Governor’s tax plan does little for middle class Nebraskans

LINCOLN — The example of a middle-class Nebraska taxpayer used by the governor in the rollout of his tax plan Thursday would not receive an income tax cut under the proposal but the tax plan would harm Nebraska’s ability to support schools, roads, public safety and other services that are important to middle-class residents.

Once the standard deduction is applied, the governor’s example of an individual Nebraskan who earns $29,831 would not pay the top tax rate on any of his or her income, and therefore would not receive a tax cut under the governor’s proposal, OpenSky Executive Director Renee Fry said.

“While middle-class Nebraskans would see little to no tax savings, the wealthiest Nebraskans would see large tax reductions under the governor’s proposal,” Fry said.

Fry also raised concerns about the income tax cut trigger mechanism proposed by the governor.

“Income tax triggers are not reasonable policy as tax cuts are enacted when revenue hits arbitrary levels even if the state doesn’t have the resources needed to adequately fund schools, roads and other drivers of a strong economy,” Fry said. “Triggers also tie lawmakers’ hands in terms of addressing state needs, including during economic slowdowns or following natural disasters.”

In response to the governor’s statement that middle class Nebraskans haven’t seen tax rate cuts in 20 years, Fry noted that LB 970 in 2012 reduced the rates of the state’s middle two income tax brackets and LB 987 in 2014 indexed Nebraska’s income tax brackets for inflation.

Fry also noted that Legislative Fiscal Office shows that income tax cuts made by the Legislature over the last decade have reduced state revenue by $268 million in FY17 alone.