Gov. Dave Heineman claims the time is right for a tax cut.
The recession and its lingering effects hit the state budget hard, forcing lawmakers to implement cuts. Heineman says people can disagree about whether the nation has fully emerged from recession, but Nebraska’s budget picture has brightened. The governor points out that net state revenue grew by $349 million last year. He says cash reserves have been built to $400 million. He says the combination makes his proposed $326.6 million tax cut over the next three years affordable.
“I’d love to do more, but you’ve also got to make sure that it fits within your fiscal budget,” Heineman tells reporters.
In his State of the State address before the legislature, Heineman stated, “Nebraska families have had to tighten their belts and learn to do more with less. So should government.”
Sen. Abbie Cornett will carry the governor’s tax cut package in the legislature this session. Cornett says she has been reviewing Nebraska’s tax structure for the past few years, eyeing an expansion of the individual income tax brackets.
The governor’s office issued the following information about the tax package:
The Governor’s proposed tax relief plan will provide $326.6 million in tax relief over three years, beginning January 1, 2013, with $273.7 million going to individual income tax and $52.9 million for Nebraska businesses.
For example, tax relief for Married, Filing Jointly would be as follows:
Bracket 1 – Expand from $0-4,800 to $0-6,000 & Lower rate from 2.56% to 2.42%.
Bracket 2 – Expand from $4,800-35,000 to $6,000-36,500 & Lower rate from 3.57% to 3.40%.
Bracket 3 – Expand from $35,000-54,000 to $36,500-60,000 & Lower rate from 5.12% to 4.90%.
Bracket 4 – Expand from over $54,000 to over $60,000 & Lower rate from 6.84% to 6.70%.
Corporate income tax relief would lower the tax rate for income over $100,000 from 7.81% to 6.70%.
The proposal also calls for the elimination of the inheritance tax, derogatorily called the death tax by opponents. Nebraska is one of only eight states with an inheritance tax.
Taxes have been reduced over the past few years in Nebraska. The governor’s office points to the Tax Foundation state rankings which placed Nebraska 45th in 2006 and now place Nebraska 29th. The governor claims that reduction in tax burden and the implementation of the Nebraska Advantage in 2006 led to 270 businesses investing $5.9 billion in Nebraska, creating 19,500 jobs. Nebraska enjoys the second lowest unemployment rate among the states at 4.1%.
Cornett says the tax package proposed by the governor will capitalize on that economic progress.
“I think the business communities are really looking at Nebraska in a manner that they haven’t in the past,” according to Cornett. “We are receiving far more businesses requesting meetings and to see about moving to Nebraska and see what possibilities we have. And when the businesses look at Nebraska, they look at the tax climate.”