4 Ways to Make Nebraska Compete with Anyone
As Nebraskans, we’re proud to say our state is the place for the Good Life. Over the years, Nebraska’s had its fair share of controversial mottoes and even license plates. But through it all, the concept of the “Good Life” has been considered about as good as it gets when it comes to capturing what most of us see as special about Nebraska.
To me, the Good Life has always been Nebraska’s own version of the American Dream. Our individual dreams will look different from each other, but they’re basically rooted in the idea of creating a better life for ourselves and future generations through honest work.
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Now, many of us think one of the benefits of the good life is that even our largest cities don’t have the hustle and bustle of New York or LA, but we also know that to have the promise of the Good Life ring true for more people, we still need to be willing to shake things up and borrow the best the world has to offer.
After all, everybody likes seeing things like new restaurants open on our main streets, new employers locating near where we live, and to take part in exciting events happening that make people want to be here. These things only happen for long if there’s a promising market in a state or community where people are willing to pay or work to sustain these amenities and opportunities.
With all due respect to dear old Nebraska U, while there may be no place that makes us feel like Nebraska, when it comes to providing that marketplace, there are actually a lot of places like Nebraska. There are lots of states with moderately affordable housing, low unemployment, and a good mix of livable cities and rural communities where people and businesses would want to put down roots.
Using data from the IRS and other government sources, you can actually track the movement of Americans from one state to another. From tax year 2019 to 2020, Nebraska was 45th, or just a few places from the bottom, for the net percentage of income taxpayers brought from other states by moving. The top state gaining taxpayers under this measure was Idaho. As of this post, Idaho has a slightly smaller population than Nebraska, but that may not be the case in the near future.
In just that brief period of time, Idaho added a net of more than 36,000 taxpayers (or a 2% boost to its population), while Nebraska lost a net about 4,200 people to migration. Of course, both of our populations are still growing because people who live in Nebraska are having decently sized families, but what this means is that there are not enough people moving to Nebraska compared to the number of people leaving for other states.
Here’s an assortment of states that are also making gains.
- South Carolina added a net of just under 54,000 people.
- Arizona added 80,000.
- Tennessee netted 45,000.
- New Hampshire gained nearly 10,000.
While the South and the Mountain West tend to be the fastest growing parts of the country in recent years, closer to home, Missouri also gained a net of about 9,000 people. This demonstrates that there are states making a solid case to new residents in every region of the country.
Acknowledging that Nebraska doesn’t have a monopoly on America’s idea of the Good Life, I want to share four ways Nebraska can give itself the best competitive edge with these states when it comes to getting a great job, starting a business, being a taxpayer or welcoming innovators.
If we succeed in these four areas, it will not only give us a more level economic playing field with other states, but it will make our other qualities (which are harder to measure in terms of dollars) even more appealing. These four strategies are:
- Rolling out the red carpet for workers who are already trained and licensed in other states.
- Scaling back Nebraska’s taxes on paychecks and property in a big way.
- Welcoming startups and innovators with a regulatory sandbox.
- Making Nebraska a better place to live by making it a better place to die.
Every single item on this list draws back to the most precious resource for our state’s future: people. Nebraska needs to provide distinct economic advantages for people who want to be able to determine their economic and personal future. And look, Nebraska’s not a terrible place for economic opportunity by any stretch of the imagination.
In many ways, it’s getting a little bit better all the time. But in any given year, there are hundreds of thousands of Americans choosing the new state to live in. And right now, Nebraska’s simply not competing with a lot of the comparable states.
#1. Let’s start getting competitive by rolling out the red carpet for workers who are already trained and licensed in other states.
It may not seem concerning until it impacts you or someone in your life, but Nebraska makes it harder than many other states for workers to bring their career skills from another state or the military. This is all the more unfortunate, because Nebraska’s widely acknowledged to have one of the country’s most severe workforce shortages.
The excesses of job licensing laws are a tough nut to crack because while it’s in the public’s interest to have access to a wide range of skilled professionals, it’s not in the average person’s interest to go make a fuss in Lincoln about their ability to schedule an electrician or book a massage therapist in a rural community.
On the other hand, it may very well be in the interest of various Nebraska-based industry groups to use the legislative process to make it harder for an electrician trained by the military or a massage therapist license from another state to continue their career here.
Mike Byer, a U.S. Navy veteran from Bridgeport, Nebraska experienced this difficulty firsthand after completing a military apprenticeship for electricians. During his eight years in the service, Mike came home to Nebraska to apply his trade as a civilian, but he was told by state officials that he would have to work another three years in an apprenticeship to get his Nebraska license.
In the race to recruit talented people like Mike, more states are adopting laws that remove this obstacle and ease licensure for those who are already working in occupations in other jurisdictions. The concept is called universal recognition.
It doesn’t require any kind of special arrangement between states or additional requirements for workers to attain a job license. A state with universal recognition simply recognizes the workforce skills of licensing applicants who come to their state from outside the state or the military.
The driving force behind this idea is that people don’t lose skills they’re already using in the workforce just because they move across state lines. A cosmetologist employed today in Arizona isn’t less qualified because they moved to Nebraska and vice versa. Arizona was actually the first state to pass a universal recognition bill in 2019. Almost half of the states have since followed them, including most of Nebraska’s neighbors.
Adopting universal recognition in Nebraska would send a powerful message to those considering a move that we not only want them, but we want members of the family who hold the job license. It will let them know that we respect and honor the training and experience that they’ve had in other states in their chosen occupation and that they can continue their work here.
And the evidence from Arizona already demonstrates that universal recognition brings more people from licensed fields into the workforce. In just one year, 2,600 new licenses were issued in Arizona under this program.
Universal recognition is designed to keep people from needing to start over with new education or training when they have a record of qualifications in another state or even the military. It doesn’t prohibit Nebraska from betting these applicants from out-of-state, such as performing criminal background checks, nor does it eliminate any state or federal licensing requirements.
In short, even states that have some of the most abundant and attractive labor markets still see universal recognition as an economic benefit for recruiting people to their states. Nebraska’s leaders can’t afford to neglect the workforce issue and can easily emulate the success being enjoyed in other states.
I’ve often said that excessive barriers to getting a job and starting a business can effectively become a hidden 100% tax on economic opportunity, which in many ways is much worse than other more transparent taxes we pay. Still, all the other taxes we pay in Nebraska add up to and influence whether people think the good life is really as rewarding as it should be.
This is why our second strategy is just as important.
#2. Scaling back Nebraska’s taxes on paychecks and property in a big way.
One of the biggest questions Nebraskans ask us is why our state’s tax system is the way it is and what can be done about it. I’ve already mentioned that Americans are moving with their feet and not choosing Nebraska in large enough numbers, but Nebraskans who live here aren’t happy with the status quo either.
In the Blueprint Nebraska economic visioning process, participants identified reducing or eliminating taxes as a top three concern for ensuring Nebraska’s economic vitality. Of course, we all have to pay taxes, but Nebraska is currently way down the national standings for the competitiveness of our tax system.
In 2022, our tax burden was not only higher than all of our neighboring states, but was placed just one ranking above the dozen most burdensome states for taxpayers. Compared to most of our peers, Nebraska levies heavier taxes on income and property permitting our government to take more money out of our paychecks and increasing the cost of owning housing or business property to a greater extent than most other states.
Unfortunately, these are very things Nebraska needs to thrive. The more people willing to work here and earn a paycheck, more housing and businesses of all sizes to invest in, and more families that want to stay in the homes and farmland they’ve known for generations.
When it comes to competing with other states, a lot of people who engage in water cooler talk about taxes might land upon discussing states like Texas, Florida and Tennessee which have no personal income tax. But in recent years, a large crop of states have been making their own waves on tax reform to signal to relocating Americans that they can also offer robust economic opportunities that residents may not be finding in current homes.
States like Idaho, Georgia, North Carolina, Arizona, and even Iowa and Missouri have made significant changes to their tax structures. One of the biggest trends among these states is to adopt lower flatter state income taxes. In effect, these states are saying they aren’t going to increase your tax rate if you earn more income in their state.
In some cases, they’re also sparing many of the residents from paying very much income tax at all because the income tax may not kick in until a generous amount of income is earned. In addition, many of the four mentioned states have more restraint on the property tax side of their equation, meaning they give their taxpayers more breathing room on what they earn and what they own for the long term.
Some of these states do have higher sales taxes than Nebraska, but not all. Some are comparable or even lower, and just spend less taxpayer money overall. Nebraska has the same opportunity to remedy how it taxes, paychecks, and property as all of these other states.
In fact, in the pandemic years, the Unicameral experienced a surge in revenue that gave the state literally billions of dollars in cash reserves to weather financial uncertainty. Rather than spending this money on more government programs, the state should set an ambitious plan to expeditiously use its excess tax collections to bring Nebraska’s tax burden closer to its competitors.
Let’s not forget that by creating a better tax system for everyone, the financial and political justification for lawmakers to provide special treatment under our tax code also goes way down.
For decades, Nebraska’s tried to make up for the fact that its tax policies were not so great by offering a more select group of taxpayers exemptions, deductions, credits, and incentives. But in the long term, these policies haven’t attracted the people that are at the core of Nebraska’s growth potential, and they’ve also created inequities in how the tax burden is shared.
But things don’t have to stay that way.
Blueprint Nebraska has developed a tax modernization plan vetted by independent research and supported by urban and rural taxpayers that can help create a simpler, sustainable tax system that’s more supportive of economic growth in Nebraska. You can learn more about the plan at platteinstitute.org/blueprint.
One of the key economic interests Nebraskans also share is making our state a better hub for entrepreneurs and technology that bolsters industries like finance and agriculture among others. That brings me to our third strategy for increasing Nebraska’s competitiveness and unleashing the Good Life.
#3. Welcoming startups and innovators with a regulatory sandbox.
I won’t blame you if your first question is, “what the heck is a regulatory sandbox?” Simply put, it’s a way to give business startups that don’t fit the norm a space to try new ideas.
Every state has a regulatory code that consists of rules for doing business. And of course, some of these rules make sense and benefit the public, but because these regulations are not made by legislators but by state agencies, they can sometimes escape necessary scrutiny. And there are just too many rules for any one person to keep track.
If you sat down to read Nebraska’s regulatory code for 40 hours a week, it would take you 10 weeks to read it all. At its worst, the regulatory process can be captured by existing firms to prevent new innovative competitors from entering the market. But even at best, state agencies can promulgate rules that prevent creation of new technology-based firms.
Because regulators can’t anticipate the products and services that new technologies will introduce to the marketplace, they may have created rules that prohibit a new business model that would be beneficial to the public. A regulatory sandbox helps to solve this problem.
Just like a kid can sit down in a real sandbox and safely play for hours, creating all kinds of shapes and designs with their pale and shovel, a regulatory sandbox is a space established by state regulators that allows firms and entrepreneurs to test new business models under supervision.
A regulatory sandbox creates a time limited trial process for a new type of business, product or service. These trials are often for technology-based projects, but regulatory sandboxes have applications for numerous industries.
In some countries and states, regulatory sandboxes are supervised by one particular agency for a certain set of businesses, like financial technology or insurance. While other jurisdictions offer all inclusive regulatory sandboxes where firms can apply to join the sandbox with any type of business proposal.
Regulatory sandboxes got their start in the United Kingdom in 2016 with a financial technology sandbox. Since then, and as of this post, regulatory sandboxes have been launched in about a dozen U.S. states and the World Bank reports that more than 50 countries now offer one.
Since 2019, South Korea has expanded its regulatory sandbox to various fields. They’ve allowed firms to test ways to recycle electric vehicle batteries, design commercial laundry equipment that cleans clothing without using any water, create safer and more high-tech, medical and personal protective equipment, and even how to market home beer brewing appliances.
A firm’s participation in a regulatory sandbox doesn’t obligate regulators or lawmakers to change regulations or laws once their trial in the sandbox is complete. But this process does tend to spur change over time.
In South Korea, hundreds of sandbox trials have been run and thousands of regulatory restrictions have been modified as a result of regulators observing how companies perform when the old regulations were waived inside the sandbox. The United States does not have a federal regulatory sandbox as of yet, but it could be coming in the near future. And the states that are prepared will reap the benefits.
Legislation for a regulatory sandbox received a hearing in Lincoln in 2022, but did not advance to full legislative debate. Legislation is expected to be introduced once again in 2023. It may be the case in Nebraska, we’ll have to start small with an industry specific regulatory sandbox to prove to state lawmakers that the idea has economic benefits and that the state agencies can manage the process.
And while sometimes even making small steps into new frontiers can add up over time, there is another economic policy area where Nebraska has dragged its feet for so long. It’s no longer just stuck in the 20th century, but almost as far back as the 19th century.
I’m talking about the fact that Nebraska’s one of the very last states in the country and soon to be the only state among its neighbors that has an inheritance tax.
Nebraska’s Inheritance tax was created in 1901 and is based on a 19th century concept of tax and economic policy that no longer has any place in American life. It’s stubbornly stuck around because county governments, which are the only governments in Nebraska to levy this potentially heavy tax, believe they couldn’t live without it.
But with Nebraska experiencing historic revenue surpluses that can enable this state to see county governments through a transition, it’s long past time for a change.
#4. Make Nebraska a better place to live by becoming a better place to die.
Let me put the inheritance tax situation in Nebraska into perspective. The inheritance tax in Nebraska is not an estate tax. It’s a tax on regular people who receive Nebraska property from a loved one who has died. That can include your parents, grandparents, aunts or uncles, or even a friend.
Currently, the only full exemption to the county inheritance taxes for spouses, or most recently for people age 21 and under. That was a change we supported at the Platte Institute to make sure that younger Nebraskans would not be prevented from having the chance to own property and start an adult life in Nebraska because of taxes they may not be able to afford.
Of course, we won’t be satisfied until people at any age are exempt from the inheritance tax, but it’s a good start. The county inheritance tax makes Nebraska, especially uncompetitive because there aren’t any states nearby that plan to use inheritance taxes ever again. The last holdout among our neighbors was Iowa, but now they’re eliminating that tax too.
This means, if you plan on owning property in any of the states west of the Mississippi River, other than Nebraska, your loved ones will not need to pay extra taxes to receive your property after you die. Or, if you plan on inheriting Nebraska property one day, you may have to get legal help to pay taxes in Nebraska that you wouldn’t pay almost anywhere else in the country.
But one of the truly weirdest parts of Nebraska’s county inheritance tax, is that the tax rate increases as the relationship between the person who died and the heir becomes more distant. Besides being kind of nosy and mean to people who don’t have a traditional family, or who have loved ones who they’re not related to, this law makes no economic sense.
Why should the government get to squeeze even more money from property, which is already taxed every year, just because the previous owner died and decided to give their land they’re building to someone they’re not related to or not closely related to? What possible public interest does it serve to tax this group of people more than anyone else?
Every state has the opportunity to levy this tax if they really want to, but from the lowest tax states to the various highest tax states, the inheritance tax has been consistently discarded across the U.S. map. Whether your Good Life is coming to an end or is just beginning, you shouldn’t be disadvantaged in owning property in Nebraska compared with other states.
Having the ability to own a small piece of the world is a big reason. Someone may choose to relocate to a new state, and it’s a shame that Nebraska’s laws are currently less respectful of this opportunity than most other states.
Fortunately, I have great hope that the inheritance tax may not be long for this world. Nebraskans hate the tax and are hungry for leaders in both parties to show some backbone and do the hard work of laying it to rest.
Today, we’ve discussed four strategies for Nebraska to be able to compete with any state out there and offer economic policies that really allow what’s special about the Good Life to shine through. Once again, they are:
- Rolling out the red carpet for workers who are already trained or licensed in other states.
- Scaling back Nebraska’s taxes on paychecks and property in a big way.
- Welcoming startups and innovators with the regulatory sandbox.
- Making Nebraska a better place to live by making it a better place to die.
We have so much to be proud of as Nebraskans, but if we want more people to become Nebraskans and contribute to our quality of life, we can’t deprive them of the chance to find their Good Life and what would make them proud to be part of our state. Lawmakers in Lincoln should prioritize policies that enhance economic freedom and welcome all kinds of people to create new opportunities in Nebraska that will make the Good Life greater than ever.