Parity Between Top Corporate, Personal Income Tax Rates Sought

Published by Nikki Palmer on Tue, 03/16/2021 - 12:00am

Unicameral Information Office

The Revenue Committee heard testimony Feb. 25 on a proposal to cut the state’s top corporate income tax rate.

Corporations currently pay an income tax rate of 5.58% on the first $100,000 of taxable income and 7.81% on all taxable income in excess of that amount. Legislative Bill 680, introduced by Sen. Lou Ann Linehan of Elkhorn, would set the top rate at 6.84%, the same as the state’s top individual income tax rate, beginning Jan. 1, 2022.

The state Department of Revenue estimates that the bill would reduce general fund revenue by $5 million in fiscal year 2021-22, $20 million in 2022-23 and $36 million in 2023-24. Linehan said that most businesses are formed as passthrough entities that distribute income to partners and shareholders, who pay personal income taxes on those distributions.

She said LB 680 would create tax parity for businesses regardless of their legal form and make Nebraska less reliant on tax incentives that “everybody knows we have to have but nobody seems to love.”

Sarah Curry, policy director for the Platte Institute, testified in support of the bill, saying Nebraska’s current tax code puts it at a disadvantage to other states in the region. South Dakota and Wyoming do not levy a corporate income tax, she said, and Missouri and Colorado have some of the nation’s lowest corporate tax rates.

Bryan Slone testified in support of the bill on behalf of the Nebraska Chamber of Commerce and Industry and the Lincoln and Omaha chambers. He said reducing the corporate tax rate is essential for Nebraska to compete with other states in the region for new business investment.

Renee Fry, executive director of OpenSky Policy Institute, testified in opposition to LB 680. She said the proposed tax cut mostly would benefit a small number of individuals who live outside Nebraska while cutting revenue used to fund state services.

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