Nebraska State Tax System Revenues

Where the State & Local Tax Dollars Come From....

Sources of All Taxes and/or Revenues

The Nebraska State & Local Tax System consists of all taxes and revenues that are collected in three separate funds:

  1. General Fund (State)
  2. Local Funds (County Government)
  3. Cash Fund (State Tax & Non-Tax Revenues)
The total revenues amount to over $5 Billion dollars for FY 1997-98. Of that $650 Million (13%) may be considered non-tax revenue. As indicated before and if we consider UNMC and the University Nebraska System as publicly owned enterprises, their revenues should be considered part of the tax system since they are funded by tax subsidies. One problem has been able to get detailed information on all three funds for the same year. You will note that detailed information for each fund may have different Fiscal Years, however, historical evidence suggests that each fund is within 5-7% more of each preceding year. Better comparisons will be made when the information becomes available.

NETaxRev97-98.gif - 4663 Bytes
Chart 1.0 Total Taxes & Revenues for FY 1997-19982.
1. General Fund
General Fund or State Levied Revenues are categorized below. The vast majority of
the General Fund consists of Personal Income Tax and Sales Tax. It does not include
the over 290 cash funds paid to government agencies for particular services.
General Funds are most subject to legislation.

2. Cash Fund
Cash Funds or Tax and Fee Revenues can be considered as dedicated funds
and are less subject to legislation since they are generated directly
and often paid directly to certain agencies. Some cash funds are
very tax-like e. g. Motor FuelsTax while University Revenues for Tuition, are not.

3. Local Funds
Local funds consist primarily of Property Taxes and Local Sales Taxes.
Unlike General and Cash Funds, Local Funds do not pass through the state treasury.

Nebr. State General Fund Revenues

(2/25/00 Forecast)

Category FY99-00 Est. ($) Percent (%) of General Funds
Indivdual Income Tax $1,150,000,000 49.0%
Sales Tax $890,000,000 37.0%
Miscellaneous Receipts (Fees) $172,000,000 07.3%
Corporate Income Tax $137,000,000 05.8%
Total $2,349,000,000 100.0%

Source: Highlights of the 2000 Legislative Session, The State of Nebraska, April 20001.

Miscellaneous General Fund Tax Categories

 Note: These categories combined make up only 7.3% of General Fund Revenues.
Source: 2.

State Cash Fund Revenues

Category FY1996-97 ($) Percent (%) of Cash Funds
Highway Revenues $440,551,275 40.8%
UNMC Hospital Revenues $202,420,033 18.8%
University Nebraska Tuition/fees $160,000,077 14.8%
Lottery Funds $35,363,387 3.3%
Game & Park Fees $27,385,954 2.5%
HHS-Reg. Fees and Patient Revenue $44,528,918 4.1%
All Other $168,281,174 15.6%
Totals $1,078,530,818 100.0%

Source: Legislative Fiscal Office 11/13/98 in 3.

Major Sources of Highway Funds

Category ($) FY96-97
Motor and Special Fuels Tax $192,340,825
Fed. Highway Funds Reimbursement $138,266,357
Motor Vehicle Sales Tax $55,174,334
MV Registration Fees $27,029,866
MV/Title Fees $10,563,424
Other $17,079,000
Total $440,451,275

Local Fund Revenues

Local fund Revenues consisting primarily of property taxes are handled by the local county government or political subdivision. However, as an exception, property taxes from railroads and car lines go to the state.

Trends in Local Taxes

Property taxes have been the major source of Local Fund Revenues. However, legislators have been shifting the burden away from property taxes to sales and income taxes. The major From 1978-1998, property taxes have shifted from 50% of the total taxes to 35% of total taxes. Other taxes have been the same, the use of city sales taxes has grown. The significance of these trends are important and will be discussed elsewhere here. See Nebraska Tax Overview.

FY97-98LocalTaxes.gif - 6011 Bytes
Chart 2.0 Nebraska Local Tax Revenue FY-97-98

Property Taxes

Property Taxes are assessed on the value of land and its use. Each property is given a valuation and a corresponding rate or mil levy. The total property taxes assessed are calculated on the total assessed value times the Total Levy. Amendment 1, passed in 1990, provided that agricultural land could be taxed at a method other than actual or market value. In 1991, LB 320 provided that agricultural land be assessed at 80% of actual value. As a result, K-12 Schools lost $82 million in property taxes that year.

The total mil levy is based on the number of subdivisions in the county. The average total mil levy in Nebraska for 1997 is 2.24%.4 In 1997, K-12 Schools received over 62% of the total property tax levied. Each subdivision is allocated a certain percentage. LB 1114 , proposed in 1996, resulted in the imposition of overall levy caps by 1998 that resulted in the loss of approximately $64 million dollars in school property tax.3 As noted earlier, the losses in direct property tax payments were offset by subsidies from the General/Cash Funds.

1997 NE Property Taxes Levied % of Total Property Tax
K-12 Schools $957,975,232 62%
Counties $229,054,745 15%
Cities and Villages $175,075,000 11%
Community Colleges $57,740,000 4%
NRDs $22,000,000 1.5%
ESUs $23,000,000 1.5%
Fire Districts $16,000,000 1%
Townships $9,000,000 ~1%
Misc. Districts $29,000,000 2%
SIDs $28,000,000 2%
Total Gross Property Taxes Levied $1,547,000,000 ~100%

In terms of net dollars, property taxes have steadily increased about 5% each year between 1978-1998. [Ref. 2, p. 10] Legislative Fiscal Office, 11/12/98. This compares with all combined tax revenue which has increased 6.5% over the same period. The proportions of Local Funds compared with General Fund and Cash Fund Revenues are listed in the table below. The individual percentages of each of these taxes as a percentage of total taxes paid have been relatively constant except for the shift mentioned above.

Major State and Local Taxes as a percentage of Personal Income have averaged 10.7% over the last 20 years [FY1978-1998].

Summary of All Nebraska Taxes and Revenues

Major State and Local Taxes & Revenues

(Tax Types as % of Total Revenues)

FY 1997-1998

General Fund State Sales Tax $803,800,000 16.1%
Individual Income Tax $981,600,000 19.7%
Corporate Income Tax $142,200,000 2.8%
Misc. Taxes & Fees $177,900,000 3.6%
Cash Fund Motor Vehicle Sales Tax $112,800,000 2.3%
MV Fuel Tax $271,000,000 5.4%
MV Reg. Fees $60,900,000 1.2%
FY 96-97 UNMC Hospital Revenue3 $202,420,000 4.1%
FY 96-97 U. Nebraska System Tuition/Fees3 $160,000,000 3.2%
Other3 $275,000,000 5.5%
Local Funds Property Taxes (net) $1,510,000,000 30.3%
Motor Vehicle Fee/Tax $133,700,000 2.7%
City Sales Tax $155,800,000 3.1%
Total Revenues $4,987,420,000 ~100%

Source: Legislative Fiscal Office (11/12/98) 2.
Note: This table has been recompiled to include all cash revenues.

References:

  1. Highlights of the 2000 Legislative Session, The State of Nebraska, April 2000
  2. A Comprehensive Guide to the Nebraska State & Local Tax System, December, 1998, p. 10.
  3. Ibid, p. 6.
  4. Ibid, p. 37.
  5. Ibid, p. 43.
Posted: January 2, 2001
Updated: February 19, 2001

State Sales Tax

Sales tax began in Nebraska in 1967. In 1984, sales tax on food for consumption off premises was eliminated. In the mid 1980's, sales tax base was expanded to include computer programming services, warranty contracts, and utility payments Nebraska sales tax is levied on the retail sales of tangible personal property and some services. It does not apply yet to sales for resale, sales of intagible propety, most services, or real estate. Nebraska is 25th in the nation with a rate of 4.5% except where local communities approved an increase upto 1.5%. [p. 81-83] 62 cities in Nebraska have opted for a 1% City sales tax and 16 cities have opted for the 1.5% city sales tax.

Nebraska is estimated to lose more than $17,000,000 annually in uncollected use tax on mail order purchases alone. While the purchaser is supposed to remit this amount, it has been nearly impossible to enforce. [p.87]

Douglas county which has 27% of the states population generated 35% of the total sales tax collected in the state in 1997. p. 92.

Individual Income Tax

In 1987, Govenor Kaye Orr proposed LB 773 which coupled the state income tax with adjusted gross income tax on the federal return. [p. 98] Income tax is the most progressive of all taxes. The rich pay more income tax. Nebraska, compared to neighboring states, is about in the middle of the pack. Nebraska State income taxes have not increased since 1990.

Corporate Income Tax

The corporate income tax was enacted in 1967 at 2% of federal taxable income for corporations. Currently the corporate income taxes are based on a two tier system with rates of 5.58% and 7.81%. On a per capita basis, it amounts to $70 which is 30th in the nation. [p.126]. LB775 of 1987 provides major tax credits for companies that invest in the community and provide new jobs. [p. 127]

Motor Fuel Tax

The Motor Fuel tax has been around since 1925. Procedes are used in the construction, repair, and maintenance of roads and bridges in Nebraska. [p.128]. With a total gas tax of 39 cents per gallon tax, Nebraska was ranked 5th and recently has dropped to 15th out of 50 states in terms of total gas tax rates. [p. 130-1].

Cigarette and Tobacco Tax

The cigarette tax has been in effect since 1947, The rate has increased from 3 cents to 34 cents per pack. The tax generates about $43 million dollars in revenue. Funds from the cigarette tax are earmarked for the general fund, special building or capital construction, or cancer research. [p.148-150]. Compared to adjacent states, Nebraska is second highest behind Iowa's 36 cents per pack tax.