Contact: Adam Weinberg
Revenue Committee Advances LB461 Tax Reforms
Bill Proposes First Major Tax Structure Changes Since 1980s
Update, 4/6/2016: The original draft of this release stated LB461, like LB452, would introduce a single-rate corporate tax. Under LB461 as amended, the top and bottom corporate tax rates would remain, but at eventual rates of 5.99 and 5.58 percent respectively.
LINCOLN, NE (April 5, 2017) – The Nebraska Legislature’s Revenue Committee has advanced a comprehensive tax reform package including property and income tax relief measures by a 6-2 vote. LB461 would introduce an income-based assessment of agricultural property as well as a restructuring and reduction of Nebraska’s personal and corporate income tax rates.
The last time a similar structural overhaul of the state tax system occurred was during federal tax reform in the 1980s. Since then, over $3 billion in annual adjusted gross income has exited Nebraska’s economy due to out-migration, mostly to states with lower income tax rates. In fact, Nebraska’s top income tax rates affecting middle-income taxpayers, small businesses, and corporations have not been reduced in 20 years.
“Year after year, Nebraskans ask for something meaningful to be done about the tax burden in our state, which is out of line with our region and the states we compete with for growth. But in past legislative sessions, the majority of the Revenue Committee consistently ignored these demands and blocked major tax reforms from being debated by the entire Legislature.
Sen. Smith’s Revenue Committee is turning the page on that chapter in Nebraska’s history by advancing LB461 and doing the work voters sent them to Lincoln to do,” said Jim Vokal, Chief Executive Officer of the Platte Institute.
Under LB461 some measures would be enacted in the next year, while others would occur in a series of incremental tax reductions based on state revenue growth projections.
In 2016, the Platte Institute published “A 21st Century Tax Code for Nebraska” in partnership with the Tax Foundation, the nation’s leading independent tax research organization. The report made recommendations about tax reforms the Legislature could make to raise needed revenues while reducing the state’s high tax rates and the burden they place on Nebraska’s economic growth.
LB461 adopts many of the recommendations from that report, including:
- Suspending tax carve-outs that benefit some taxpayers in order to fund tax reductions for taxpayers as a whole;
- Reducing the state's high corporate tax rate, which currently increases demands for tax incentives;
- Simplifying and reducing Nebraska’s personal income tax rates;
- Modestly expanding the Earned Income Tax Credit;
- And providing revenue trigger safeguards that require strong state revenue growth projections for top tax rate reductions to occur.
Under LB461, Nebraska’s top personal and corporate income tax rates would be incrementally reduced to 5.99 percent by 2025, pending sufficient revenue growth projections (above 3.5 percent) in each annual review. The personal income tax rate on income earned between $3,000-$18,000 for a single filer would be reduced to 3.25 percent in the first year of the reforms.
“Adopting LB461 would send a strong message that Nebraska is serious about a long-term commitment to tax reform that improves the competitiveness of Nebraska’s tax system and reduces the sticker shock associated with our high tax rates. The bill’s revenue triggers also provide certainty to state budget-writers that strong state revenue growth projections are required to move forward with each year of these reforms,” said Vokal.
To arrange an interview with Jim Vokal please contact Adam Weinberg at (402) 452-3737 or at email@example.com.
The Platte Institute advances policies that remove barriers to growth and opportunity in Nebraska.