New Study: Risky tax plan likely would raise taxes for most Nebraskans

OpenSky logoToday, OpenSky Policy Institute, a nonpartisan Nebraska organization dedicated to fiscal research and analysis, released results of a new study on what a large cut in the state’s income tax could mean for our state’s economy.

The results indicate Nebraska would send a large chunk of revenue out of state if it implemented a risky tax structure that recently has taken hold in Kansas and North Carolina.  If implemented here, that plan would likely increase taxes for most Nebraskans while endangering the funding base for vital services in our communities like schools, hospitals, law enforcement, and keeping up our streets and highways.

According to the report, such a drastic tax system change does little to help Nebraska’s middle-class, working families.  In the proposed system, Nebraskans who earn between $36,000 and $58,000 a year would see an income tax cut of only $64 (less than $6 a month).  And if the state decided to make up the lost income tax revenue by raising regressive sales and property taxes, most Nebraskans would actually see their taxes go up.

A tax system like those proposed in North Carolina and Kansas would do little to help middle-class Nebraskans.

A tax system like those proposed in North Carolina and Kansas would do little to help middle-class Nebraskans.

The study, which OpenSky commissioned from the Institute on Taxation and Economic Policy, found that a tax plan that cuts the top income tax rate to 5 percent, similar to the plans in Kansas and North Carolina, would cause Nebraska to lose $339 million in revenue.  Of that money, $134 million (about 40 percent) will leave the state entirely, rather than be returned to Nebraska families.  That lost tax revenue comes from people living out of state who hold stock in Nebraska companies, and people who work in Nebraska but live in other states.  The plan also would result in Nebraskans paying more federal income tax because it eliminates certain state deductions.

Nebraska needs a stable, sustainable tax structure that protects our middle-class families while still funding the building blocks of The Good Life – quality schools, well-maintained roads, and safe, healthy communities.  As the Legislature’s Tax Modernization Committee moves forward, we encourage them to heed the lessons learned in other states that have gone down this path and focus on solutions that will build a stronger Nebraska.

Appleseed is part of Rebuild Nebraska, a collection of Nebraska stakeholders and organizations dedicated to rebuilding Nebraska’s families, communities, businesses, schools, infrastructure, and workforce.

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