Governor Jim Pillen has introduced what he calls the largest tax cut in Nebraska history. At the center of the plan is cutting $720-million dollars in individual income tax by going to a flat rate of 3.99% for all filers.
The individual income tax rate for the state’s highest earners is currently 6.94%, but will drop to 5.84% by 2027 under a plan passed last year.
Married couples with an adjusted gross income of less than $41,190 currently pay a rate of 3.5% and couples making $6,860 or less have a 2.46% rate.
Asked what will happen to those currently paying less than his proposed rate, Pillen said everyone would eventually pay the 3.99% – explaining that it treats everyone the same with “taxing income on an equitable basis the fairest way I know.”
Pillen said yesterday his proposed tax changes, along with school finance changes he proposed on Wednesday, addresses the shared priorities of Nebraskans.
Pillen’s plan also replaces the local property tax for community colleges with state general fund money and speeds up the full elimination of taxes on Social Security from 2025 to next year.
Pillen, who has a large hog operation, also wants to value ag land for property tax purposes on its income producing potential, not on its market value.
Robust tax receipts, fueled in part by federal pandemic spending, has Nebraska with a projected budget surplus of $1.9 billion dollars by the end of the 24-25 fiscal year.
The eventual end of the federal programs have some analysts wary of PIllen’s tax cut and school funding increase plans. They question if revenue will remain strong enough to continue funding state services in the long run.