Coming Soon: Easy Decision for Nebraska Lawmakers

Last week Nebraska Governor Dave Heineman testified before the Revenue Reform Committee regarding his tax reduction bill. The bill's major components include lowering income tax rates, decreasing the number of income tax brackets and eliminating the marriage penalty. Over four years the complete tax cut package is expected to cost a whopping $1 billion.

An ITEP analysis showed that making these reductions to the state's income tax reduces taxes, on average, for the wealthiest 1 percent by over $6,500, while the lowest income Nebraskans those with an average income of $11,000 will see an average tax cut of only $13. In fact, 72% of the total tax change goes to the wealthiest 20 percent of Nebraskans. While the majority of Nebraskans will benefit from the proposal, the regressive nature of the plan is striking.

Opponents of the proposal also testified regarding the unfair nature of the Governor’s plan, also saying that Nebraska can't afford tax cuts of this magnitude. Many state legislators, advocates, and concerned citizens think the Governor's proposal is taking the wrong path; instead they see a need for fundamental property tax reform and not regressive income tax reductions that help better-off Nebraskans.

Recommendations for fixing the state’s property tax abound. Some Senators are advocating for a $500 refundable property tax credit for all homeowners. But because the credit isn’t means-tested and excludes renters, the credit isn’t targeted to those Nebraskans most in need. Many states with property tax credits do take into account the fact that renters pay property taxes.

Clearly lawmakers and advocates are dealing with complex and expensive choices. Let’s hope they keep in mind the needs of Nebraskans with the least ability to pay. One way Senators could show their commitment to low and middle income workers is though passing a bill, expected to be heard next month in Committee, that expands the state’s refundable EITC from 8 percent to 15 percent of the federal. The EITC has long enjoyed bipartisan and popular support--perhaps a vote on this bill won’t be such a difficult decision for state leaders.