It’s a fact that Nebraska’s high tax rates are harming our economic growth.
Income tax rates in Nebraska, particularly for individuals and businesses earning more than $30,000, have not meaningfully improved in the last twenty years, and property tax rates are the 7th highest in the nation. Meanwhile, IRS data show the majority of income lost to out-migration in Nebraska over that time has relocated to Texas, Florida, Arizona, Colorado, and even Iowa.
Despite our stable economy, these losses contributed to Nebraska falling below the national average in job and population growth in the past decade.
More Nebraskans and Americans are choosing to live and work in states where they can keep more of what they earn. On average, taxpayers in these rival states pay 52 percent less personal income tax per person than in Nebraska, and 24 percent less in property tax. Federal data show residents investing in these states are creating more businesses and better jobs.
To see relief in 2017, taxpayers must reject the myths being used to keep taxes high.
With opponents of tax relief running out of excuses and support in the Legislature, they hope lower state revenue projections can stand in the way. But the projections do not mean state revenues are shrinking at all.
Revenues are growing at a healthy pace. This latest projection means the state will have a smaller than expected windfall, but senators can still pay the bills better than at any time before.
We can reduce taxes that contribute the most to out-migration without harming these revenues.
Which types of taxes we rely on most is a different question from how much money we want to raise. Our current budget can be funded at the same level with greater stability, even as our tax structure imposes less burdensome rates on working and investing in Nebraska.
Reducing property tax rates must be part of this, but it’s not enough. In a recent editorial, the Journal Star tried to pit payers of property and income tax against each other by claiming the Legislature has already made “major income tax cuts.”
Well, they probably weren’t for you.
Among the tax cuts they mention are tax incentives for special interests. But those of us who pay full price for Nebraska’s taxes have not seen relief. The Small Business & Entrepreneurship Council recently ranked Nebraska one of the 15 worst states for small business taxes. In the vast majority of cases, these are the same high taxes paid on family incomes and property tax bills.
Real tax reform means rolling back special privileges in the tax code to make rates lower for everyone. But more can be done to grow our tax base and reduce tax rates without increasing reliance on the property tax.
There is absolutely no reason both property and income tax rates can’t be reduced together through comprehensive reforms that grow our sales tax base. In the states we lose the most income to, greater reliance on local option sales tax helps keep other taxes in check. Importantly, this does not require increasing sales tax rates, but reviewing the types of sales subject to the tax.
Eliminating arbitrary sales tax exemptions can also provide more stable state revenues. Currently, the majority of the state’s general fund relies on income tax, which research from the Pew Charitable Trusts show has been less stable than sales tax nationally going back decades.
For many, Kansas’ shadow looms over the tax reform issue. But Nebraska doesn’t have to copy Kansas to have lower tax rates. Many other states across the country have provided responsible tax relief, including ten states that reduced income taxes in 2015 alone.
States as diverse as New York, Indiana, Maine, and Arkansas are enacting income tax rate reductions, along with property tax relief, to remove barriers to economic growth and opportunity in their states.
It’s time for Nebraska’s taxpayers to unite in this coming legislative session instead of being set against each other. More excuses that prevent reform, and keep the Good Life out of reach for Nebraska families and businesses, should be rejected by all Nebraskans.