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1 Scott Drenkard, Pro-Growth Tax Reform in the Cornhusker State 1 (2014)

handle is hein.taxfoundation/taxfaane0001 and id is 1 raw text is: Pro-Growth Tax Reform in the Cornhusker State Scott Drenkard Economist, Tax Foundation Hearing of the Nebraska Revenue Committee February 13, 2014 Chairman Hadley, Members of the Committee: My name is Scott Drenkard, and I'm an economist at the Tax Foundation. I'm pleased to have the opportunity to speak today regarding L.B. 1097. While we take no position on legislation, I hope to give a review of our research on tax policy across the country and our survey of the economic literature on taxes and growth. In October of 2013, in partnership with the Platte Institute, Joe Henchman and I authored a book titled Building on Success: A Guide to Fair, Simple, Pro-Growth Tax Reform for Nebraska. In it, we detail reform recommendations in line with the principles of sound tax policy: simplicity, neutrality, transparency, and stability. Many of the findings I will note here are discussed in more detail in that primer. Reducing the Corporate Income Tax Boosts Growth and Competitiveness The first proposal I'd like to address is the reduction of the corporate income tax rate over the next few years. Lowering the top corporate rate from 7.81 percent to 5.9 percent makes Nebraska competitive with more of its neighbors. Colorado, Missouri, and Kansas all currently have lower rates, and South Dakota and Wyoming do not levy corporate income taxes at all. More importantly though, corporate income taxes are generally found to be among the most harmful taxes to economic growth. The economic literature that distinguishes between types of taxes provides very compelling evidence that corporate income taxes hurt economic growth most, followed by personal income taxes, then sales taxes, and finally property taxes. Add to this the fact that corporate income taxes represented just 2 percent of Nebraska state and local collections in 2011, and in many ways corporate tax reduction is a high bang for your buck strategy to increase growth without costing the government a lot of revenue. Finally, economists agree that corporate income taxes are not even borne by corporations themselves. While corporations cut the check to the department of revenue, the tax burden is 1