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Nebraska Tax Rankings Leave Room for Improvement

October 31, 2014

Good news for the hard-working taxpayers of Nebraska:  according to the nonpartisan Tax Foundation’s annual rankings for “business tax climate,” the state moved up five spots from 34th in 2014 to 29th in 2015. But while Nebraska is certainly trending in the right direction, there is still much work that can be done to create a better tax climate for both families and businesses.

The driver of Nebraska’s improvement was reductions and simplifications of the corporate and individual income taxes. This included removal of the unpopular and confusing alternative minimum income tax and tying the tax brackets to inflation. But despite these improvements, Nebraska still does not rank in the better half of either corporate or personal income taxes compared to other states. This is especially problematic when compared to neighboring states such Wyoming, South Dakota, and Colorado who rank numbers 1, 2, and 20th overall in tax climate. These states will continue to look more appealing to Nebraska’s residents and businesses which could cause many to leave for friendlier tax climates.

Nebraska must work to improve its competiveness through two main areas. First, the state should seek to continue to lower the individual income tax rate. North Carolina, which saw the biggest jump in the history of the index improved from 44th overall to 16th thanks to historic tax reform that lowered and flattened the income tax, cut the corporate tax, and reformed the sales tax. Nebraska should learn from North Carolina’s example and continue to lower its tax rates and broaden the base.

Additionally Nebraska’s property tax system is in dire need of reforms. Currently Nebraska ranks 39th in property tax rankings, unmoved from the previous year. While the rest of Nebraska’s tax code moves in a positive direction, property taxes have remained stubbornly in place. Property taxes should be brought into line with income taxes as to not distort the tax code and to help protect the pocketbook of Nebraska residents.

Nebraska has the opportunity to become a leader in low taxes and improved job, wage, and population growth. Other states in the Heartland as well as around the country continue to work to improve their tax competitiveness, and our state should not fall behind. Rather than resting on its laurels, taxpayers should continue to advocate keeping more of their own hard-earned money, in the process creating greater prosperity and well-being for all.

 

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