Ricketts of Nebraska seeks tax cut for highest earners

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LINCOLN, Neb. (AP) — Nebraska Gov. Pete Ricketts on Thursday proposed an income tax cut for corporations and nearly 419,000 residents whose incomes reach the state’s top bracket.

The Republican governor said he would seek to lower the top rates to 5.84%, from the current 6.84% for individuals and 7.25% for corporations due to take effect next year.

The plan would reduce state tax collections by $178.8 million by fiscal year 2025. Like many other states, Nebraska is loaded with cash from a better-than-expected pandemic economy and billions of dollars in federal stimulus payments that went to most Nebraska taxpayers.

“I was elected on the promise to bring tax relief to our state,” Ricketts said in his annual state of the state address, his last before leaving office next year. “It’s what the hard-working men and women of our state deserve. And, given our current financial situation, we must deliver on our promises.”

Ricketts also tried to preemptively respond to a common criticism that cutting the top rate benefits the wealthy, an argument that has stymied similar plans in recent years. Nebraska’s highest rates are just over $32,000 for individuals and $64,000 for married couples filing jointly, although many taxpayers reduce their taxable income below these levels through credits and deductions.

“For those who might try to call this a tax cut for the rich, I challenge you to ask Nebraskanians earning $33,180 a year or families earning $66,360 a year if they feel rich,” did he declare. “They represent the 418,900 Nebraskas in this tax bracket who deserve relief.”

In fact, they only represent the lowest-earning Nebraskanians in the highest tax bracket. Under Ricketts’ plan, a single person with a taxable income of $40,000 would save less than $80, while a person with a taxable income of $1 million would save almost $10,000.

“The fact is that the tax cuts the governor discussed today, including those on Social Security income, are heavily biased toward the wealthy,” said Rebecca Firestone, executive director of OpenSky Policy Institute. , which generally opposes such policies. “They would leave the state vulnerable to cuts to real economy builders like schools and health care when the federal dollars that currently support our economy stop flowing.”

Many Nebraska business groups have said income tax rates are one of the factors businesses consider when deciding where to open, though they acknowledge that businesses also consider the availability of workers in a region, the quality of life and other factors. They argued that the lower rates would also benefit employees, allowing them to keep more of their income.

“On a collective level, you have more money in their pockets that is reinvested in goods and services,” said Jim Smith, who leads a pro-industry initiative called Blueprint Nebraska. “That’s where the growth happens then, and you have an expansion of the economy.”

Proponents also said the corporate tax cut would bring some businesses in line with the rate paid by small businesses, which are often set up to pay taxes as individuals rather than corporations.

In neighboring Iowa, Republican Gov. Kim Reynolds announced her own tax cut plan on Wednesday that would impose a 4% flat tax at an estimated cost of $1.58 billion. Some critics have argued that states can only cut taxes because of the economic boost provided by federal pandemic aid.

Ricketts also backed a bill that would accelerate the phase-in of a Social Security tax exemption that was approved last year, implementing it in five years instead of 10.

Ricketts also urged lawmakers to pass his proposals to build a new state prison to replace the Nebraska State Penitentiary in Lincoln, to build a system of canals and reservoirs to preserve the city’s water supply. Nebraska and a state budget with an average annual growth of 1.5%.

Ricketts outlined his plans for more than $1 billion in federal pandemic recovery assistance, which is separate from the state’s general fund. His plan includes nearly $200 million for public health services and $500 million to combat the negative effects of the pandemic on the economy, including aid for economic development projects in North Omaha. and money for low-income parents and community colleges in Nebraska.

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