$225 billion

As the work of the 119th Congress begins in earnest, a key campaign promise of the incoming administration may become one of the first items tackled. The body will consider raising, or otherwise retooling, the cap on SALT tax deductions,  the ability of individuals to deduct state and local taxes paid on their federal income taxes. Many Congressional Representatives have been seeking a remedy since 2017, when the Tax Cuts and Jobs Act (TCJA) capped the deduction at $10,000 a year for married couples who file jointly, consisting of property taxes plus state income or sales taxes, but not both. The cap has become so hotly contested that a bipartisan SALT Caucus was established to find an alternate solution, primarily for states like New York, California, and New Jersey, where residents pay relatively high property taxes.

Analysis by the Tax Policy Center found that doubling the cap to $20,000 could be extremely costly, increasing the federal debt by about $225 billion in the next decade, assuming all of the other provisions of the 2017 TCJA are extended permanently. Their analysis further points out that the cap increase would largely benefit wealthy households. On average, households making $200,000 or less would not see any change in their after-tax incomes even with a $20,000 cap and that 99.4% of middle-income households would get no tax cut at all. For the 0.6% who would, the average tax cut would be $470 in 2025. Meanwhile, those making between $430,000 and $1 million would receive about $1,400 in tax cuts annually.

1,044

This week, the burgeoning city of Gretna narrowly authorized construction of a Good Life District, after weeks of controversy, commentary and confusion about what happens next. The project was approved by 1,044 voters with 1,029 voting in opposition.

The Good Life District is an economic development tool made possible by the passage of LB 727 in 2023 and refined by LB 1317 in 2024. It authorizes up to 5 Good Life Transformational Projects in the state, and reduces the state sales tax collected within the boundaries of the District to 2.75%, or half the state sales tax. For the city of Gretna, voter approval was required to authorize the mayor and city council to launch a program to recapture the remaining 2.75% of sales tax and use it within the District to defer development costs. Gretna was a bit unique as the tax has been reduced since April 2024 and no method was in place to recover the additional funds, leaving an estimated $300,000 to $500,000 in revenue on the table each month.

Now that the program has been authorized by voters, city leaders will be able to work with developers on proposals that meet the criteria outlined by the Department of Economic Development.

$273 million

Nebraska’s federal medical assistance percentage (FMAP) will decrease in October 2025, resulting in additional state General Fund contributions of $273 million to the state’s Medicaid and Children’s Health Insurance (CHIP) programs over the coming biennium. The FMAP determines the amount of federal matching funds for state spending on Medicaid and CHIP and is calculated by a formula that compares each state’s average per capita income to the national average. The minimum FMAP for all states is currently 50% and a decline in a state’s percentage, as Nebraska is currently experiencing, indicates the state’s economy is performing well relative to other states.

News this week that Medicaid cuts are being considered by the incoming Congress, including lowering the minimum FMAP, could require Nebraska to contribute an even greater share of state funds to its Medicaid and CHIP programs in future years. Given the Nebraska legislature will already need to address a projected budget shortfall for the upcoming biennium while contending with declining income tax rates and increased spending on property tax reduction, any decrease in federal Medicaid and CHIP funding could cause major challenges for the state budget and the services Nebraskans rely on through these programs.

0.5%

Governor Jim Pillen introduced his proposed budget to the Nebraska Legislature, who will now begin the work of conducting hearings to determine what ends up in the final biennium budget. Our team is engaged in a comprehensive analysis of the budget and will have much more to report as the process continues. The Governor’s proposal calls for a two-year average reduction in overall state spending of 0.5% and promises additional investments in property tax relief as well as special projects like a Nuclear Command, Control and Communications Center at Offutt Air Force Base, increases in developmental disability aid, and a 3% salary increase for state employees.