Nebraska's July tax receipts were less than expected for the fifth month in a row

Nebraska’s July net tax receipts came in under forecast for the fifth month in a row, although this time they were only short by 0.1% compared to expectations. This comes after cuts to individual and corporate income tax and amid a growing budget deficit.

Net receipts came in at $373 million, only slightly under the projected $374 million. General fund net receipts were $431 million the same month last year.

Gov. Jim Pillen has been championing individual and corporate income tax cuts, which were approved by the Legislature in 2023. The cuts lowered those rates from 6.84% to 3.99% incrementally, with the final cut going into effect in January next year. The current receipts reflect shrinking rates, as individual and corporate receipts were the only two categories that came in under forecast. Individual receipts were 17% below forecast and corporate taxes were 40% below forecast.

But sales and use taxes were 11% above forecast, bringing in more than $25 million more than expected.

Forecasts were put together by the Nebraska Economic Forecasting Advisory Board in February this year.

Nebraska’s budget is currently short by more than $208 million for this year. The next biennium is already short by $840 million.

While the Legislature inherited a budget deficit of around $471 million at the beginning of the session in January, senators managed to end with $6 million in the bank. However, tax receipts, particularly beginning in March, when receipts came in nearly 15% below forecast, sank the state back into a deficit. According to data released May 15 for the month of April, receipts were just over 8% less than expected. In May, receipts again fell short at nearly 8% below forecast.

Proponents of the tax changes, among them Sen. Robert Clements, who chairs the Appropriations Committee, agreed with Pillen that it is important to shrink the size of the state government. Moreover, ever-increasing property tax relief from the state to individuals and municipalities is a way for the government to return money to the taxpayer, both Pillen and Clements have said.

Opponents worry that relying on sales and use taxes can regressively impact people of a lower income. Rebecca Firestone, executive director of Open Sky Policy, told Nebraska Public Media News earlier this month that the state is weighed down by property tax relief, which contributes to the budget deficit.