As data is being analyzed from the 2010 Census, it is becoming clear that people are voting with their feet, opting to leave high tax states. Migration from the high tax to low tax states is resulting in shifts within Congress, as The Washington Examiner article, below, reports.
Nebraskans might find it interesting to note one important fact found in the article; the highest average income tax rate in the states that lost population was 6.05%. Nebraska’s highest income tax rate is 6.84%. As the tax tables on the Nebraska Department of Revenue’s site indicates, a married couple filing jointly earning over $54,000 per year pays $2,173.82 + 6.84% on the amount exceeding $54,000, and the marginal rates are phased out for incomes over $166,800.
Fortunately, Nebraska does not share the same situation with the losing states when it comes to employees’ freedom to choose whether or not to be a member or dues payer in a union. Thankfully, Nebraska is a “right to work” state. A right to work law guarantees that no person can be compelled, as a condition of employment, to join or not to join, or to pay dues to a labor union. In other words, if you work in a right to work state, like Nebraska, and the employees form a union, you may not be fired if you decide not to join. Likewise, if you are a member of a union in a right to work state, and you decide to resign from the union, you may not be fired for that reason.
What Nebraska does share with many other states are concerns over the costs of state employees’ retirement plans. Another layer of issues are found at the local government level regarding public employees’ salaries, benefits, and retirement plans.
The bottom line: Nebraska has high income tax rates, increasing public employee costs, and revenue shortfalls. Noting that people are migrating from high tax to low tax states should be viewed as a signal. While Nebraska may be in better shape than a number of other states, that is only by comparison. In addition to creating an undue burden on citizens, high income tax rates usually translate into suppression of business activity. Considering that Nebraska’s revenues have stayed well below projections since 2008 and have resulted in a budget shortfall for the next two years estimated to be $900 million – $1.4 billion, it may time to assess whether a real stimulus program may be in order that tackles key issues; income tax rate reductions and major reforms that would lower public employee costs.
Considering that no solution seems near regarding the looming tax increases at the federal level, making efforts to alleviate tax burdens on Nebraskans seems well worth considering.
The Grand Island Chamber of Commerce’s October 2010 Newsletter includes excellent information about the federal income tax increases, as well as many statistics about Nebraska’s tax structure, business costs, and general business climate, which you can view by clicking HERE.