In the face of a budget shortfall, some political leaders in Lincoln are clamoring to cut income taxes for the wealthiest Nebraskans.
The move would compound our real challenge. It’s property taxes that Nebraskans are asking lawmakers to look at.
The Center for Rural Affairs has long held that state revenue should be balanced among property, sales and income tax. Today, property tax accounts for 36 percent of revenue; sales tax, 30 percent; and income tax, just 26 percent.
Income tax is already the shortest of the three revenue legs.
The proposal in Lincoln to give the wealthiest Nebraskans a tax cut would further reduce the income tax share of our revenue. That will put additional strain on Nebraska’s budget, undercut state services, and make it difficult to reform property tax.
To achieve a balanced revenue model, we actually need to increase revenue from income tax and reduce property taxes. An income tax increase could be targeted to the highest earners in the state. Farmers and ranchers would pay their fair share when their incomes are high, and see immediate relief when the farm economy slumps.
To create a strong and sustainable future for Nebraska’s state budget, we must find the political courage to look at our entire tax system — property, sales and income tax — in a holistic way.
