PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

State of the Week: NEBRASKA

By at 28 April, 2017, 3:26 pm

by Raymond J. Keating-

Small Business Policy Index 2017: Nebraska ranked 35th among the 50 states.

SBE Council’s “Small Business Policy Index 2017” ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2016: Nebraska ranked 40th among the 50 states.

SBE Council’s “Small Business Tax Index 2016” ranks the states according to 25 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

Is Tax Relief on the Way? (Eventually?)

When it comes to taxes, Nebraska is not a friendly state for entrepreneurs, businesses and investors. That in turn is not good news for the state’s overall well-being, including in terms of economic, income and employment growth.

Nebraska ranked a woeful 35th on SBE Council’s “Small Business Policy Index 2017,” and 40th on the “Small Business Tax Index 2016.” The state faces numerous challenges on the policy front, including high income and capital gains taxes on both the individual and corporate sides of the tax system.

Clearly, Nebraska needs to make some substantive changes. That process has at least gotten started.

With leadership from Governor Pete Ricketts, the state’s unicameral state legislature is considering a tax plan that would, eventually, reduce the state’s top individual income and capital gains tax rate from 6.84 percent to 5.99 percent, and the top corporate tax rate would go from 7.81 percent to 5.99 percent.

Any tax rate relief certainly is most welcome, and would be an economic plus. It also must be noted that these tax rate reductions would be subject to a long phase-in period, and annual rate cuts would only occur if state government revenue growth targets are met. So, the earliest that these proposed tax rate reductions could be fully phased in by would be 2027 – that is, in a decade. And the reductions could stretch out longer, again, if revenue growth comes up short.

Tax cut phase-ins obviously delay the positive impact that such relief has on incentives for starting up, operating and investing in businesses. Furthermore, uncertainty as to when tax relief is going to happen further diminishes the potential economic benefits.

Eventually, these proposed tax cuts in Nebraska, if passed and signed into law, will provide a competitive boost to the state, but as for when that happens, a long phase-in tied to revenue triggers leave matters uncertain. In the end, the more immediate and certain the tax cuts, the far more robust their economic impact.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

 

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