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Income Tax Cuts: A Cautionary Tale for Nebraska

Communities in Kansas and Oklahoma have faced many difficult choices in the years following massive tax cuts. (M. Kuhlman)
Communities in Kansas and Oklahoma have faced many difficult choices in the years following massive tax cuts. (M. Kuhlman)
March 27, 2017

LINCOLN, Neb. -- Four-day school weeks, reduced Medicaid reimbursements, cuts to programs that help home-bound seniors; those are just some of the tough choices communities in Kansas and Oklahoma have faced in the years following massive tax cuts. And their stories could be cautionary tax tales for Nebraska.

In what Kansas Gov. Sam Brownback dubbed an "experiment,” the state passed a tax package in 2012 that slashed the income tax for individuals and eliminated it for nearly 300,000 businesses. This year the state is facing a $346 million deficit.

Annie McKay, president and CEO of Kansas Action for Children, said two sales tax hikes and soaring property taxes have not been able to make up for record revenue losses.

"No longer having the same resources coming in from our income tax, the state sought to pay its bills in other ways and still hasn't been able to do that,” McKay said. "And not only have we had nine consecutive rounds of budget cuts, but we've also hiked taxes in other ways that have now thrown Kansas wildly out of balance."

Oklahoma faces a similar financial crisis that state leaders say was sparked by low oil and gas prices. The top income tax rate in Oklahoma was cut by nearly one-fourth over the past decade, resulting in more than $1 billion in lost revenue.

Executive director of the Oklahoma Policy Institute David Blatt said Nebraska and other states should be careful as they consider tax policy changes. He said Oklahoma's income tax cut has provided little economic benefit and has put a tremendous strain on public resources.

"Core services in a quality education system, a quality health care system, infrastructure, public safety that businesses and communities depend on has been badly eroded,” Blatt said.

Faced with an $895 million budget gap over the next two years, Nebraska lawmakers are examining the impact of proposed tax changes. Join us next Monday when our series will cover a plan to freeze child care subsidies supporters say would save the state more than $7 million, but opponents argue would hurt working families.

Mary Kuhlman, Public News Service - NE