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An Open Letter to Nebraska Governor Dave Heineman: Taxpayers Support Income Tax Reform

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Dear Governor Heineman:

On behalf of the 3,100 members of the National Taxpayers Union (NTU) in Nebraska, I write to commend your proposed tax reform program. As you have noted, Nebraska has one of the highest tax burdens in the nation, and the antiquated income tax system is ready for major improvements. We applaud your decision to allow Nebraskans to keep $476 million more of their hard-earned money over the next two years by modernizing many aspects of the state income tax system in a taxpayer-friendly manner.

A quick look at Nebraska's personal income tax brackets shows that they do not reflect existing income levels. According to the U.S. Census Bureau, the fiscal year 2006 median income for four-person families in Nebraska was $63,625. Under the "married filing jointly," "head of household," or "single" filing categories, such a family would fall under the top income tax bracket of 6.84 percent. Your plan to consolidate four brackets into three, reduce the current top two tax rates, and eliminate the marriage penalty will go a long way toward lowering tax burdens for the middle class. Cutting the top marginal rate immediately, instead of over the four years your plan proposes, would likely give a stronger boost to Nebraska's economy.

We also support your decision to index the new tax brackets for inflation. NTU played a critical role in indexing the federal personal income tax for inflation during President Ronald Reagan's Administration, and we know firsthand how quickly rate reductions can be eroded by the ever-present waves of inflation. We appreciate your foresight in stopping a cost-of-living raise from pushing taxpayers into a higher bracket.

Including repeal of the estate tax -- commonly known as the "death tax" -- in your reform proposal is also worthy of praise. The "death tax" is a tax on virtue - living frugally and accumulating wealth. As such, the death tax is unfair and immoral, and taxpayers have been working diligently to put it to rest at the federal level and across the country. We encourage you to remain resolute in championing this important reform during your negotiations with the Legislature.

Revenue is only half of the budgeting equation. Controlling government spending is just as important to the state's fiscal health as implementing a streamlined tax structure. Enactment of the Stop OverSpending ballot initiative in November 2006 could have helped to ensure that state government grew at a reasonable rate, and our members were disappointed to learn of your opposition to the measure. Taxpayers hope you will now stand by your recent proposal to limit spending through other means as you rally supporters for your income tax reform plan.

Sincerely,

Kristina Rasmussen
Senior Government Affairs Manager