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Opposition to LB 970 – Governor’s tax cut proposal

Voices for Children testified in opposition to the Governor’s tax cut proposals.  In addition to our written testimony below, we shared an infographic to illustrate the amount of the cut for families at different income levels:  No real relief for Nebraskans

January 26, 2011

To: Revenue Committee

From: Aubrey Mancuso, Policy Coordinator

RE:  Opposition to LB 970, to terminate the inheritance tax and change income tax rates

Voices for Children is opposed to LB 970 because we don’t believe that it is meaningful tax cut for most Nebraska families and because of the overall impact on the state budget and likely outcomes for other programs for children and families.

In 2010, about 80% of Nebraskans had incomes of less than $88,000.  According to an analysis by the Institute on Taxation and Economic Policy (ITEP), the monthly amount that 80% of Nebraska families would receive under the proposed tax cut ranges from about .58 cents per month for a family making less than $20,000 to $12 per month for a family making up to $88,000.

For example, if you are a family of four living in Omaha with an income of $30,000, you will receive just under $3 per month. If you are a single mom in Lincoln with an income of $40,000, you will receive about $6 per month. Attached to our testimony is a chart illustrating the added purchasing power those families would have when it comes to food.  As you can see, the majority of Nebraska families won’t experience any real tax relief.

In addition, income tax cuts aren’t the most meaningful form of tax relief for lower and middle income families.  An analysis by ITEP in 2007, showed that Nebraska families in lower and middle income ranges pay a higher percentage of their income in sales, excise, and property taxes than they do in income taxes.  For instance, a Nebraska family making $34-$57K annually paid 2.5% of their income toward income taxes, but paid 3.5% toward property taxes and 3.7% in sales and excise taxes.[i]  A more meaningful way to provide tax relief to lower and middle income families would be to increase the state Earned Income Tax Credit.

Finally, Voices for Children is concerned about what these cuts mean for the state budget overall and for our capacity to make state investments in children by funding things like education, child abuse and maltreatment prevention, and health care.  Reducing state revenues by over $300 million is likely to lead to further cuts to programs serving children and families.  This bill will likely result in a significant increase in the state budget deficit which has historically resulted in cuts to programs impacting children as they did last year with cuts to the child care subsidy program.

If we do have additional state revenue, we could make smart investments in children for a fraction of the cost of the proposed tax cuts.  These will pay off in the future with a healthy, educated tax base and workforce.

Nearly 1 in 5 Nebraska kids currently lives in poverty.  We can’t afford to trade their future for a tax cut that won’t even pay for a meal for most families.

We urge the committee not to advance this bill.  Thank you.

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