Grand Island Independent on December 8: Unexpected shortfall, state study validate lawmakers’ fiscal prudence
Two separate but related developments underscore the importance of resisting calls for income tax cuts in Nebraska and continuing on the prudent path lawmakers have followed in recent years.
The state’s revenue forecast recently was reduced, which means that, despite having a strong economy and low unemployment, lawmakers will face a $110 million budget shortfall when they convene in January, with an even larger shortfall looming in the next budget cycle.
On the same day as the revenue forecast, the Department of Revenue released its Tax Burden Study, which examines the economic impact of possible tax changes. The study showed that a hypothetical $100 million reduction in state personal income taxes would result in a net loss of $94 million in tax revenue and would not come close to paying for itself with increased economic activity. That likely means enacting such a tax policy would force lawmakers to make cuts to education, health care or other services to balance the budget.
Aside from showing that an income tax cut would have negative ramifications for the state budget, the Tax Burden Study also showed that the majority of such a tax reduction would largely go to Nebraskans with the highest incomes.