus dollars can’t be used to cut taxes, the measures advanced by the Revenue Committee could come at twice the cost to the state — as Nebraska could forgo revenue because of the tax cuts and also have to give back a corresponding amount of federal dollars.
Finally, it’s important to note that the cost of these measures would be increasing as the fiscal impact of LB 1107 — the tax package lawmakers passed last year that included a new refundable income tax credit and business tax incentive package — starts to ramp up. The combined impact of all of these measures would likely necessitate major cuts to schools, health programs and other services that are essential to our state, our residents and our economy.