November tax revenues remain strong as 2021 Legislature approaches
Nebraska’s November General Fund tax revenues are in, and the good news is that revenue forecasts were both exceeded by actual collections for both the month and the fiscal year.
According to a press release from the Nebraska Department of Revenue, the month of November saw revenues 14.3% above the certified forecast and revenues for the fiscal year are currently 9.6% above the certified forecast.
The only tax category that fell below forecast was corporate income tax, which is 39.4% below the November projections and is 3.2% below projections for the fiscal year.
Before we get ahead of ourselves, know that Nebraska is not the only state experiencing more than anticipated tax revenues.
Idaho is seeing record-setting numbers for a budget surplus in fiscal year 2021. Minnesota is projecting a $641 million surplus for fiscal year 20/21, while Iowa finished the last fiscal year with a surplus of $305 million. Even California, which has been reported to have dire budget deficits ever since the pandemic started in March, is now experiencing higher than anticipated tax revenues for a huge unexpected budget surplus of $13.1 billion.
What does all this mean? Well, many states restrained spending and made tough financial decisions amidst the pandemic to be careful with the tax revenues they had. Nebraska lawmakers were even hesitant to conform to the CARES Act tax changes for fear it would push the state into a budget deficit.
The good news of strong tax revenues is not a signal to increase spending. Nebraska lawmakers need to remain prudent with these precious tax dollars. Many Nebraska businesses are still not operating at full capacity, and many workers are still unemployed or working less than before the pandemic.
My friends at a Texas think tank created a five-step strategy to help Texas recover from the shutdowns and support economic growth.
- Pass a conservative budget
- Reduce government spending
- Reduce regulatory burdens
- Reject tax increases
- Use the Rainy-Day Fund/Cash Reserve responsibly
While all of these seem to be common sense, sometimes it helps to remember that just because tax revenues are exceeding expectations does not mean it is time to spend more money or create new taxes. In fact, reducing or modernizing Nebraska’s antiquated tax code might even help push our recovery into warp speed.
The next Legislature has a lot of work to do, but spending more money or raising taxes should not be on the top of the list if we want to continue our recovery from the COVID-19 pandemic.