The writer, of Omaha, is executive director of the Platte Institute for Economic Research.
While preseason college football guides have hit newsstands, replete with conference breakdowns and rankings, a national ranking of a different sort is catching Nebraskans’ attention.
This week CNBC released its America’s Top States for Business 2013, and Nebraska — at No. 4 — landed its highest ranking ever.
The Cornhusker State’s ascent to the top five (last year we were sixth) was bolstered by its especially high marks in “business friendliness.”
As the Nebraska Tax Modernization Commission begins its work this week to review our state’s tax environment and recommend potential improvements, it should consider the positive impacts of important tax policy reforms made thus far and the opportunity to press forward in making our state even more attractive to new businesses and entrepreneurs.
The CNBC analysis credited tax relief accomplished in this session of the Nebraska Legislature for Nebraska’s high ranking and indicated it could do more. The analysis noted Gov. Dave Heineman’s push to significantly lower or eliminate the state income tax. Now is the time to build on our momentum.
The commission, which was formed earlier this year to review and recommend updates to our tax code, provides a unique opportunity to place Nebraska’s tax structure among the best in the nation for families and businesses.
The commission’s approach should center on fairness and competitiveness. All Nebraskans, especially low- to moderate-income households, should be able to keep more of what they earn to spend, save and invest. The need for tax reform should reflect this philosophy. Research shows that the two states with the lowest poverty rates, Wyoming and New Hampshire, have no income taxes.
It is also true that states with no or very low income taxes have a distinct competitive advantage over those that do in terms of job creation and population growth. Between 2002 and 2012, 62 percent of the 3 million new jobs in the United States were created in the nine no- income tax states.
A correlation exists between income tax structure and retention of residents and population growth. Seven of the nine states that have no income tax saw their populations grow faster than the national average. The other two still grew faster than other states in their region.
In addition to examining income tax rates, the commission should examine the impacts of the Nebraska inheritance tax and high property tax rates. Nebraska is one of only six states that still has an inheritance tax, and increasing property taxes hurt Nebraska’s competitiveness with neighboring states. Close scrutiny of the consequences of inheritance taxes and property taxes on local economies, especially in our rural areas, is warranted.
While the process of tax reform in Nebraska won’t be quick or easy, it is important that it be deliberative, comprehensive, open and transparent. All Nebraskans will have a chance to register their input with the members of the Tax Modernization Commission at hearings that begin in September.
Data from around the country show that growth in economic activity, population and tax revenue is evident in states with low or no income taxes and favorable tax climates. This should provide all the more reason the Tax Modernization Commission should work to achieve further tax relief for Nebraskans.
If we continue to build on recent progress, Nebraska will soon be striving, right alongside the Cornhuskers, in the quest to be No. 1.