Tax & Accounting Blog

Nebraska Governor calls for elimination of individual income tax, including no taxation of retirement distributions

ONESOURCE, State Reporting, Tax Information Reporting January 29, 2013

WheatNebraska Governor Dave Heineman, in his State of the State speech, proposed the elimination of the Nebraska individual income tax, including no taxation of any retirement income. His tax proposals also include elimination of Nebraska corporate income tax. As an offset, he proposes to end numerous sales tax exemptions. The key points made by the governor include no individual income tax for working Nebraskans, no taxing of small business income, no taxation of Social Security income, no taxation of military retirement income, no taxation of any other retirement income, and no corporate income tax.

Two bills are being introduced in the Nebraska legislature to further the governor’s proposals. One bill would eliminate approximately $2.4 billion in sales tax exemptions, and eliminate both the individual income tax and the corporate income tax. The other bill would eliminate approximately $395 million in sales tax exemptions, and eliminate the corporate income tax, and exempt from Nebraska income tax the first $12,000 of retirement income for married couples and $6,000 for single individuals. Both bills would still exempt food from taxation.