New corporate rate rankings highlight Nebraska’s pathway to a top 10 corporate tax code

New corporate rate rankings highlight Nebraska’s pathway to a top 10 corporate tax code

Nebraska levies the 18th-highest corporate income tax rate in the country in 2023, according to a new compilation of state corporate rates from Tax Foundation. The Cornhusker State’s top corporate rate was reduced from 7.5% to 7.25% on January 1st, making Nebraska’s top rate equal to New York’s at #18.


Nebraska is one of fifteen states that imposes a progressive tax structure on corporate income, while twenty-nine states levy a single-rate structure. Nebraska’s two-rate corporate tax structure imposes a lower rate of 5.58% for the first $100,000 of income and a higher rate of 7.25% on corporate income beyond $100,000.

Tax Foundation points out that the “equity” argument that is used to favor progressive tax rates does not apply to corporate taxes. Equity is often used as a justification to tax higher individual income at higher rates, and lower individual income at lower rates. The reason that the equity argument does not apply to corporate income is because the size of a corporation’s profits bears no relationship to the income level of its owners.

For tax purposes, a corporation is simply a stack of legal documents that sets up an entity that collects and remits taxes. But the legal documents themselves do not actually pay taxes. Corporate taxes are actually distributed across and paid by the corporation’s consumers (via higher product prices), workers (via lower wage rates), and shareholders (via lower investment returns). The pro-equity “ability to pay” argument, which favors higher tax rates on higher incomes, is invalid for corporations because Americans of all income levels purchase from, work for, and own highly-profitable corporations. According to Jeffery Kwall, Professor of Law at Loyola University Chicago School of Law:

Graduated corporate rates are inequitable—that is, the size of a corporation bears no necessary relation to the income levels of the owners. Indeed, low-income corporations may be owned by individuals with high incomes, and high-income corporations may be owned by individuals with low incomes.

Senator Lou Ann Linehan’s LB 754 would fix Nebraska’s most significant corporate tax problems by cutting the top rate and imposing a flat tax structure. The bill would likely result in a flat low corporate rate of 3.99% by 2027, dramatically enhancing Nebraska’s corporate tax competitiveness. In addition, Senator Brad von Gillern’s LB 492 would make full expensing the permanent tax treatment for capital investments in Nebraska, which would also improve Nebraska’s corporate competitiveness (read more about full expensing here and here).

The overall competitiveness of Nebraska’s corporate income tax is determined by both corporate tax rates and the corporate tax base. Tax Foundation’s 2023 State Business Tax Climate Index, which considers dozens of different factors, ranks Nebraska #29 for overall corporate tax competitiveness.


Senator Linehan’s LB 754 would greatly improve Nebraska’s rate competitiveness while von Gillern’s LB 492 would improve the corporate tax base. These changes would go a long way to moving Nebraska up the corporate tax rankings.

Policies that impact Tax Foundation’s corporate rankings include the state’s top corporate rate, whether the tax has a progressive rate structure, treatment of net operating losses, treatment of Section 168(k) expensing (i.e. full expensing), and whether the state is over-reliant upon corporate tax credits. In short, the rankings are far more robust than simple state-to-state rate comparisons. Yet it’s worth noting that neighboring Missouri is ranked #3 for corporate tax competitiveness based in part upon its well-defined corporate tax base and 4% flat tax rate.

Cornhusker State lawmakers should target a top-10 corporate code. Enacting both LB 754 and LB 492 would dramatically improve two factors that would propel Nebraska up the corporate tax rankings. While Nebraska has several competing tax reform priorities in 2023, corporate tax reform would cost the least in foregone tax revenue and would deliver the most competitive improvement per dollar of tax reform.

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