LB 939 – a bill to cut corporate and personal income taxes – is on Tuesday’s Legislative agenda and also will be the focus of a Monday briefing with Senator John Cavanaugh and co-sponsored by the Nonprofit Association of the Midlands, the Coalition for a Strong Nebraska and the Nebraska Civic Engagement Table. (The briefing starts at 2 p.m and you can register to attend here.)

LB 939 would lower the state’s top personal and corporate income tax rates to 5.84% over the course of a few years. The measure is projected to reduce state revenue by $415 million by FY 26-27 while offering large tax breaks that predominantly benefit the wealthy and out-of-state corporations.

The bill passed on the first round of debate with the understanding that an agreement would be reached to address the concerns of several senators. Proponents of the measure have returned with a new plan – contained in AMs 2418 and 2397 – that is even more costly than before.

What’s in the new plan?

This new plan phases in the top rate cuts more slowly. When fully implemented, the cuts are still largely directed to the wealthiest Nebraskans and out-of-state corporations. The new plan would also remove the allowable growth rate cap on the LB 1107 refundable income tax credit, which was designed to help limit the revenue impact of that credit. In addition, the new plan calls for a new refundable income tax credit for community college property taxes paid and it contains no fiscal guardrails to protect the state budget.

The annual fiscal impact of the new plan would be about $590 million by FY 27-28. If the plan passes along with other tax-cut bills on the second round of debate – the annual combined fiscal impact of all of the bills would be more than $894 million by FY 27-28. Revenue losses of that size would likely force future state lawmakers to either cut funding for schools, health care and other key services or increase other taxes and fees to balance the state budget.

Other amendments are more fiscally sound, provide more relief to low- and middle-income families 

While the plan put forth in AMs 2397 and 2418 would create massive revenue problems and largely benefit the wealthy and corporations, other new amendments on LB 939, including AM 2414, would better target relief at low- and middle-income Nebraskans while putting less pressure on the state budget.

These amendments would use $400 million of the current surplus to provide every Nebraskan with a one-time $200 tax rebate. That means a family of four earning the state’s median income of $61,439 would receive $800 from the state. Under the personal income tax cuts proposed in AM 2418 and 2397, this family would receive no tax reductions.

AM 2414 and similar amendments also would lower the rate of the third personal income tax bracket from 5.01% to 4.01%. Institute on Taxation and Economic Policy (ITEP) analysis shows this tax cut would be better targeted toward low- and middle-income residents. The measure would have a significantly smaller fiscal impact as well. Following the initial $400 million cost for the direct payments, such a measure would have an ongoing fiscal impact of only $97 million annually once fully implemented, ITEP data show. Read more about AM 2414 here.

LB 939 is the third item on the Legislature’s agenda on Tuesday. Nebraska Public Media will stream debate live.