With the Nebraska Legislature’s 2014 session only three months away, the Tax Foundation and Platte Institute have teamed up to release a new book detailing powerful tax reform options for the Cornhusker State. Like their conversation-starting publication on North Carolina tax reform (which helped Tar Heel lawmakers achieve historic tax relief), Tax Foundation’s Building on Success: A Guide to Fair, Simple, Pro-Growth Tax Reform for Nebraska should help get the ball rolling in Nebraska.
While the state currently enjoys low unemployment and a high quality of life, there is plenty of room for improvement. Tax Foundation’s Joe Henchman explains that “beneath that success are anxieties: worries about the future of agricultural prices, the outward migration of young people and retirees, the cultural perception of the Plains states, and heavy reliance on tax incentives.” The state currently ranks 31st on the State Business Tax Climate Index.
To address these concerns about Nebraska’s future, the guide offers the following tax reform options:
• Option 1: Revenue-neutral plan that would lower the top individual income tax rate from 6.84 (highest among neighboring states except Iowa) to 5.5 percent, simplifying the current system from four brackets to two. This plan would also impose a single corporate income tax rate of 5.5 percent (top rate is currently 7.81 percent), slightly expand the sales tax base, and strengthen caps on property taxes.
• Option 2: In addition to the lower rates detailed in Option 1, this plan includes “triggers” that would further reduce the corporate income tax rate if revenue surpasses stated goals. The first trigger would lower the rate to 4 percent, and the second trigger to 3 percent.
• Option 3: Builds upon Option 2 by adding individual income tax “triggers.” The first trigger would reduce the rate to a flat 4 percent, and the second trigger to a flat 3 percent personal income tax.
Each of these plans is discussed in further detail in the book, along with in-depth study of Nebraska’s economy and previous tax reform efforts in the state. Moving forward, this guide should serve as a valuable resource for Nebraska lawmakers looking to implement a more growth-oriented tax system. As Washington continues to rack up debt and increase taxes, it’s up to state lawmakers to grant relief to overburdened taxpayers. If Cornhusker tax reform is successful, citizens will be able to keep more of their hard-earned pay and businesses will enjoy more of their profits, allowing for greater investments, new jobs, and a higher quality of life for all Nebraskans.