Editorial Roundup: Nebraska

Lincoln Journal Star. April 9, 2022.

Editorial: Tax cuts don’t help poorest or bode well for future

Sen. Lou Ann Linehan got her income tax and corporate tax cuts, and Sen. Tom Briese succeeded in his effort to reduce property taxes through income tax credits.

But, after the Legislature’s 43-0 passage of the massive tax cut package in LB873, it becomes clear that some Nebraskans will benefit far more than others.

The personal income tax cuts would leave out single filers making less than $40,000 and married filers making less than $81,000. Nebraska’s average household income is about $80,000.

Which means a large number of Nebraska income tax payers would not benefit from the tax cuts.

Nor will the property tax credits benefit anyone who doesn’t own property. Again, largely the same lower income strata would not benefit from the credits.

And the corporate income tax credits would leave out businesses making less than $100,000 of taxable income.

But Linehan, Briese and the other supporters of the “transformative” package claim that all Nebraskans will somehow benefit from the cuts.

That is uncertain at best.

Trickle-down economics that argues that tax cuts for the upper income will trigger growth that will benefit those who didn’t receive the cuts has long been proven to be a myth. Upper income and corporate tax cuts at both the federal and state levels have not been shown to have significantly stimulated the economy, generated jobs or higher wages.

One thing is certain. The tax cuts will take a giant bite out of future revenues, endangering the ability to adequately fund state programs and institutions, deliver services and pursue new initiatives.

Specifically, the Nebraska Department of Revenue estimates that the package would reduce state revenues by $565 million by fiscal year 2024-25, and the OpenSky Policy Institute estimated the reduction at $900 million by fiscal year 2027-28 when all the pieces of the package are fully implemented.

Hamstringing the government is always an underlying motive for tax cuts. The state can’t spend money it doesn’t collect. But reducing revenues by close to $1 billion will put Nebraska on the disastrous path trod by Kansas, where tax cuts created a government and school operations crisis.

Perhaps new revenues can be found through eliminating sales tax exemptions or new sources, such as, if it is legalized, taxes on marijuana, which have been a windfall for other states.

Maybe Nebraska will see enough population growth, job growth and increased economic activity to make up the revenue losses.

But if it doesn’t and no new revenues can be found, the legacy of the tax cuts is almost certain to be a future state taxing-and-spending crisis in exchange for some additional cash in the pockets of some, mostly higher income Nebraskans.