While Nebraska legislators continue to debate LB 939’s personal and corporate income tax cuts on the floor, the Revenue Committee on Wednesday will hold hearings on two other bills that would provide significant personal and corporate income tax breaks.

Both bills – LB 1264 and LB 827 – would deplete Nebraska of considerable revenue while offering little in the way of guaranteed economic benefit.

LB 1264 proposes a multitude of tax changes including:

• Corporate and personal income tax cuts;
• Elimination of the state’s inheritance tax;
• Removal of several sales tax exemptions; and
• The elimination of standard and itemized income tax deductions, among other things.

LB 1264 on its own is projected to reduce state revenues by $1.3 billion in FY 24 with its annual fiscal impact continuing to grow into the future.

The other measure – LB 827 – would permanently extend state tax breaks for corporations that allow them to immediately deduct the cost of machinery, equipment and research purchases expenditures from their Nebraska income taxes. The tax breaks were implemented federally and at the state level as part of the 2017 Tax Cuts and Jobs Act. The tax breaks are set to phase out at the federal level but LB 827 would have them continue at the state level.

According to the bill’s fiscal note, the measure would have an annual revenue impact of nearly $78 million by FY 26. As is the case with the corporate tax cut proposed in LB 939, the vast majority of LB 827’s tax savings would flow out of state as most of the corporations and shareholders who would benefit from the tax cut don’t actually live in Nebraska.

It is highly questionable as to whether the proposed tax changes in these bills would benefit Nebraska’s economy as academic research struggles to find a conclusive link between tax cuts and economic growth. The revenue losses, however, would necessitate funding cuts for real economy builders like schools and health care programs or increases in fees and other taxes including property taxes.

Wednesday’s Revenue Committee hearings start at 1:30 p.m., and will be streamed live by Nebraska Public Media.