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State lawmakers went home recently, ending a 90-day session marked by reductions in spending and borrowing from cash reserves to close a projected budget gap that once topped $400 million.
Hard to believe that just a couple of years ago, the state was sitting on a huge surplus of cash. It was enough to set legislators dreaming big dreams, like digging a massive lake between Omaha and Lincoln and financing new marinas and other tourism amenities.
But that was then and this is now, and the STARWARS initiative (standing for “Statewide Tourism and Recreational Water Access and Resource Sustainability”) never left the launching pad for the most part.
When money is short, not a lot of new state spending is going to get approved. That’s been the history of dealing with budget shortfalls down in Lincoln, and that’s how we deal with it in our own lives – when cash is short, we don’t buy new cars or go out for prime rib.
This wasn’t a great year for fans of property tax relief.
Efforts by Gov. Jim Pillen and State Sen. Tom Brandt to impose new taxes on previously tax-exempt sales didn’t advance (just like they didn’t make it to the finish line last summer at that totally forgettable special session).
Shifting taxes off of property and onto sales of candy, soda pop and services like golf lessons and tattoos is complicated, but it’s a proven way to provide property tax relief. Such a tax shift comes with some negative consequences, but I gotta believe that with some compromises and some salesmanship it could happen.
Instead, state lawmakers opted to proceed with the massive income tax cut they passed only two years ago, much to the disappointment of the state’s farm groups who want property tax help.
Gotta say, when election time comes around, politicians are universally calling for property tax relief, not income tax cuts.
However, the state’s business community has been pleading for income tax cuts for years, and in 2023 got a Big Whopper – passage of a bill to gradually reduce the state’s top personal income tax rate and the corporate income tax rate from 6.84% to 3.99% by the 2027 tax year.
The argument for cutting income taxes has always been “we have to remain competitive” with our neighboring states, like Iowa, which is dropping to 3.8%. Wealthy Nebraskans, we’re told over and over, move away to states with little or no state income taxes (though research shows there are other reasons for moving, such as being closer to family and for better weather or nicer, mountain views. Think Jackson Hole or Tucson).
Brandt had a reasonable – and simpler – way for the state to dig out of its budget hole, which was to drop the income tax rates to 4.99% instead. Later, he said, when the state has the money, further cuts could be considered.
