Legislative Testimony for LB615: Reduce income tax rates and provide for certain transfers from the Cash Reserve Fund
Good afternoon Chairwoman Linehan and members of the Revenue Committee. I am here today to testify in support of this bill.
It is no secret that Nebraska is a high taxed state. Property taxes are the 7th highest in the nation, income taxes are the 15th highest, and the average state and local sales tax rate is the 25th highest. It is also no secret that the Platte Institute supports comprehensive tax reform.
While we agree that many of our tax rates put Nebraska at a competitive disadvantage, reform should only be done in a responsible and sustainable manner. Amendment 314 to this bill proposes a minimum balance of $500 million to the state’s Cash Reserve fund before tax relief can begin. We think this is a worthy fiscally responsible condition to establish prior to tax reform efforts. Requiring a minimum balance in the cash reserve fund is a good precondition to include before making any reductions to the state’s income tax rates. This sets a good long term goal because good tax policy should be to collect needed revenues for supporting essential services that maximize Nebraska’s economic growth, not merely maximizing tax revenues.
It is also no secret the Platte Institute supports property tax reform. We are happy to see property tax as a primary focus in LB615, however, we think structurally reforming the property tax and setting more limitations on local taxing subdivisions by lowering the levy or adjusting valuations is a better way to lower the tax burden then simply adding more to the Property Tax Credit Relief Fund.
In the past we have supported the use of revenue triggers for tax reform. Triggers do not guarantee a tax cut, but are a responsible method that only enables incremental reductions when state revenue growth shows the tax reduction can be afforded through that growth. We would however caution the committee from using triggers based on “expected growth” and would rather see triggers based on “actual receipts” to ensure a safeguard against an overly optimistic forecast.
Overall we see LB615 and AM314 as a responsible solution to Nebraska’s detrimentally high tax rates with long term goals to make Nebraska a more competitive and fiscally stable state.
Thank you for the opportunity to testify today. I am happy to answer any questions the committee may have.