Proposed corporate, personal income tax cuts draw support and ire

Sen. Lou Ann Linehan of Elkhorn, sponsor of the corporate tax reduction plan contained in LB938, said the reductions would attract businesses and talent to Nebraska, helping meet the challenge posed by its current workforce shortage and opening the door to growth in the state.

Linehan is chairwoman of the Legislature's Revenue Committee, which held a public hearing on the bills.

Bryan Slone of Omaha, president of the Nebraska Chamber of Commerce and Industry, said the bills could "make a game-changing difference" for the state, meeting the challenge of "a brand new economy with a different workforce structure" as the nation emerges from the COVID-19 pandemic.

It will be "a new competitive environment," he told the committee.

Currently, Slone said, there are an estimated 80,000 jobs open in the state.

Craig Beck, senior fiscal analyst for Open Sky Policy Institute, said the plan would "disproportionately benefit the highest-paid Nebraskans" by sharply cutting their taxes while reducing state revenue by $400 million annually within a few years and leaving state government programs "vulnerable to major budget cuts."

The average tax cut for most Nebraskans under LB939 would be $62.75 a year compared to more than $8,900 annually for the highest 1% of income-earners, he said.

About 84% of the personal income tax cuts would go to the highest-earning 20% of Nebraskans, he said.

Linehan's LB938 would follow on the heels of an earlier corporate tax reduction plan approved by the Legislature designed to reduce the rate from 7.81% to 7.25% in 2023 by adding further incremental reductions that would take it to 5.84% in 2026.

Linehan said the reduced rate will "attract more businesses" while allowing taxpayers to "keep their own money."

Supporting the proposal were representatives of the Nebraska Federation of Independent Business, the Nebraska Bankers Association, the Lincoln Independent Business Association and Americans for Prosperity.

Benefits from the corporate tax cut would flow mostly to wealthy nonresidents, Beck said, resulting in "reduced revenue for services to Nebraskans."

Only $9 million of the $53 million in corporate income tax reductions would stay in Nebraska when the bill was fully implemented, he said.