Nebraska ranks 35th in national economic outlook according to policy group
Every year, the American Legislative Exchange Council (ALEC) releases their economic outlook rankings for states. The Rich States, Poor States ranking incorporates 15 different policy variables to look at the 50 states and determine their economic outlook. This is essentially a forecast for each state.
Since 2008, Nebraska has remained relatively steady in the outlook rankings nationwide, with a range from 29th to 37th. The 14-year average comes to a ranking of 33rd best in the nation. However, for 2021, our nationwide ranking was 35th.
I encourage you to look through the data of the report. It is interesting because it breaks down each variable and shows the trends from 2008 to 2021 for Nebraska. When you look through the time-series data, it is clear that most of Nebraska’s figures have remained constant for the past 14-years, showing that the state has not made many significant changes to any of the 15 variables measured.
So, you might be asking why our ranking changes if we are not changing any policy that would alter our data in these areas. The reason is because other states are constantly changing. As other states in the nation enact tax reform, or other pro-growth policies, they move ahead of Nebraska, and therefore the Cornhusker State moves downward in the rankings.
Here is a list of the 15 variables and where Nebraska ranks:
- Top marginal income tax rate, 6.84%, 31st
- Top marginal corporate income tax rate, 7.81%, 34th
- Personal income tax progressivity*, $18.93, 44th
- Property tax burden*, $38.94, 41st
- Sales tax burden*, $23.39, 26th
- Remaining tax burden*, $14.66, 11th
- Estate/Inheritance Tax Levied, Yes, 50th
- Recently legislated tax changes, $0.00, 12th
- Debt service as a share of tax revenue, 5.4%, 16th
- Public employees (FTE) per 10,000 of population, 650.8, 47th
- State Liability system survey (tort litigation treatment, judicial impartiality, etc.) 72.3, 8th
- State minimum wage, $9.00, 26th
- Average worker’ compensation costs per $100 payroll, $1.44, 25th
- Right-to-work state, yes, 1st
- Tax expenditure limits, 0, 32nd
*Means it is measured per $1,000 of personal income
How does Nebraska improve its economic outlook and its ranking?
First, the state needs to eliminate the inheritance tax. This is an outdated tax that only 6 states in the entire nation still have. To learn more about Nebraska’s inheritance tax, click here.
Second, the state needs to lower its high income tax rates. Having some of the higher rates in the region, on top of having multiple brackets, makes our state uncompetitive. These policies disadvantage Nebraska on many state-based rankings, and also in the minds of people who may consider moving to the state.
Third, the state needs to fundamentally reform its property tax system. Nebraska’s temporary relief programs are not working. The recently enacted LB1107 relief did not impact our ranking because it didn’t reduce the actual tax burden.
Overall, Nebraska is a great state from an economic standpoint, except for its taxes. If Nebraska can successfully modernize its tax code to reflect a 21st century economy, then Nebraska will be able to realize more substantial growth in future years. If it cannot, it will continue to have a more mediocre outlook, and potentially continue to drop in national rankings as other states surpass it with their own successful reforms.