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All Things Nebraska
“To the Arch by March.” That was the scary slogan circulating throughout Omaha back in the 1980s when both Union Pacific and ConAgra were threatening to move their corporate headquarters out of the River City. (U.P. was said to be looking at St. Louis, home of the Gateway Arch.)
That meant that hundreds of good paying jobs would be leaving Nebraska and that Omaha’s status as a home of corporate headquarters would be diminished.
Never fear, the Nebraska Legislature and then-Gov. Kay Orr responded with the “Investment and Growth Act,” Legislative Bill 775, which offered millions in tax breaks to companies who invested money and expanded employment in the state. “Major revisions in Nebraska’s tax structure are necessary to accomplish economic revitalization of Nebraska,” read the official justification of LB 775, which was billed as a way to make the state “competitive” with other states offering similar tax breaks.
Fast forward to today, and the State Legislature is again passing tax breaks to retain, attract and inspire expansion of businesses.
It seems there’s never enough tax incentives for businesses.
LB 775 begat the Advantage Act of 2005, which begat the ImagiNE Nebraska Act of 2020, which begat this year’s “Grow the Good Life Act.”
State Auditor Mike Foley, a black-belt finder of waste and abuse in state government, fired a warning shot in February with a letter to state lawmakers. He warned that current state tax incentives lacked sufficient oversight to ensure that state funds weren’t flowing to businesses that hadn’t earned them via job expansion and new investment.
The state’s incentive programs, Foley pointed out, had cost the state $1.2 billion over the past four years. Some of those funds, he said, had continued flowing to businesses that had declared bankruptcy or had abandoned an expansion project.
Local communities, the auditor said, had contributed nearly $181 million in sales tax breaks to businesses – that’s money and you and I have to make up to fund city services, in part through higher property taxes.
I remember the anguish on my state senator’s face back in the ‘80s when he described his support for LB 775.
He said hated to do it – because it meant fewer funds for state services and tax breaks for you and I – but it had to be done. Omaha, and the state, can’t afford to lose businesses like Union Pacific and ConAgra, the lawmaker said.
Boy, have we heard that argument over and over. But it is a difficult issue, and companies basically have state leaders over a barrel – “pay up, or we’ll move.”
It’s a disgusting conundrum. (And it doesn’t always work – ConAgra eventually moved its HQ to Chicago. Though, it must be noted, they kept a lot of jobs in Omaha.)
Nebraska, due to its high property taxes, has historically ranked high on taxes compared to other states.
But the state has made progress in recent years, thanks mostly to a gradual, deep cut in state income taxes.
Nebraska now ranks 22nd among the states in “tax competitiveness.” That’s a ranking I think we’d take if it was the NU football team (though probably not one we’d accept if it was our basketball team, wrestlers or volleyball squad).
We always tout the advantages of locating in our state – low cost of living, cheap energy, abundant water, friendly people and a dedicated workforce.
But, when companies come threatening to move away, that’s all forgotten as we open up the state’s pocket book and provide more tax breaks.
Paul Hammel has covered the Nebraska state government and the state for decades. He is a retired senior reporter for the Nebraska Examiner and the former Capitol Bureau Chief for the Omaha World-Herald.
