(The Center Square) – The Nebraska legislature has passed legislation cutting the corporate income tax rate from 7.81% to 7.25% over two years.
The bill now goes to Gov. Pete Ricketts, who is expected to sign it
The Nebraska Chamber applauded the passage of the bill.
Nebraska’s corporate income tax has been almost one percentage point higher than the individual tax rate, Bryan Slone, chamber president, told the Center Square.
“That created an odd situation where two businesses which did the exact same thing and had the exact same income, one might be taxed 1% less just because it was a pass-through, or Sub Chapter S rather than a corporation,” Slone said.
Many corporations in Nebraska are older entities that were formed long before limited liability companies existed, the chamber president said.
“It’s a simple matter of equity,” Slone said. “We have a lot of agricultural corporations, manufacturing corporations and all of our public companies.”
Corporate profits are actually taxed twice, first at the corporate level and again when the profits are distributed as dividends to shareholders, Slone said.
“The general rule of thumb is that you keep your corporate rates lower than your individual rates, which is true at the federal level,” he said. “It’s an oddity to have your corporate rate exceed your individual rate.”
This is the first time in about three decades that corporate taxes have been lowered in Nebraska, Slone said.
“It was a clear signal from the legislature that they are serious about making the state more competitive from a tax standpoint,” he said. “We enjoy lots of competitive advantages in this state. One of the things we are working hard on is getting our tax rates down. This was a first step.”