Nebraska Approves Modest Income Tax Reduction

I’m in Kansas today presenting some of our recent studies, but today’s state tax 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 tax 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 brackets and rates and how they will change under the new legislation:

Current Nebraska Income Tax Brackets and Rates (2012) and New Tax Rates (2013)

New Tax Brackets and Rates (2014 and thereafter)

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 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.”

More about Nebraska here.