Nebraska nets $720 million in revenue in May
Nebraska’s state tax revenues remain above projections as the state continues its rebound from the COVID-19 pandemic. According to the most recent Nebraska Department of Revenue news release, gross revenues for the month of May 2021 were $892 million or 72.6% above the certified forecast. Net revenues for the month were $720 million, which is 70.2% above the certified forecast from August 2020. This is partially due to less-than-expected tax refunds.
When looking at the revenue sources, corporate income tax revenues stand out. May gross corporate income tax revenues were 200.9% above forecast, and May net corporate income tax revenues were 375% above forecast.
During the 2021 legislative session, policymakers were cautiously optimistic when it came to moving forward tax reform legislation, particularly with LB432. The original version of the corporate income tax proposal was to lower the top corporate income tax rate from 7.81% to 6.84%, bringing the rate in line with the state’s top personal income tax rate, which is paid by most other types of businesses. What evolved was a 4-year phase-in of this 1 percentage point decrease. May 2021 net corporate income tax accounted for only 3.4% of total net revenue.
While hindsight is known for being 20/20, this 4-year phase-in will delay the ability for corporations to reinvest tax savings in technology, equipment, and employees. Regardless, the passage of LB432 is a good, if incremental, improvement to the state’s tax rates.
In sum, Nebraska continues to see a strong revenue picture in the post-COVID economy. Hopefully these numbers will prompt lawmakers to take a serious look at much needed tax modernization to become competitive nationally and encourage more people and businesses to experience the Good Life in Nebraska.