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Krusin' the Capitol

By Nebraska State Senator Lowen Kruse

2003
Week 10
March 15, 2003

Hi

A recurring myth is that Nebraska is a high-tax state. We are a bit below the middle in the ranking of the states.

Overall, the February issue of "Governing," which has a page reporting on every state, shows Nebraska is ranked 29th from the top in total of all taxes as a per cent of personal income.

It has an interesting quote from Mary Jane Egr, our tax commissioner: "Most of our tax code was written in the late 1960s. To a large extent it has become obsolete. It's woefully out of step with our current economy." The analyst goes on to note that is not a problem unique to Nebraska.

Our tax system comes out of an era when land and property defined wealth and therefore was the basis of all taxes. Now, a rancher on valuable land in a drought does not have income according to his/her property.

Another big factor: in 1960, we measured people's ability to spend by how much they spent on goods and things, so that is how sales taxes were set up. Now, if we are to tax people's ability to spend we must include the services we buy, which command a much higher proportion of our expenses than in 1960.

The analyst goes on with another problem: "Although the state falls roughly in the middle of the pack in the breadth of its sales tax base, the tax is loaded with exemptions."

The figures that follow are from the Nebraska Research Council, Inc. and are based on fiscal year 2000. Nebraska's rank in state and local general tax revenue remains unchanged, at 24th, or right in the middle. Our individual income taxes put us at 32nd from the top and sales taxes at 25th.

Nebraska does have a higher per cent of personal income going to property taxes than Kansas, Colorado and Missouri, which certainly is a concern. We are above average nationally, one-third of the way down the list, slightly below Iowa and just above South Dakota. Property taxes are at 3.26% of income and the median of states is 2.93% of income. High is 4.87% and low is 1.27%.

There is a reason for the variance. The extreme states have a different tax structure. Specifically, we depend on property taxes to provide more than the usual portion of local school funds. So our property taxes are higher and income taxes are lower than average.

Other figures: Nebraska is 39th in rank of gross tax revenues and 32nd from the top in the taxes paid to the state (excluding local taxes, which were included above).

All expenses for the last five years of record, as per cent of personal income, place us at 32nd in the overall ranking.

I would expect us to hold close to these rankings in the current budgeting, as other states are increasing taxes in many ways. Spread the word: we are a middle-tax state!

* * * * *

We have had a good response to the survey. Several asked for the results so I will be lazy and add it here.

Survey

1. Tax shift. Which of these taxes should have the most protection from increase?

2. Increased costs will come in three areas. Which should be cut back the most?

3. Which cut back the least?

4. Is one casino, in Omaha, a good idea?

5. Should school taxes be shifted?

6. University and colleges support for next year:

7. Is the right to carry a concealed weapon a good idea?

8. Smoking ban in restaurants?

A few wondered why my questions were so terse. I wanted to keep it simple and to get a reaction, not a studied response. For example, why only one casino? Why not other options? One casino costs us the least, by far, so is the fairer test of who would be inclined to support casino gambling.

Thank you for responses, and to all of you for your interest. Your many comments make this writing more fun and fun is in short supply in my work these days.

Lowen

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