Responsible Tax Reform

April 11, 2017 Leave a comment


By Governor Pete Ricketts

One of my top priorities as Governor is to reduce the tax burden on all Nebraskans to grow our state.  The Tax Foundation ranks Nebraska 14th highest for income tax collections per capita and USA Today rates us 5th highest for property taxes.  We can, and must, do better.

 

As I travel Nebraska, people share with me their personal stories about how taxes are hurting their families and businesses.  Roxie and her husband run a small restaurant and family farm near Fremont.  Last year they took out a second mortgage on their house to pay their property and income tax bill.  For Roxie, tax reform is the difference between keeping the business and farm, or shuttering their operation. This is not an isolated situation.  I hear these stories from Nebraskans in every corner of our state.  Each story deepens my resolve to deliver better tax policy to Nebraskans.

 

I have been working closely with Revenue Committee Chair Jim Smith and Agriculture Committee Chair Lydia Brasch to put together a tax reform package that will provide meaningful tax relief to families and small business owners now.

Nebraskans in every county want to see a change in how property taxes are assessed, and families want to keep more of the money they earn.   This is why this tax reform package reforms both ag land valuations and reduces income taxes.

 

Property tax reform must be delivered for our farm and ranch families.  Income taxes must be reduced to help our hardworking families, grow small business opportunities, and create new and good-paying jobs.  To get either one of these goals accomplished, we are going to have to work together and do both.

 

Last week, the Revenue Committee advanced a comprehensive tax reform package in LB461 that includes both the property and income tax reforms I announced at the beginning of this session.  The package will go to the full Legislature very soon.  Here are the top five things you should know about the tax plan:

 

  • Property Tax Reform First: The plan changes the way ag land is valued for taxation purposes beginning in 2018, moving from a comparable market sales approach to valuing land based on its income potential.  Functionally, this plan would have reduced ag land property valuations by $12 billion if it had been in place in 2017.  This would have been an average reduction of 12 percent statewide.  With flat levies, this would have reduced property tax on ag land by about $147 million in 2017.  This plan also protects our K-12 schools with a projected investment of over $30 million each year in the state aid formula.
  • Incremental Income Tax Relief: Starting in 2020, reduces the top income tax rate incrementally from 6.84 percent to 5.99 percent, but only if state revenues are expected to grow by 3.5 percent or more.

 

  • Tax Credits for Low-Income Families: Starting in 2019, the plan provides tax credits for low-income families, increases the personal exemption credit, and expands the existing Earned Income Tax Credit.  The plan contains approximately $7 million of new tax credits a year for low-income Nebraska families.

 

  • Corporate Tax Relief to Create Jobs: The plan incrementally reduces the top corporate income tax rate from 7.81 percent to 5.99 percent to help make Nebraska more attractive to new companies or companies looking to expand.  After an initial reduction to 7.59 percent, the plan makes continued incremental reductions only if state revenues are projected to grow by 4 percent or more starting in 2020.

 

  • Tax Relief for All Nebraskans: Nebraskans of all income levels will see tax relief on their income under this plan.  Middle and low-income Nebraskans will see the biggest percentage reduction in income taxes.

 

This is responsible tax reform that delivers relief to the Nebraskans who need it most, and is sustainable even as we work to restrain our growth in spending.  Tax reform will grow Nebraska unleashing long-term growth on Main Street and in agriculture by allowing working Nebraskans to keep more of the money they earn.

 

You might wonder how we can pass tax reform at the same time we are working to balance the budget.  None of the proposed reforms would adversely impact the budget, or require cuts to the upcoming two-year budget.  This tax reform plan is designed to protect state budget needs and investments in education and public safety.

 

I urge you to contact your senator immediately and encourage them to control the growth in government and support tax reform this year.  Special interests in the State Capitol do not want to see any relief pass this year, because they want to see more government spending.  Visit www.NebraskaLegislature.gov for information on how to contact your senator.  If you have additional thoughts on tax reform that you’d like to share with me, please contact my office atpete.ricketts@nebraska.gov or 402-471-2244.

 

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Competing for Growth

March 22, 2017 Leave a comment


By Governor Pete Ricketts

Over the last two years, Nebraska has hit some key growth benchmarks.  In 2015, for the first time, Nebraska had over one million non-farm jobs.  Our population hit an all-time high of 1.9 million people last year.  And just a few weeks ago, Nebraska won the Governor’s Cup for the most capital investment projects per capita in the nation.  Over 100 new investments helped Nebraska garner this coveted award.

 

Even with all these successes, Nebraska should not rest.  We must continue to look for ways to become more competitive nationally.  Other states are constantly working to develop new competitive edges to attract more people, jobs, and investment.  

 

One significant area that Nebraska is not competitive in is taxes.  We are a high tax state.  Bloomberg ranks Nebraska 16th highest for income taxes and USA Today rates us 5th highest for property taxes.  Recently, the Tax Foundation released a new study showing Nebraska ranks 14th highest nationally for income tax collections per capita.  High taxes stifle growth, hinder job creation, and burden family budgets.  Our tax rates also matter because site selectors in charge of picking venues for new investments screen out high tax states for new projects, meaning Nebraska can miss out on even being considered for some investments.

 

If we are going to stay competitive, we must make progress in bringing our tax rates down.  Over the past two years, we successfully delivered over $400 million in direct property tax relief for all property owners across the state, and an additional $40 million in property tax relief targeted at ag land taxpayers.  Additionally, we worked with the Legislature last year to put more resources towards state aid to K-12 schools along with new spending controls on school spending.  

 

This year, we are working with the Legislature on new reforms to income and property taxes to make our state more tax competitive. 

 

In the area of income tax, I am working with Revenue Committee Chairman Jim Smith to bring down our top tax rate from 6.84 percent to under six percent.  Bringing down the top tax rate is critical because 90 percent of income taxes are paid by Nebraskans who pay in the top tax bracket.  This includes solidly middle class families making more than $29,831 of taxable income.  Additionally, 90 percent of Nebraska businesses pay individual income taxes, according to the Nebraska State Chamber of Commerce.  Cutting income taxes will give more money back to family budgets, help Main Street grow job opportunities, and make our state more attractive to job creators.

 

On property taxes, I am working with Ag Committee Chairwoman Lydia Brasch to change the way ag land is valued for taxation purposes.  With the Agricultural Valuation Fairness Act, we are proposing to move assessments for ag land from a market-based system to an income-potential approach.  This will help valuations to better reflect the income of Nebraska’s ag producers.  This is long-term, structural reform that will help ensure our state’s number one industry remains strong.  This system has been suggested to me by ag producers across the state, because of the success other ag states have experienced.  If the Agricultural Valuation Fairness Act were in place for 2017, it would have reduced ag land valuations by about $2.2 billion.

 

Getting both income and property tax reform done this year is critical for growing both Main Street and agriculture, and key to bringing together both urban and rural senators in the Unicameral. 

 

While many senators are focused on getting tax reform done this year, a small minority have suggested no tax relief is needed.  Last week, one senator even suggested that the Legislature should consider raising taxes instead of providing tax relief.  Our income tax rates are already uncompetitive.  Raising our income tax would put an additional burden on our middle class families and small businesses.  Right now, our sales tax is middle-of-the-pack.  Raising our sales tax even a penny would give Nebraska the 14th highest sales tax in the nation, according to the State Chamber.

 

As you can see, we need to focus on bringing tax rates down if we want to ease the burden on our families and grow Nebraska.  Raising taxes would make us less competitive and less attractive to job creators as well as to families looking to move here.  If you have feedback on what you would like to see the Legislature do on tax reform, I encourage you to contact your senator.  You can find all their information at www.NebraskaLegislature.gov.  If you have feedback for me, I hope you will contact my office by emailing pete.ricketts@nebraska.gov or by calling 402-471-2244.

Governor Pete Ricketts

 

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