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Brace yourself Nebraskans for another year without meaningful property tax relief.
That’s because the “One Big Beautiful Bill” means that Nebraska will have to do without about $216 million in state income tax revenue over the next two years, and $406 million less over the next four years.
That’s a Big Gulp of funding for a state budget that lawmakers had already cut by nearly $400 million to balance the state budget.
As you recall, during the last session of the Nebraska Legislature, meaningful additional property tax relief was nixed after it was necessary to dig into the state’s cookie jars and cut back on spending and tax incentives, to make the budget balance. So more cuts likely means, again, no relief from property taxes.
Nebraska’s budget pogoes like a grade schooler on a teeter-totter, up and down, up and down.
Only a couple of years ago, the state was swimming in extra, post-COVID era cash, enough to have legislators funding new marinas on lakes, expanding several museums and dreaming about building a huge lake between Omaha and Lincoln, which is now dead.
But that was then, and this is now. The farming sector is hurting, via a combination of low crop prices and exploding costs of inputs, in part fueled by the tariffs imposed by President Trump.
An advocacy group, Farmers for Free Trade, recently estimated that Nebraska’s farmers, through June, had spent an additional $51 million due to new tariffs on things like steel, building materials, fertilizer and equipment, according to the Lincoln Journal Star.
That puts a crimp on farm income, and in turn, state income taxes.
The One Big Beautiful Bill won approval from every member of the all-Republican Nebraska congressional delegation. They defended the loss of state income tax revenue by trumpeting the tax cuts in the OBBB.
U.S. Rep. Mike Flood said that without the bill, a family of four earning $76,484 would have seen a $1,600 increase in their income taxes. U.S. Sen. Pete Ricketts gave an even bigger benefit, of $2,443 less in taxes.
To be fair, some of that tax break is expected to be offset by higher consumer prices due to the tariffs.
The conservative, pro-business Tax Foundation says that 71% of the food imported by Americans will increase in price, things like imported liquor, baked goods, coffee, fish and, gulp, beer. That group foresees a $1,300 impact on the average family. Another group, the liberal Center for American Progress, projects an even higher hit on the pocketbook, of $2,400 for the average family. What can lawmakers cut now? And will Gov. Pillen get the additional $500 million in budget cuts he was calling for only a couple of months ago?
Does the state suspend construction of a new state prison to replace the State Penitentiary and relieve overcrowding (exacerbated by pledging to take an additional 280 federal immigration detainees at the Cornhusker Clink)? Does the state skip the $628-million Perkins County Canal?
What about pausing, for a year or two, the gradual reduction in state income taxes -- to 3.99% by the 2027 tax year -- passed a few years ago?
State Sen. Tom Brandt of Plymouth had a simple solution to the state’s revenue shortfall last year – pause the gradual, state income tax reduction at 4.99%, thus saving the state nearly $500 million over the next two fiscal years.
That would more than solve the state’s looming budget problem, and leave some extra funds to provide some property tax relief, which I hear over and over is the state’s top tax problem.
State senators, when they were debating the bill to cut the state’s top individual income tax bracket from 6.84% to 3.99% (and drop the state corporate tax levy from 7.25% to 3.99%) kept saying that if times got tough, a future Legislature could decide to pause the tax breaks.
That sounded reasonable then, and seems reasonable now, given that we’re getting a cut in federal income taxes.
But Gov. Ricketts and other business leaders say that stopping the state income tax cuts would send a bad signal.
It will all make for one heck of a debate in the 2026 legislative session.
Paul Hammel has covered state government and the state for decades. Prior to his retirement, he was senior contributor with the Nebraska Examiner. He was previously with the Omaha World-Herald, Lincoln Journal Star and Omaha Sun.
