Gov. Pillen pushes for more income tax cuts, competitor warns of state fiscal woes

Nebraska Gov. Jim Pillen is making another round of income tax cuts a centerpiece of his reelection campaign, while Democratic challenger Lynne Walz argues the state’s worsening budget outlook shows the previous tax reductions have gone too far.

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Nebraska governor pushes for more income tax cuts, competitor warns of state fiscal woes

LINCOLN, Neb. —

Nebraska faces a projected budget shortfall of more than $600 million in the next two-year budget cycle. On top of that, the shortfall for this fiscal year has grown to over $170 million as monthly net tax receipts continue to dip below projections.

Critics of the state’s recent tax policy say the phased-in tax cuts approved in 2023 are contributing to the deficit, while Pillen argues lower taxes are essential to attracting and retaining residents.

Walz, a former state senator, said the state’s finances reflect years of poor budgeting and insufficient investment in economic development.

“Our economy is broken in Nebraska. We have not been open for business,” Walz said in an interview with KETV. “You cannot continue to budget the way Gov. Pillen has done and expect us to get out of the hole that we’re in.

The OpenSky Policy Institute argues that the legislature and governor’s approach, to pair a massive income tax cut with widespread property tax relief, placed increasing pressure on the state’s finances. Under current law, Nebraska’s top individual and corporate income tax rates are scheduled to fall to 3.99% beginning in January.

“You cannot cut your way to prosperity,” OpenSky Executive Director Rebecca Firestone said. “The state needs to be able to invest in key infrastructure to support economic vitality.”

Pillen directed state agency heads to cut 5% in spending in a memo on Wednesday. If reelected, Pillen said he plans to seek legislation lowering the state’s income tax rate to 2.99%.

“We’ve got Nebraskans that have been leaving this state for 50 years,” Pillen said. “We’ve got gobs of Nebraskans that would love to come home. The least we can do is create a favorable tax climate for them to come home.”

Walz said lower income taxes will not reverse Nebraska’s population losses.

“Not one person has said, ‘You lower your income taxes, and I’m going to stay,’” she said. “I hear that they want vibrant communities. They want educational opportunities for their kids.”

Walz voted in favor of the 2023 tax package while serving in the Legislature but said lawmakers intended to pause future tax-rate reductions if state revenues failed to keep pace with costs.

Pillen has said his proposed tax reductions would be offset by broadening the state’s sales tax base. Walz has instead called for greater investment in economic development and community growth as a strategy for strengthening Nebraska’s economy.

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