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LINCOLN — As lawmakers work to close a projected $471 million budget deficit, they got a bit of relief Friday in Nebraska’s latest tax revenues, which came in above expectations.
The state’s January tax receipts show a net growth of 6.5% over what Nebraska’s Economic Forecasting Advisory Board predicted in October.
That equates to just under $37 million in extra revenue flowing into the state’s coffers. Overall, fiscal year-to-date net receipts are nearly on track with expectations, just 0.2% below projections — a $9.6 million difference.
The biggest contributor to January’s positive receipts came from sales and use tax revenues, which came in 26.6% above projections for a $69.7 million gain.
This was welcome news to State Sen. Rob Clements of Elmwood, chair of the Nebraska Legislature’s Appropriations Committee, who said sales taxes are a good indicator of how the state’s economy is doing.
Legislative Fiscal Analyst Keisha Patent said January is historically a good month for sales and use taxes because it reflects holiday spending. Even so, she said sales and use tax revenues exceeded expectations for the month.
Individual income taxes came in 8% below forecasts, for a $17.7 million loss. Clements said he believes that was due to the continued impact of the state’s phased-in decreases to individual income tax rates, which are set to wrap up in 2027, when the rate will hit 3.99%.
Corporate income taxes also came in below projections by 30.5%, but because it typically is a smaller tax category, the drop equated to a $16.8 million loss. Patent said this was likely due to quarterly estimated payments for businesses coming in below projections for January.
The latest tax receipts are one of the final economic indicators feeding the forecasting board before its members update projections at their next meeting Feb. 27. The meeting will be critical in determining the size of the projected budget deficit lawmakers have to fill before the end of March.
