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Fact check/Is Nebraska doing well in most economic indicators?

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Fact check: Is Nebraska doing well in most economic indicators?

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The state flag of Nebraska

March 8, 2017
By Sara Reynolds

Nebraska Governor Pete Ricketts is proposing to cut the state's top income tax rate. Supporters say the state's high income tax has negatively affected economic growth and job creation. Critics question whether the tax cuts would be enough to impact economic growth, and say that the majority of Nebraskans view property tax cuts more favorably than income tax cuts.[1][2]

Becky Gould, executive director of Nebraska Appleseed, questioned why the state should lower income taxes. "Nebraska has been doing well in most economic indicators," she said. "Where really is the problem here in terms of income tax holding us back as a state?"[1][3]

Is Gould correct? Has Nebraska been doing well in most economic indicators?

"Doing well" is a subjective characterization. In several respects, the state’s economic indicators are consistent with (or even better than) national trends, as detailed below. However, the Federal Reserve Bank of Kansas City recently concluded that Nebraska's economic growth is unbalanced due to a multi-year slump in crop prices that has negatively affected farm income in the state, where one in four jobs is related to agriculture.[4]

  • Nebraska's real Gross Domestic Product (GDP) increased nearly 40 percent between 2000 and 2015, from $71.6 billion to $100.1 billion. The national real GDP increased 28 percent (from $12.6 trillion to $16.1 trillion) during the same period.[5]
  • Annual mean wages in Nebraska increased 6.5 percent, from $40,999 to $43,677, between 2001 and 2015. Annual mean wages increased 6.1 percent for the entire United States during the time, from $46,649 to $49,507.[6][7][8]
  • Nebraska's unemployment rate is 3.3 percent, up from 2.8 percent in January 2000.[9] The national unemployment rate also increased during this time, from 4 percent to 4.7 percent.[10][11]
  • The state's labor force participation rate decreased by 4.2 percentage points, from 73.6 percent in January 2000 to 69.4 percent in December 2016, consistent with national trends.[12][13]
  • Nebraska reported slightly more than one million total nonfarm jobs in December 2016, a 12 percent increase from 909,100 in January 2000.[14] Nationwide, total nonfarm employment increased about 11 percent, from 131 million to 145.3 million.[15][16][17]
  • Between 2000 and 2016, the net domestic migration rate has been consistently negative, meaning more people have left the state than have relocated to it.[18]

Background

Governor Ricketts is proposing to lower the state’s top income tax rate by about 0.11 percent per year over eight years, starting in 2020, on the condition that revenue growth exceeds 3.5 percent annually. This would ultimately lower the top individual income tax rate from 6.84 to 5.99 percent.[19][20][21] Most businesses in the state pay taxes at the individual income tax level.[1] If the tax cuts went into effect in 2017, a single taxpayer earning $125,000 would save $755.[22]

Former Governor Dave Heineman also signed income, sales, and property tax cuts into law during his time in office (2005-2015).[23]

Finance, government, and manufacturing were three of Nebraska's largest industries in 2015.[5] Other top industries in the state include agricultural manufacturing, health care, military and defense, and transportation.[24]

GDP

Nebraska's real GDP increased 40 percent between 2000 and 2015. Nebraska's growth outpaced the national GDP, which increased 28 percent during that time.[5]

Real GDP Nebraska 4.png

A recent analysis from the Federal Reserve Bank of Kansas City concluded that Nebraska's economic growth is unbalanced, and the state's farm economy is suffering despite growth in the service sector.[25]

The Federal Reserve found that a nationwide slump in crop prices has lowered farm income and also negatively impacted industries connected to agriculture.[25] According to the Bureau of Economic Analysis, realized net farm income in Nebraska declined 47 percent between 2011 and 2015 (from $8.3 billion to $4.4 billion).[5][7]

The Federal Reserve report additionally noted that farm real estate prices have declined in the state since 2014.[25] The average value per acre of irrigated and nonirrigated cropland in Nebraska declined between 2014 and 2015 (for the first time since 2002), and continued to decline in 2016.[26]

Irrigated cropland Nebraska 4.png

Wages

Annual mean wages for all occupations in Nebraska increased 6.5 percent, from $40,999 to $43,677, between 2001 and 2015. This is consistent with nationwide trends. Annual mean wages increased 6.1 percent for the entire United States, from $46,648 to $49,507.[6][7][8]

Unemployment

In December 2016, Nebraska's unemployment rate was 3.3 percent, ninth lowest among all states.[27] Since 2000, unemployment peaked at 4.8 percent, from June 2009 through March 2010, due to the recession. It was at its lowest, 2.8 percent, from January to August 2000, as well as February and March 2015.[9][28]

In the same period, the national unemployment rate peaked at 10 percent in October 2009, and was lowest at 3.8 percent in April 2000. In December 2016, the national unemployment rate was 4.7 percent.[10]

Labor force participation rate

The labor force participation rate measures "the percentage of the population that is either working or actively seeking work."[29]

Nebraska’s labor force participation rate dropped 4.2 percentage points since 2000, when it was 73.6 percent, to 69.4 percent in December 2016.[12] (That is, 69.4 percent of the state’s potential workforce was employed or actively seeking employment in December 2016 compared to 73.6 in January 2000.)

The state’s rates are consistent with national trends. In the same period, the national labor force participation rate decreased by 4.6 percentage points, from 67.3 percent to 62.7 percent.[13]

Job creation

The Bureau of Labor Statistics estimated total nonfarm employment in Nebraska to be slightly more than one million in December 2016. That is the second-highest number of reported jobs since 2000 (with just a few thousand more in November 2016, the highest). Employment increased 12.3 percent since January 2000.[14]

Nationally, total nonfarm employment increased 10.9 percent between 2000 and 2016, from 131 million to 145.3 million. National employment at the end of 2016 was also at its highest since 2000.[15][16][17]

Net domestic migration

Net domestic migration is "the difference between the number of people who moved into a metro area from elsewhere in the country and the number of people who moved out of that area to another part of the US."[30] The net domestic migration rate "expresses net domestic migration during a specified time period as a proportion of an area's population at the midpoint of the time period."[31]

Nebraska's net domestic migration rate improved between 2001 and 2016, but more residents still left the state than moved in during the entire period. Between 2000 and 2016, Nebraska lost the fewest residents (on net) in 2008 and 2013.[18]

Net domestic migration Nebraska 4.png

Conclusion

Responding to the Nebraska governor's proposal to cut the state's top income tax rate, Becky Gould, executive director of the nonprofit Nebraska Appleseed, said, "Nebraska has been doing well in most economic indicators."[1]

"Doing well" is a subjective characterization. In several respects, the state’s economic indicators are consistent with or outpace national trends. However, a slump in crop prices has negatively affected farm income in the highly agricultural state.

See also

Sources and Notes

  1. ↑ 1.0 1.1 1.2 1.3 Lincoln Journal Star, "For most, Ricketts' income tax cuts would offer little benefit," February 6, 2017
  2. ↑ Omaha World-Herald, "Supporters, critics of Ricketts' income, ag land tax proposals sound off at committee hearing," February 9, 2017
  3. ↑ Nebraska Appleseed describes itself as a "nonprofit organization that fights for justice and opportunity for all Nebraskans." See Nebraska Appleseed, "About," accessed February 27, 2017
  4. ↑ Nebraska Department of Agriculture, "Nebraska Agriculture Fact Card," accessed March 4, 2017
  5. ↑ 5.0 5.1 5.2 5.3 United States Department of Commerce, Bureau of Economic Analysis, "Regional Data," accessed February 20, 2017
  6. ↑ 6.0 6.1 United States Department of Labor, Bureau of Labor Statistics, "OES Data," accessed March 6, 2017
  7. ↑ 7.0 7.1 7.2 Numbers have been adjusted to 2017 dollars using the United States Department of Labor, Bureau of Labor Statistics, "CPI Inflation Calculator," accessed March 2, 2017
  8. ↑ 8.0 8.1 Verbatim used 2001 as a baseline because it was the most recent year that the Bureau of Labor Statistics provided an annual mean wage for the "All Occupations" category.
  9. ↑ 9.0 9.1 United States Department of Labor, Bureau of Labor Statistics, "BLS Data Viewer: Unemployment Rate, Nebraska," accessed February 16, 2017
  10. ↑ 10.0 10.1 United States Department of Labor, Bureau of Labor Statistics, "Databases, Tables & Calculators by Subject, Labor Force Statistics from the Current Population Survey, Unemployment rate," accessed February 16, 2017
  11. ↑ Nebraska's unemployment peaked at 4.8 percent in August 2009, and the national unemployment rate peaked at 10 percent in October 2009.
  12. ↑ 12.0 12.1 United States Department of Labor, Bureau of Labor Statistics, "Civilian Noninstitutional Population and Associated Rate and Ratio Measures for Model-Based Areas," accessed February 20, 2017
  13. ↑ 13.0 13.1 United States Department of Labor, Bureau of Labor Statistics, "Labor Force Statistics from the Current Population Survey," accessed February 20, 2017
  14. ↑ 14.0 14.1 United States Department of Labor, Bureau of Labor Statistics, "Economy at a Glance: Nebraska," accessed February 20, 2017
  15. ↑ 15.0 15.1 United States Department of Labor, Bureau of Labor Statistics, "Employment, Hours, and Earnings from the Current Employment Statistics survey (National)," accessed February 20, 2017
  16. ↑ 16.0 16.1 The number provided for December 2016 is a preliminary number.
  17. ↑ 17.0 17.1 Numbers have been seasonally adjusted.
  18. ↑ 18.0 18.1 United States Census Bureau, "State Population Totals Datasets: 2010-2016," accessed February 27, 2017
  19. ↑ Nebraska Legislature, "One Hundred Fifth Legislature - First Session - 2017, Introducer's Statement of Intent, LB337," accessed February 27, 2017
  20. ↑ Nebraska Legislature, "Legislative Bill 337," accessed February 27, 2017
  21. ↑ The legislation would lower the individual income tax rate for single individuals; married couples, filing jointly; heads of household; married couples, filing separately; and estates and trusts.
  22. ↑ Sara Reynolds, "Email communication with Deepa Buss, Communications Manager, Nebraska Department of Revenue," March 3, 2017
  23. ↑ Hartford Courant, "Two Governors, Two Styles: Tax Increases In Connecticut, Tax Cuts In Nebraska," October 11, 2011
  24. ↑ Newsmax, "Top 5 Industries in Nebraska: Which Parts of the Economy Are Strongest?" April 13, 2015
  25. ↑ 25.0 25.1 25.2 Federal Reserve Bank of Kansas City, "Diverging Economic Growth in Nebraska," June 29, 2016
  26. ↑ United States Department of Agriculture, Economics, Statistics and Market Information System, "Agricultural Land Values," accessed March 2, 2017
  27. ↑ United States Department of Labor, Bureau of Labor Statistics, "Local Area Unemployment Statistics, Unemployment Rates for States, Seasonally Adjusted," accessed February 16, 2017
  28. ↑ United States Department of Labor, Bureau of Labor Statistics, "The Recession of 2007-2009," February 2012
  29. ↑ United States Department of Labor, Bureau of Labor Statistics, "How the government measures unemployment," accessed February 20, 2017
  30. ↑ Business Insider, "Here's where people are relocating in the US," May 25, 2016
  31. ↑ United States Census Bureau, "Net domestic migration," accessed February 28, 2017
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