LB 939 was pulled from the second-round of Legislative debate on Tuesday but most of its tax-cut provisions have been moved into LB 919 under AM 2513. This bill could be up for first-round debate in the Legislature soon.
The new proposal raises most of the same concerns as LB 939 in that it would provide large tax breaks to the wealthy and out-of-state corporations while significantly reducing state revenues in future years. Specifically, LB 919 as amended would:
- Lower the state’s top personal and corporate income tax rates to 5.84% over the course of several years;
- Incorporate LB 723’s provision that sets the minimum level of the LB 1107 refundable income tax credit at $560 million once fully implemented;
- Creates a new refundable income tax credit for community college property taxes paid; and
- Reinstates the 5% growth rate cap on the LB 1107. Proponents sought to remove the cap in prior amendments on LB 939.
Other than reinstating the LB 1107 growth rate cap, LB 919 contains no other guardrails to limit its impact on the state budget.
OpenSky estimates the measure would reduce revenues by at least $815 million annually by FY 27-28. Should LB 919 pass along with LB 825, a measure to exempt Social Security income from taxation, they would combine to reduce state revenues by about $900 million by FY 27-28. Revenue losses of that size would likely force future legislators 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 likely to be proposed would better target relief at low- and middle-income Nebraskans while putting less pressure on the state budget. These amendments could include using surplus dollars to provide direct payments to Nebraskans and a rate reduction in the third-income tax bracket.
(Editor’s Note: Previous OpenSky estimates regarding the tax-cut provisions now contained in LB 919 were based on Institute on Taxation and Economic Policy data. Our current estimates are based on Legislative Fiscal Office data. They also include the fiscal impact of the tax changes proposed in LB 723 that have been included in the latest amendments.)
