Legislative Testimony: LB1264, Change provisions relating to inheritance taxes, sales and use taxes, and income taxes
Chairwoman Linehan and members of the Revenue Committee, my name is Jim Smith, and I am the Chief Strategy Officer at the Platte Institute. Previously, I served as President of Blueprint Nebraska for three years, and prior to that, as you all know, on this legislative committee.
Most of the time when the Revenue Committee has to make decisions about the impact of a bill, senators have to rely on a fiscal note from the Legislative Fiscal Office.
Because of the time and talent that has been invested in the Blueprint Nebraska process, LB1264 contains what may be the most vetted and calculated tax modernization framework this committee has ever considered.
The Blueprint Nebraska framework was independently analyzed by Regional Economic Models, Inc., which many know as REMI.
This particular economic model is used by state Departments of Revenue around the country to make educated decisions about the macroeconomic effects of changes to tax policy.
LB1264 changes some of the fundamental incentives Nebraska offers for workers, residents, and businesses, and the REMI model captures those variables to estimate how it will impact our tax revenue, population, and economy over time.
What REMI’s model shows is that the components of LB1264 produce the growth that every Nebraska policymaker wants to see in Nebraska, and that growth is realized in every region of the state.
Over ten years, this plan is estimated to recruit or retain 70,000 additional residents to the state, an increase of over $65 billion in Gross State Product, and $40 billion in personal income growth.
REMI also projects that the state will collect $470 million more than it would over the next ten years under our current tax code. Notably, because of the base broadening provisions in this bill, part of that revenue increase is due to a rise in corporate income tax collections, and the removal of itemized income tax deductions. Over time, the state gains more from removing sales tax exemptions than it gives up in income tax.
And we’re especially proud to have achieved a vision of tax modernization that is both highly competitive and fairly distributes the tax burden. The greatest percentage of tax savings under this plan is for Nebraskans who earn under $50,000, and it nears a 20% or more reduction in tax burden for these taxpayers in every region of the state.
I think it’s also worth mentioning that this particular number does not include the impact of reducing property taxes or eliminating the inheritance tax. It only takes the income and sales tax into account, so in many parts of the state, the total savings will be even greater than reflected in this figure.
On the other side of the income distribution, taxpayers earning more than $1 million will pay more than today. That’s because although our income tax rate will be lower, there will be fewer ways for these taxpayers to avoid paying income and sales taxes than under our current system.
But as the model shows, our top-earning taxpayers will do very well, economically speaking, under the Blueprint plan. Their personal incomes are projected to grow significantly more than they would under the current system.
And finally, I would just direct the committee’s attention to the fact that the distribution of economic activity, output, and investment in this model is very promising for Nebraska’s key industries.
The largest increases in economic output by industry are in food manufacturing, agriculture, and real estate, while the greatest increase in investment will be in construction, real estate, and computer and electronic product manufacturing.
These are just a few of the industries where the model shows very strong growth and investment, but they are all critical areas for creating the opportunities and amenities that will make Nebraska communities statewide even more desirable places to live and work.
With that, I strongly encourage your support of LB1264 and I’d be happy to take any questions about the model or the development of Blueprint framework.