LINCOLN — A new report on Nebraska's business tax incentives concludes that the state doesn't offer as many tax breaks as other states, and doesn't formally review whether the programs are working.
A leading state senator said that Wednesday's report highlights the lack of measurable “benchmarks” in Nebraska to determine whether taxpayers are getting a good return on the millions in tax breaks offered to new and expanding businesses.
“We need measurable benchmarks so we can say to the public and taxpayers, yes, it is worth the dollars we're spending,” said State Sen. John Harms of Scottsbluff, who heads the Legislative Performance Audit Committee that did the report.
Harms said the committee will work to develop those benchmarks in the next couple of months. He said he hopes they will be among the recommendations made to the Legislature by a committee of lawmakers exploring the fairness of the state's overall tax system.
State lawmakers across the country have been grappling in recent years with the effectiveness of such tax breaks, including whether they create new jobs or just subsidize jobs that would have been created anyway.
Barry Kennedy of the Nebraska Chamber of Commerce and Industry said Wednesday that the question has been impossible to answer. The state risks losing jobs and business opportunities if it doesn't offer tax breaks, he said.
Renee Fry of the Lincoln-based Open Sky Policy Institute said other states have developed ways to evaluate the effectiveness of tax incentives, and Nebraska should, too.
Right now, Fry said, the state doesn't have enough data to determine whether state money could be better invested in education and new roads.
Last week, state officials said Nebraska's main incentive program, the Nebraska Advantage Act, had provided $130 million in tax credits and refunds from 2006 through 2012 to businesses that had created 7,100 full-time equivalent jobs and invested $3.5 billion. That translated into about $18,300 in tax breaks per job.
Wednesday's report compared Nebraska's incentive programs with nine nearby states — Iowa, Colorado, Kansas, Missouri, South Dakota, Wyoming, Arkansas, Texas and Oklahoma. The report showed that, unlike most of the other states, Nebraska does not offer tax breaks for job training and does not provide “deal-closing” cash awards to new businesses.
Six of the nine states reviewed conducted formal evaluations of the effectiveness of their incentive programs. Nebraska does not, though it does prepare an annual report of costs and jobs created.