Last week the Nebraska legislature gave first round approval to LB 629, a bill introduced by Sen. Danielle Conrad that would require Nebraska governors to include the cost of Nebraska business tax incentive programs and other tax expenditures in their respective biennial budgets.
There is currently no requirement in Nebraska statute that calls for a review of the effectiveness of tax incentive programs that have been passed into law. That should change.
LB 629 would fix the problem by requiring a Department of Revenue report to be included in the governor’s budget proposal outlining the number of jobs and types of jobs that have been created by incentive programs. The governor would also be required to recommend which programs should continue, be modified or even terminated for poor performance.
Nebraska has utilized business tax incentive programs, such as the Nebraska Advantage Act, as a way to help offset the state’s corporate income tax rate for businesses looking to locate in the state. While these programs have made the state more competitive when recruiting new businesses there has been no oversight as to their effectiveness and return on investment for the state’s investment – and the investment has been quite substantial. The New York Times recently reported that Nebraska is the third biggest incentive program spender per capita in the nation at $1.4 billion annually.
In a report issued this year, the Nebraska legislature’s Performance Audit Committee brought to light the fact that currently there is not a good method for determining if money spent on business incentive programs is creating the desired outcome. LB 629 helps to resolve that problem by forcing elected officials and the Department of Revenue to take a look at each program on an annual basis, thus protecting Nebraska taxpayers and providing the state with empirical evidence as to which programs are working as the Governor and legislature look to create new incentive programs.
While a full repeal of the corporate income tax rate as proposed this year by Gov. Heineman would be the ideal solution to fixing Nebraska’s burdensome business tax policy, LB 629 is a great step toward protecting Nebraska taxpayers and bringing a much needed level of transparency to our state government.