Nebraska Advances to #24 on State Tax Competitiveness Index
Nebraska’s 2023 income tax reforms are beginning to bear fruit in the form of enhanced state tax competitiveness. So says the findings of Tax Foundation’s 2025 State Tax Competitiveness Index, a tool that assesses the competitiveness of each state’s tax code. Nebraska moved up from #30 in the 2024 edition to #24 in the 2025 edition. Some of the improvement is attributable to Tax Foundation’s new methodology, while most of the improvement is due to Nebraska’s increasing competitiveness.
The Great Plains region has become a hotbed of tax competition, as reflected in the new Index rankings. Wyoming and South Dakota remain the top 2 states in the country for tax competitiveness. Missouri’s #13 national ranking is far better than average, and Iowa jumped from #33 to #20 from 2024 to 2025, thus leap-frogging Nebraska. Kansas ranks #25 and Colorado #32 to round out Nebraska’s neighbors.
The 2023 income tax reforms are driving improvements to Nebraska’s overall ranking. Nebraska’s corporate tax has advanced to #20 in the country while Nebraska’s individual income tax is #26. At #13, Nebraska’s sales tax continues to be a competitive factor of the Cornhusker code, and Nebraska’s unemployment insurance tax is highly competitive at #3 in the country. Yet Nebraska’s property tax ranks as one of the worst in the country at #45, holding back the states’ overall competitiveness.
| Tax | Ranking |
| Corporate income tax | #20 |
| Individual income tax | #26 |
| Sales tax | #13 |
| Property tax | #45 |
| Unemployment insurance tax | #3 |
Tax reform opportunities are expected to be more challenging in the next 3 years than they were in the past 3 years according to new revenue projections from the Nebraska Economic Forecasting Advisory Board. The Board projects little revenue growth through June 30, 2027.
Tax Foundation notes several areas where Nebraska can make improvements without a steep revenue cost. Nebraska’s income tax rankings will continue to improve over the next several years due to rate reductions that are already schedule in the tax code. In addition, Nebraska should improve its individual income tax by eliminating its “convenience of the employer” rule that allows for double taxation of the income of remote workers. Nebraska can improve its corporate tax through restoring full expensing for investments in capital assets, as it existed from 2018-2023.
Still more structural improvements are needed with the property tax. First, Nebraska is one of the few states that still imposes a capital stock tax, known in Nebraska as the Nebraska Occupation Tax. Capital stock taxes are a remnant of an era that pre-dates corporate income taxation. They directly disincentivize investments in the state by taxing the net worth of a business regardless of profitability. These taxes are complicated and generate minimal revenue.
Nebraska can also improve its property tax by eliminating its inheritance tax and restoring a de minimus exemption of at least $10,000 for its tangible personal property tax. Finally, Nebraska can improve its property tax by directly lowering levies, which will lower the effective property tax rate.
Nebraska’s improved tax ranking is welcome news after years spent reforming the state’s tax code. Nebraska must guard the gains it has made and ensure that income tax cuts phase in as scheduled. Further improvements are available and greatly needed, particularly for the state’s property tax, which remains ranked #45 in the country due to high rates and a variety of structural impairments. Lawmakers should enact property tax relief to ensure both lower rates and a better tax structure in coming years.