A report on state tax credits shows the costs outweigh the benefits

LINCOLN, Neb.Nebraska Exam) -The projected tax relief provided by a major state economic stimulus program far exceeds the program’s tax revenue benefits, according to a new report by the state Department of Revenue.

Estimated tax credits provided through the Nebraska Advantage Act in fiscal year 2022-23 were $93.4 million higher than the tax revenue generated, the report shows.

information, A report Friday to two Nebraska legislative committees prompted a state senator to call the program a “subsidy” rather than a job creation stimulus and a state watchdog group to denounce it as a “drain” on public services.

‘It’s a subsidy’

“I’m not sure this is a win-win proposition for the average Nebraska taxpayer,” said state Sen. Tom Brice of Albion.

It appears to benefit too few companies and too few Nebraskans, he said.

“To me, it’s a subsidy,” Breese said.

Rebecca Firestone of the Open Sky Policy Institute said the report highlights concerns that economic stimulus programs do not pay for themselves and instead act as a revenue “drain” to support schools, health care and other government programs.

Advertising revenue loss is rising

The Nebraska Department of Revenue, Firestone, noted that over 10 years, the Advantage Act would result in a $1.4 billion loss in accumulated revenue.

But a revenue official told members of the Legislature’s appropriations and revenue committees that the report did not include the secondary impact of job creation and economic investment in the state.

The annual Nebraska Tax Incentives report shows that 4,582 “full-time equivalent” jobs are expected to be created this fiscal year by companies using $146 million in sales and income taxes.

Jen Creger of the Greater Omaha Chamber of Commerce, which has supported “performance-based” tax credits for businesses that create jobs, said the Imagine Act and other programs that provide tax credits for job creation will help “level the playing field” with Others have helped states that lack labor in Nebraska.

It helps to expand the economy

“Thirty-plus years of these programs have increased Nebraska’s economic diversity and livability through new jobs and a broader tax base,” Kreger said. “Look at Nebraska’s economy in the 1980s and look at Nebraska’s economy today.”

Sen. Lou Ann Linehan of Elkhorn, who chairs the Legislature’s Revenue Committee, which drafts state tax policy, said she always has questions about the tax breaks. However, he added, they are necessary due to the high income and property tax of the state.

The state, Linehan said, would be much better off if it could lower income and property tax rates for everyone. Breeze said she completely agrees.

The Priority Act, passed in 2005, served as the state’s primary economic development tool until 2021, when an updated version called the ImagiNE Act took effect.

Unpredictable

At Friday’s hearing, some senators touted the ImagiNE Act as an improvement because it would require businesses to receive their tax credits sooner rather than waiting years to receive the cash. Companies can get tax credits from the Preferences Act until 2051.

Sen. John Stinner, chairman of the House Appropriations Committee, said the unpredictability of when companies cash in on their tax credits could disrupt state budgets.

In 2016, he said, his committee had to cut millions more from the budget because companies cashed in about $100 million in tax credits they received through job stimulus programs.

In total, the Preferences Act created 28,070 jobs and paid off $910 million in tax credits, the Department of Revenue said.

So far, the state has received 77 applications for Imagine Act incentives, which will invest $643 million, lawmakers were told.

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