Nebraska's tax collections could rise or fall dramatically based on the outcome of the federal tax package that's working its way through Congress, a state analyst told lawmakers Thursday.
State officials can't predict how the proposal might affect tax collections or the state budget, but even now, the prospect of lower future tax rates has prompted some investors to hang onto their holdings rather than sell, said Legislative Fiscal Office Director Michael Calvert.
Nebraska's tax code is closely tied to the federal code, so tweaks to federal deductions or credits could trigger automatic changes in state revenue, which has recently been growing at a slower-than-average rate. That could create problems for lawmakers who have to balance the budget next year in the face of a projected $173.3 million revenue shortfall.
"I've never had this kind of discussion before, but I think the risks are really, really significant because of the uncertainty," Calvert said in testimony to the Legislature's Tax Rate Review Committee.
The Lincoln-based OpenSky Policy Institute issued a similar warning last month, noting the state also faced a conundrum in 2002 and 2003, when President George W. Bush's tax cut package threatened to trigger a $416 million loss in state revenue over five years. Lawmakers at the time decoupled some of their tax laws from the federal system, shrinking the projected loss to $84 million.
Despite the uncertainty, Gov. Pete Ricketts has remained a vocal champion of the GOP tax package. In a news release Thursday, he and other Republican state officials reiterated their support and saluted President Donald Trump for leadership on the issue. Critics have said the Republican plan favors the wealthy.
"Providing relief will put more money back into the pockets of hard-working families and unleash economic growth in communities across our nation," Ricketts said.
Lt. Gov. Mike Foley said Trump is "following through on his commitment to help grow America's middle class with federal tax reform."
State Auditor Charlie Janssen said "fairness and simplicity" are hallmarks of good tax policy.
"President Trump's tax reform efforts seek to simplify the tax code and provide relief to families and job creators across the nation," he said.
Also joining in the statement of support for tax reform were Sens. Jim Smith of Papillion and Lydia Brasch of Bancroft, both members of the nonpartisan Legislature who are registered Republicans.
"Tax reform is essential to returning jobs to the U.S. and to helping our employers create more opportunities at home," said Smith, who is chairman of the Legislature's Revenue Committee.
"The lower rates and higher standard deductions will greatly benefit large numbers of our middle-class taxpayers and ag producers," said Brasch, chairwoman of the Legislature's Agriculture Committee.