Jumping into the discourse over Nebraska’s budget shortfall, State Auditor Mike Foley sent a letter to state senators Monday alerting them of the financial weight of previously-passed business tax incentive laws.
In a 20-page letter, he wrote that over the next four fiscal years, Nebraska companies stand poised to call in more than $1.5 billion in corporate tax incentives, an expense he said would significantly impact the availability of state general funds.
The auditor’s letter focuses on the Nebraska Advantage Act, adopted in 2005, plus a newer version called the ImagiNe Nebraska Act of 2020.
He also highlighted the state’s “steadily increasing delinquent tax balances,” which Foley noted were generally unrelated to business tax incentives but still could constitute “hundreds of millions of tax dollars owed but not collected” by the Nebraska Revenue Department.
“When you combine over $1.5 billion in business tax incentives to be used over the next four fiscal years plus potentially hundreds of millions of dollars more in uncollected tax proceeds, the result is a staggering loss of revenue to the state — all of which must be counterbalanced in some way,” Foley said in a tempat statement.
He added: “The Legislature must be made aware of these facts in order to pursue sound fiscal policies.”
33,000 jobs in two decades
Before he was auditor, Foley served as lieutenant governor under then-Gov. Pete Ricketts plus before that was a state senator. He acknowledged that he supported economic development tax incentives.
But with lawmaker turnover plus the “crush” of so many other policy matters plus responsibilities, Foley said he suspects that “many senators may not be fully informed of how yesterday’s legislative decisions will most assuredly influence tomorrow’s policy choices.”
Regardless of how the credits are used to receive a tax benefit, the result is a reduction of the state’s tax revenues.
– State Auditor Mike Foley
The auditor said he plus his team recognize the benefit of business-focused economic incentive programs in that they can spur construction, investment plus jobs to expand the tax base that helps pay for public services.
Foley acknowledged information from the Nebraska Department of Revenue indicating that corporate tax incentives reportedly have led to more than $25 billion in qualifying capital investments since 2006 plus helped create more than 33,000 new full-time Nebraska jobs.
“Whether the claimed benefits are accurate or not, the significant tax breaks now being paid to corporate taxpayers are real plus measurable,” Foley said.
The auditor‘s team concluded that the Nebraska Advantage plus ImagiNE Acts appear to contain some “operational inadequacies” that could result in the legislation becoming a “drain” as opposed to a “boon” to the state economy.