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The Union Pacific glassy corporate headquarters in downtown Omaha is left of the white building labeled the Omaha World-Herald. That 19-story U.P. downtown facility opened in 2004, though U.P. has had its operational base in Omaha for more than 160 years. (Aaron Sanderford/Nebraska Examiner)
Nebraska Gov. Jim Pillen was correct when he said Legislative Bill 1165 and its revamped approach to economic incentives for certain companies is “more aggressive and assertive than anything we’ve ever done before.”
Perhaps a better statement would have been to name the company that this legislation is intended to benefit, which has been reported as Union Pacific. Please keep in mind as you read this opinion column that “no government has ever given anyone anything that they didn’t first take from someone else.”
Why do states offer tax incentives? The answer is simple: Their taxes are too high, so states compete to see who can win the tax incentive giveaways.
It is good to study history so you don’t repeat the mistakes we’ve made before. Nebraska has a long history of implementing tax incentive programs to benefit businesses and attempt to encourage economic development.
Reaching Regions, a new academic journal supported by Iowa State University, the North American Regional Science Council and West Virginia University, researched tax incentives and the effect incentives have on economic development. They answered the following question: Why have local economic development policies been so disappointing?
“State and local efforts to attract ‘footloose’ firms to their regions through tax incentives or direct subsidies have largely proven ineffective in boosting population or employment,” researchers found.
Despite an extensive history of poor results, these economic development incentives have been created by our Nebraska Legislature. Nebraska’s first major tax incentive program came in 1987 through LB 775, which is known as the Employment and Investment Growth Act.
Over the years, this tax incentive program has paid out refunds and tax credits of nearly $4 billion. Currently, there remain 28 outstanding contracts. In 2024, $10 million in tax credits were claimed, according to the Nebraska Department of Revenue’s 2024 Tax Incentives Annual Report. However, the total amount of tax credits from these contracts yet to be claimed amounts to $45.6 million.
In the early 2000s, Conagra — then a major Nebraska corporation — considered moving its corporate offices to Chicago. The Nebraska Advantage Act was introduced to replace the Employment and Investment Growth Act and, partly, to help keep Conagra in Nebraska. It did not work. Conagra is headquartered in Chicago today.
As of June 30, 2024, the total amount of tax incentives earned by the Nebraska Advantage Act was $2.57 billion. This tax incentive program could hit a net loss of more credits than tax income of over $150 million per year in many of the next 10 years.
The program now costs the State of Nebraska more than $120,000 in tax incentives for every job it creates, based on data from a 2024 legislative report on tax incentives. Currently, the Nebraska Advantage Act has tax credits or refunds yet to be claimed in excess of $1.3 billion.
Proponents of such tax incentive programs claim that the jobs created by these incentives will pay taxes. How many years do you think it will take for job incentives created to pay $120,000 in income and/or sales taxes?
Hint, NEVER! There is no way of knowing if the job may have been created anyway if the incentive was not offered.
The Nebraska Advantage Act has been replaced with the ImagiNE Nebraska Act. History repeats itself. Now LB 1165 will revamp the latest tax incentive program, revising the Key Employer and Job Retention Act.
The following is the language from LB1165’s statement of intent: “It is the intent of the Legislature to transfer five million dollars from the General Fund to the Site and Building Development Fund for fiscal year 2026-27 solely for funding key employer retention capital improvement grants. A grant to a key employer to support capital improvements related to such grant shall be made at a rate of five dollars per square foot of capital improvements. If the funds available for grants in any year are insufficient to provide grants to all eligible applicants, the department shall prioritize awards to the retention and relocation plan of the employer.”
I thought the state has a $471 million deficit? They are only transferring $5 million. So we are going to spend our way into property tax relief?
Nebraska seeks to sweeten corporate incentives, partly to ensure Union Pacific stays and grows
Perhaps you are like me. I have never found a provision in anything I have read that it is the government’s job to build private businesses or compete with private enterprise. Remember, the government does not reduce its budget to pay for all tax incentive programs. These incentives raise everyone’s taxes who don’t receive incentives.
Nebraska has many such programs like the ones mentioned, as well as tax increment financing (TIF) and others to give your hard-earned tax dollars to businesses that will then compete with smaller businesses who are ineligible for these incentives.
The bottom line of tax incentive programs is this: The government picks the winners. The losers are those companies who don’t have lobbyists like the Nebraska Chamber of Commerce.
The Greater Omaha Chamber of Commerce’s new president is Heath Mello, a former state senator who said LB1165 reflects months of discussion with the Pillen team to retain talent and expand jobs.
The truth is that our state has a spending problem, which in turn raises your taxes. These tax incentive programs are a major reason why we have a spending problem. If Nebraska wants to compete to attract and/or keep businesses, young people, and retirees, we must lower our tax burden for everyone.
When we become competitive on taxes, we can compete with anyone. Today, we compete poorly with all of our neighboring states, and these tax incentive programs are actually a so-called solution. Thank you for reading.
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