This week Nebaraska legislators rolled out a significant tax reform package that should get the attention of development-minded Missouri legislators—a reform that I would characterize as comprehensive tax relief. The Nebraska proposal touches on several areas of the state's tax code, but its main focus is ultimately on the income tax. The Platte Institute's got the details.
There are a lot of details to unpack here, but the short version is still pretty short.
- As Platte highlights, the bill here makes liberal use of revenue triggers for tax cuts to become effective. If that sounds familiar to longtime readers, it's because Missouri adopted a similar apporach when it passed its tax cut three years ago. Legislators' decision to simultaneously reform some tax incentives to help pay for the cuts deserves particular recognition, given our longstanding support of such innovations here in Missouri.
- When fully phased in, Nebraska's top personal income tax rate would drop to 5.99% from 6.84%. Importantly, the overall tax rate for income below $29,000 would fall as well, further reducing taxpayers' exposure. The bill would also increase the state's earned income tax credit, a policy idea we have talked about many times before.
- The bill would reduce Nebraska's top corporate income tax rate from 7.81% to 5.99%. Missouri's current corporate rate is 6.25%.
- Finally, the bill would also change elements of the state's property tax practices, including how agricultural land is valued. You can find some of our longstanding research on property tax issues here.
When discussing objectives of tax reform, there are obviously lots of approaches and ends that one could promote. But if growth is the objective, then going after income taxes has to be front and center in any reform plan. The approach being taken in Nebraska is an appropriate and gradual one to promote economic growth—an approach that could probably be taken good deal further and still be eminently responsible.
Nebraska's tax reform push should give Missouri's state legislators some pause as they generally twiddle their thumbs in 2017. Kudos to the Cornhuskers for spending the political capital necessary to advance these important reforms.