Lowering taxes to attract and retain residents discussed

Will lowering income taxes keep and attract people to Nebraska? That was among questions raised at a public hearing Thursday that considered Gov. Jim Pillen’s tax proposals.

Thursday’s Revenue Committee hearing focused on several parts of Gov. Pillen’s proposed tax changes, including lowering the top personal and corporate income tax rates from around six percent to 3.99 percent over the next five years. Pillen invoked a sports rivalry, saying the adjustment is needed for Nebraska to compete with other states.

“Our neighboring state, Iowa, has lowered their rate to 3.99, and that takes effect in 2026. I think we all agree we can't be beat by Iowa,” Pillen said, evoking chuckles from his listeners.

According to Sen. Brad von Gillern, the first step in cutting taxes is to speed up tax cuts that were already approved last year.

“The acceleration is to stop the bleeding of people and corporations leaving the state. There are people leaving all the time. I've got personal friends that have left and moved to Florida, to Texas, South Dakota, for Oregon… simply for taxation reasons, and they've taken their businesses with them,” von Gillern said.

Not everyone agreed that taxes were the main reason people are moving. Sen. George Dungan said there could be other factors at play.

“There's some evidence to show millionaire migration, I know, to places like Florida, but obviously they're a lot warmer than we are here. So there's other reasons, I know, people are incentivized to move elsewhere,” Dungan said.

Dungan also said by his calculations, the full income tax cut would save someone making $30,000 a year about $300.

“I struggle to believe that somebody is going to move into our state based on $300 of reduction of tax. It's going to cost them more than that to hire the moving van,” he said.

But Budget Administrator Lee Will argued that kind of savings, year after year, would make a difference.

“I would argue that if you're making $30,000, $300 would be a big impact,” Will said.

Rebecca Firestone of the Open Sky Policy Institute, a non-partisan organization focused on fiscal policy, opposed the tax cuts as regressive.

“Cuts to both the corporate and personal income taxes predominantly benefit high income Nebraskans,” Firestone said.

She said that’s because the top tax rates that would be cut apply to the highest personal and corporate incomes.

The committee also heard Pillen’s proposal to take away community colleges’ ability to levy property taxes, and instead receive all their tax support from the state. Pillen said that would accomplish two goals.

“This bill gives the responsibility to the state, creating the opportunity to appropriately invest and strengthen our community colleges, and fund them fully, to make them all stronger, and provide property tax relief at the same time,” he said.

Several community college representatives opposed the bill, saying it would erode local control, and if state funding faltered, force them to raise tuition. Arlyn Uhrmacher, vice chair of the Southeast Community College board, was among the opponents. He said a better way to lower property taxes would be for the state to simply send community colleges more money.

“Why take away the taxing authority? If you’re going to put enough money in there from state aid to fund us, we won’t need to use our taxing authority, unless there’s a specific situation that comes up,” Uhrmacher said.

Still to come Friday, the Revenue Committee will hold a hearing on Pillen’s proposal to change the way agricultural land is valued for property tax purposes.