The Unicameral’s Revenue Committee held hearings Thursday on cutting Nebraska’s top income tax rates for both individuals and corporations – a top priority of Governor Pete Ricketts.
The proposed cuts received strong support from the business community, but criticism from some who questioned whether the cuts would benefit the economy. The top rate for corporations of 7.25% and 6.84% for individuals would both drop to 5.84%.
Business groups argued that the tax cuts would make Nebraska more attractive to companies, especially when compared with its neighboring states – all of whom but Iowa have lower top rates.
State Chamber of Commerce and Industry President Bryan Sloan said the top tax rates are “the front door’ when it comes to businesses looking to invest in Nebraska.
Lincoln Independent Business Association President Bud Synhorst told the panel “by competing in the tax arena, we send the message that we are open for business.”
Weighing in on the other side was the OpenSky Policy Institute, a tax-policy think tank that is often critical of measures that reduce state of revenue. Cutting the top income tax rates would reduce state income by $178.8-million dollars in 2025.
Senior fiscal analyst Craig Beck noted that the state already spends millions each year on tax incentives and warned that cutting state revenue could “impede Nebraska’s ability to invest in schools, public safety, and infrastructure” if the economy falters.
Beck pointed out the state’s current budget surplus is due in part to federal stimulus funds that went to most taxpayers and helped fuel a better-than-expected state pandemic economy.