LINCOLN — Nebraska closed out its fiscal year on a record high note, with net tax revenues nearing $6.35 billion, according to a new state report.
The Nebraska Department of Revenue report, released Friday, shows the state collected $624 million more for the fiscal year that ended June 30 than predicted just four months earlier. The total is up 10.9% from those February projections, which in turn were $370 million higher than projections issued in October.
The new revenue figures had some policymakers talking about tax cuts while others said the money should be used as a hedge against an economic downturn.
State Sen. Lou Ann Linehan of Elkhorn, the Revenue Committee chairwoman, said the increased revenues mean lawmakers should do more to reduce taxes next year, perhaps by cutting income tax rates more or faster or both.
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“I would suggest we go back and look at more tax cuts,” she said.
Gov. Pete Ricketts, whose term in office ends in early January, hailed the revenue figures as a reflection of Nebraskans’ hard work over the past year. He also called for more action to reduce taxes.
“It sets the next Legislature up with a prime opportunity to build on the historic tax relief we delivered to Nebraskans in 2022,” he said.
Earlier this year, lawmakers passed a major tax relief package that is projected to be worth nearly $900 million when fully implemented in 2027.
Legislative Bill 873 lowered the top income tax rates on corporations and individuals, ended income taxes on Social Security benefits and boosted property tax relief. The bill will be phased in over five years, meaning its impact on tax revenues will grow with time.
But Sen. John Stinner of Gering, the outgoing Appropriations Committee chairman, said the increased tax collections will bolster the state’s cash reserve fund and leave Nebraska in a better position to weather economic uncertainties. He pointed to rising interest rates and growing talk about recession as worrisome signs.
“That’s why I was adamant about leaving the reserve in a fairly robust and historic position” at the end of the legislative session, he said. “Things have worked out even better.”
When lawmakers headed home in April, the fund was expected to hit a record-high $1.25 billion by June 30, 2023. The actual year-end revenue means the reserve will be closer to $1.69 billion by the end of next June, equal to about 36% of annual spending.
By state law, the bulk of tax revenues above the certified forecast for the year just ended go automatically to the cash reserve. Ricketts said that would leave the cash reserve with “substantially more than what is needed to serve Nebraskans.”
OpenSky Policy Institute Executive Director Rebecca Firestone urged caution with the increased revenue, given national concerns about inflation and possible recession.
“It’s certainly good news that our tax receipts were so strong over the past year but signs of economic strain are increasing in Nebraska,” she said. “We continue to urge caution about talk of further tax cuts or enacting new spending programs until we can better understand the direction Nebraska’s economy is moving in.”
Sen. Carol Blood of Bellevue, the Democratic candidate for governor, credited the positive position, at least in part, to federal stimulus dollars during the COVID-19 pandemic. She said the numbers will likely drop in the next two to four years.
Still, Blood, who voted in favor of the tax package passed earlier this year, questioned why the state continues “to collect taxes from our hard working Nebraskans instead of giving them true tax relief year after year.”
“It’s been made clear that a surplus is needed each year so certain elected officials can gift it back during election cycles instead of allowing Nebraskans to keep it in their pocket,” she said.
Jim Pillen, the GOP candidate for governor, did not return a message seeking comment Friday.
The Nebraska Tax Rate Review Committee — a panel of top lawmakers and the state’s tax commissioner — will review the state’s financial picture on Monday, looking at both the year-end tax revenues and updated estimates of potential state expenses.
According to the new report, individual and corporate income taxes accounted for most of the increase in tax collections, while sales tax collections were slightly lower than the February projections. Net sales taxes for the year were 2.1% below that forecast, while net individual income taxes were 20.1% higher and net corporate income taxes were up 18.2%.
Still, Nebraska collected $123 million, or 6.14%, more in net sales taxes during the just-completed fiscal year than in the year before. Net individual income tax collections were $113 million, or 3.6%, higher than the prior year and net corporate income taxes were $144 million, or 25.2%, higher.
Revenue Department spokeswoman Lydia Brasch said she could not point to a single cause for the revenue uptick, other than Nebraska’s continued economic strength.
Photos: Leaders of Nebraska’s state offices and agencies