As anyone who’s ever lived in, traveled though, ventured near, or talked to someone from Nebraska knows, we sure do like to whine and complain about the overall amount of taxes levied at the state and local levels. Now, most of the time when sort of complaining happens, no one bothers to even look up the average tax burden for cities and states around the country and do any sort of comparative analysis. Worse yet, even when statistical comparisons are done, deeper explanations of why tax burdens are what they are remain unnoticed. Therefore, I’ll do my bit to shed some light on Nebraska’s tax levels:
State/local taxes as a % of total income:
Nebraska – 10.9% (T-8th)
Kansas – 10.4% (T-14th)
Wyoming – 10.1% (T-22nd)
United States – 10.1%
Iowa – 10.0% (T-24th)
Colorado – 9.5% (T-37th)
Missouri – 9.4% (T-40th)
South Dakota – 8.8% (45th)
Now, Nebraska’s in the top 10 overall and is higher than that of every state bordering Nebraska. Both those facts are commonly used by critics of Nebraska’s tax structure. However, it is my opinion that Nebraska can only properly compare itself to Kansas and Iowa for tax purposes; the other states are too different from Nebraska for comparison purposes for various reasons (CO and MO – much higher population; SD and WY – much smaller population and are in a better position to capture revenue from beyond their borders). So, Nebraska’s tax burden is 0.5% higher than in Kansas, 0.8% higher than the U.S. average, and 0.9% higher than in Iowa. On a $30,000 income, this is a mere $240/year in additional taxes than the national average. While higher, yes, it hardly qualifies as an “outrageously high” burden overall.
Now, why might Nebraska have higher taxes than the surrounding states? Well, we do seem to have a very high number of government subdivisions per capita; however, whenever any thought is given about consolidating or merging them in some fashion, howls of protest erupt from the Wildcat Hills to west Omaha. It’s evident that in this case, we get what we pay for.
Another notable reason for Nebraska-style tax grumbling is that the particular taxes where Nebraska is noticeably higher than the national average (property and auto) are paid in lump sums; income and sales taxes, two taxes that Nebraska is much more competitive in, are paid in a (nearly) continuous stream of small payments, which can go by largely unnoticed.