I’m in Kansas today presenting some of our recent studies, but today’s state taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. news comes from neighboring Nebraska, where Gov. Dave Heineman yesterday signed into law a modest income tax reduction package. From KVNO:
When it’s fully implemented in 2014, the bill will save a family of four with $50,000 income about $54 a year. But another bill, allowing cities to increase their maximum sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. rate from the current 1.5 percent to 2 percent, could negate that.[…]
Heineman reiterated his opposition to the measure. “When that bill reaches my desk I’m going to veto it. I hope the Legislature will reconsider. Why would you, again, lower taxes in the morning, and increase them again in the afternoon? It doesn’t make economic sense,” he declared.
Here are Nebraska’s current income tax bracketsA tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat. and rates and how they will change under the new legislation:
Current Nebraska Income Tax Brackets and Rates (2012) and New Tax Rates (2013)
|
Brackets (Single) |
Brackets (Married Filing Jointly) |
Brackets (Head of Household) |
Current Tax Rates (2012) |
New Tax Rates (2013) |
|
>$0 |
>$0 |
>$0 |
2.56% |
2.46% |
|
>$2,400 |
>$4,800 |
>$4,500 |
3.57% |
3.51% |
|
>$17,500 |
>$35,000 |
>$28,000 |
5.12% |
5.01% |
|
>$27,000 |
>$54,000 |
>$40,000 |
6.84% |
6.84% |
New Tax Brackets and Rates (2014 and thereafter)
|
Brackets (Single) |
Brackets (Married Filing Jointly) |
Brackets (Head of Household) |
New Tax Rates (2014 and thereafter) |
|
>$0 |
>$0 |
>$0 |
2.46% |
|
>$3,000 |
>$6,000 |
>$5,600 |
3.51% |
|
>$18,000 |
>$36,000 |
>$28,800 |
5.01% |
|
>$29,000 |
>$58,000 |
>$43,000 |
6.84% |
The Journal-Star reminds readers that the plan is significantly scaled back from the original proposal:
Heineman’s plan (LB970) originally would have cost $327 million over three years. It was then pared to $148 million and then to $97 million by lawmakers.
The amended plan axed a proposed reduction in corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. rates and jettisoned the governor’s plan to eliminate inheritance taxes, which are paid to Nebraska’s 93 counties and amount to as much as $48 million a year.
“I view this bill as the beginning of future efforts that will allow Nebraskans to keep more of their hard-earned dollars,” Heineman said.
Interestingly enough, today is Nebraska’s Tax Freedom Day. Nebraska is also one of a number of states involved in what the Wall Street Journal described recently as a “Heartland Tax Rebellion.”
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