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A Balanced Approach to Tax Reform


Image CC BY-SA 2.0 via flickr user 401(K)2012

This week, the Tax Modernization Committee held a working session and started to dig in to the challenge of  taking a comprehensive look at our state’s tax code and making recommendations on ways to improve it. The committee heard from speakers about income, corporate, and property taxes and how Nebraska compares nationally and to surrounding states.

Overall, the speakers made the case that Nebraska’s current tax system is not an outlier (meaning a state where taxes are either significantly higher or lower) when compared with other states and that lawmakers should proceed cautiously to ensure that any changes are made thoughtfully.

We think there are reasons to be hopeful about the thoughtful approach that the committee seems to be taking.  A recent look at the consequences of tax reform that isn’t well thought out can be seen by looking to our neighbors in Kansas. The legislature there passed significant tax cuts, but failed to agree on how to pay for them, leaving a gaping hole in the state budget.

It is also important that the committee work to ensure that the tax reform plan makes sense for Nebraska and doesn’t increase taxes on those who can least afford to pay.  This week, Open Sky Policy Institute released an analysis of what would happen if we reduced the top income and corporate tax rates to 5%.  The analysis found that such a plan would do very little to help the average Nebraska family — on average families would pay $64 less in income taxes.   The loss of state revenue would be significant, and 40% of the dollars would end up leaving the state either to out-of-state investors or going back to the federal government.

Under a plan like this, the average Nebraskan could also potentially expect cuts to things like education while seeing  very little returned to their pockets.  For most Nebraska families, $6 a month isn’t going to increase their ability to hire a tutor or pay for a private school if public schools see significant cuts.

It’s important that as the process continues to move forward that we balance the needs of communities and individuals and forge a smart path ahead that preserves our quality of life.

In the coming months, the hearings will provide opportunities for public input, and we hope people will stay engaged in looking what tax changes might mean for you, your family and your community.

Thank you to taking the time to share!

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