The writer, of Omaha, is a family business consultant.
In 2019, Nebraska was included in a number of studies prepared by national publications analyzing which states are “low-taxed” and which ones were “high-taxed” for retirees. When you look at how Nebraska fared, we should all be aghast.
Nebraska’s national reputation is horrible when it comes to the issue of how we tax our citizens. As our baby boomers retire, once they do the math regarding their cost of living in Nebraska versus low-taxed states, they’ll move out of the state, if they can. Family, especially when it comes to grandkids, is a big part of the equation when deciding on whether or not to relocate to save money. However, if it’s possible, or even necessary, many retirees might decide to leave Nebraska and relocate to a low-taxed state.
In Kiplinger’s November 2019 study, “The Most and Least Tax Friendly States in America,” Nebraska ranked the worst in the country for high taxes. We were followed by Connecticut, Kansas, Wisconsin, Minnesota, Vermont, Rhode Island, New Jersey, Illinois and New York, in that order. We are also included in a group of 13 states that tax Social Security. Most do not.
The American Legislative Exchange Council (ALEC) also has us ranked as having the highest inheritance tax on assets passed to the next generation. Wallet Hub prepared a comprehensive study in March, showing Nebraska as the 47th highest taxed state in America, followed by Pennsylvania, Connecticut and Illinois. If you adjust for cost of living, we moved up to number 37.
In the 2019 report published by ALEC, “Rich States, Poor States,” the author examines the latest trends in state economic growth and trends that have helped or hurt states’ economies.
The organization’s chief economist and vice president, Jonathan Williams, stated, “This isn’t just an academic report — it tracks the significant interstate migration that occurs every year. This migration directly influences the economic and political makeup of states, and the Electoral College, as we approach the 2020 Census.
“Americans continue to vote with their feet across states, and they are voting strongly in favor of the states that have created a free market environment conducive to economic growth and opportunity.”
In this report, Nebraska’s tax burden is 40th. Only 10 states have higher property taxes, yet many have much lower income and motor vehicle taxes. Only four states had more public employees per 10,000 residents than Nebraska, driving up property taxes.
In 2005, I enlisted Bob Zabawa, a retired banker, to do a study on how Nebraska compared on real estate, motor vehicle and income taxes at three different income levels. Zabawa found that at every income level you could save significant taxes by moving to Sioux Falls, South Dakota; Sarasota, Florida; Austin, Texas; Tucson, Arizona; Colorado Springs, Colorado; or Cheyenne, Wyoming. The average savings was 51%. At higher home, car and income categories, the tax savings can reach as high as 70%.
Since then, none of our governors or state senators have introduced any serious government reform, performance audit or tax restructuring policies modeled after low-taxed states.
If we don’t get serious about this problem, wealthy and mobile Nebraskans will continue to move to low-taxed states in retirement, and we will not be able to replace their wealth with new young workers fast enough.
As long as our national reputation regarding state tax policy is considered among the worst, we are in big trouble.
My message to the governor and Legislature is this: It is time to be bold and propose major tax reform, to create performance audit teams and to privatize as many state services as possible in order to make Nebraska a lower taxed state. It’s time to stop avoiding the elephant in the room. Our leaders need to seriously begin the process of fixing our taxing excesses. To continue to ignore this situation is a travesty for our great state.