State Budgets

Nebraska State of the State: Tax Reform on the Horizon

Governor Ricketts emphasizes the need to keep Nebraska competitive through tax reform.

Last year, Nebraska Governor Pete Ricketts (R.) received the American Legislative Exchange Council annual “Best of the Best” award for his bold, pro-growth oriented State of the State address. Unfortunately, the governor’s tax reform priority failed to materialize during the 2017 legislative session, largely due to a budget shortfall and lack of political support. Through the governor’s continued leadership on spending restraint and government efficiency, 2018 may indeed be the opportune time for the state to tackle tax reform.

Ricketts focused his 2018 address on maintaining competitiveness in the Cornhusker State in an ambitious Midwest region largely getting it right regarding tax and fiscal policy. He notes, “Our neighboring states are making themselves more competitive…The only surrounding state with an income tax higher than ours is Iowa, and right now Iowa Governor Kim Reynolds and their legislature are lowering their taxes.”

Revenue Committee Chairman, Nebraska ALEC Co-State Chair and ALEC Board Member Senator Jim Smith introduced the Nebraska Property Tax Cuts and Opportunity Act in recognition of this fact. Governor Ricketts commended this legislation’s goals of over $4 billion in property tax relief and permanent reductions in the individual and corporate income tax rates. According to the 10th edition of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, these three taxes are problematically high in Nebraska. Nebraskans at all income levels are impacted; in fact, the top personal state income tax rate of 6.84 percent kicks in at just $29,830 for a single filer and $59,661 for married couples.

In addition to tax reform, Governor Ricketts focused on the need to lighten the state’s regulatory burden. Nebraska groups such as The Platte Institute have strived to cut red tape in the state for years with some limited success, such as reducing time requirements to obtain certain job licenses. But the governor acknowledges much work remains. The review launched by Ricketts last year of the state regulatory burden uncovered over 7.5 million words of state regulations; lawmakers have already begun introducing legislation to address this issue.

The governor proposed across-the-board spending cuts to balance the budget without raising taxes. He plans to remain focused on child welfare, services for the developmentally disabled, education funding and the corrections system, while also ensuring Nebraskans keep more of their own money.

The governor commended Nebraska for having the “most economic development projects per capita of any state in the country.” These projects can be a net economic gain so long as cronyism-based tax incentive packages are not utilized. Enacting broad-based tax reform this session—rather than offering sweet deals to a favored few at the expense of other taxpayers— will brighten the state’s economic outlook.

In Depth: State Budgets

Smart budgeting is vital to a state’s financial health. The ALEC State Budget Reform Toolkit offers more than 20 policy ideas for addressing today’s shortfalls in a forthright manner, without resorting to budget gimmicks or damaging tax increases. One way to stabilize budgets over time is to embrace…

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