charts above show that for nearly all of the study period
the corporate income tax declined dramatically as a share of
the economy and Nebraska's tax mix. Tax receipts lagged
the growth in the economy through the 1990s despite the rate
increases that have taken place
1980, especially LB 1059 (1990). LB 829 (1991) adopted a number
of one year tax increases, including a corporate income tax
and a depreciation surcharge to fund replacement revenue for
a one year exemption of the personal property tax. This increase
is also visible in the chart. However, unlike the individual
income tax part of our tax system which naturally grows
faster than the economy, the corporate income tax system has
legislative changes in the chronology explain part of the reason
why. LB 775 (1987) is an investment incentive program that
in more than $50 million in income tax credits used by qualifying
companies every year.
1124 (1984) changed the apportionment of the income of multistate
unitary businesses from worldwide to nationwide combined reporting
after a Nebraska Supreme Court ruling held the prior practice
to be unconstitutional.
772 (1987) phased in sales-only apportionment of the income of
multistate unitary businesses and LB 559 (1995) phased out the
throw-back rule. Under the sales-only apportionment method, the
income of a multistate business is taxed by Nebraska based on
the amount of sales made in the state. The previous system apportioned
income to Nebraska based on the average of three factors, sales
in the state, property employed in the state and the payroll paid
in the state. Prior to the passage of LB 559 (1995), sales made
from a Nebraska location into a state which cannot constitutionally
tax the company because it has insufficient contacts with that
state were considered Nebraska sales. Enactment of LB 559 phased
out the "throw back" rule over three years.
this declining importance of the corporate income tax is not
to Nebraska tax policy. Other states are also relying less on
the corporate income tax than they previously have. According
to many experts, the contribution of the corporate income tax
to state revenues has declined by half in the last 30 years
Tax Review, July 22, 2002). In addition to the
greater use of employment and investment incentives, causes include
more aggressive state tax planning by the corporations themselves
and a greater use of other forms of business organization, like
joint ventures, corporate partners, and L.L.C.'s.
in fiscal year 2003-04, corporate income tax receipts
grew at a very high rate for three years, faster than any other
a long string of declines and may have been an aberration.
Results for FY2006-07 show a declining share and may be a resumption
of the old trend.