Because of Nebraska’s standard deduction, a married couple filing jointly would have to make more than $81,060 to get any personal income tax cut under LB 939, a bill on Monday’s legislative agenda. The bill would lower the state’s top personal and corporate income tax rates to 5.84% over three and four years respectively.
A single filer would have to make more than $40,530 to get a personal income tax cut under the bill. In both cases, the tax cut would only apply to income above those thresholds.
To illustrate further, a married couple filing jointly who makes $100,000 and claims the standard deduction would receive a $189 tax cut while a couple who makes $60,000 annually would receive no tax cut under LB 939.
The wealthy get most of the personal income tax cut
The vast majority of the tax benefits of LB 939’s personal income tax cut would go to wealthy residents. An Institute on Taxation and Economic Policy (ITEP) analysis shows the highest-paid 5% of Nebraska residents receiving 54% of the tax cut. The lowest paid 40% of Nebraskans, meanwhile, would get less than 1% of the tax cut, ITEP data show.
Corporate tax cut offers no incentive for corporations to come to Nebraska
LB 939 also would cut corporate income taxes but such a measure is unlikely to lure companies to the state. Nebraska taxes corporations based on their sales in our state through a system known as single-sales factor apportionment. Under this system, corporations are taxed the same in Nebraska regardless of where they are located. A corporate income tax cut, therefore, offers them little reason to move here.
And while companies would unlikely move based on the tax cut, such a measure would largely benefit people who don’t live in Nebraska. ITEP analysis shows 83% of the tax cut would leave the state and other estimates show that the out-of-state benefit of cutting Nebraska’s top corporate tax rate could be 90% or more.[1]
Nebraska Public Media will stream the debate on LB 939 live.