Projected Revenue Gains or (Losses) of Employment and Investment Growth Act, Quality Jobs Act,
and Invest Nebraska Act
for Tax Years 1987-2009 Projects by Fiscal Year1

Reporting Neb. Rev. Stat. § 77-4110(3)(k)


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Incentive tax credits (ITC) can influence the Nebraska economy positively, and those economic effects can, in turn, impact state revenue. Using a Computable General Equilibrium (CGE) model, the fiscal impacts of the program are estimated over the next ten years. This estimate is based upon completed and ongoing LB 775 projects.

To analyze the fiscal impact of the tax credits, the dynamic Tax Revenue Analysis In Nebraska (TRAIN) model, a custom-built Nebraska CGE model, is used.1 With TRAIN, the Nebraska economy is divided into 74 distinct sectors in order to explicitly trace economic flows. The TRAIN model is constructed based on Walrasian general equilibrium theory, which assumes all markets adjust through price changes, so the TRAIN analysis works well for analyzing structural changes and their consequences in the long run, but not for dealing with short-term fluctuations.

TRAIN details state government sectors in order to capture the sensitivity of state government revenue and expenditure flows. TRAIN calculates most tax impacts within the model, without requiring additional calculations outside the model to obtain final results. This allows the researcher to avoid rigid assumptions that may deliver vague results.

TRAIN mathematically expresses the Nebraska economy with over 1,300 equations and a social accounting matrix (SAM) database. It has 28 industrial sectors, two factor sectors, an investment sector, nine household sectors, 33 government sectors, and a rest-of-world sector.

The critical assumption when constructing a general equilibrium model is that the initial condition of the economy is in equilibrium. Therefore, the model is constructed so that its equilibrium replicates observed data in the base year. The data for TRAIN are the latest SAM and parameters. The estimate of tax credits used is based on the history of the LB 775 program.

Future revenue gains and (losses) due to LB 775 are estimated based on the analysis of historical LB 775 data, national forecasting analysis, and the TRAIN model. Possible revenue losses by tax credits claimed are estimated based on the analysis of LB 775 projects that includes 178 completed and 251 active projects. The LB 775 data contain information about the amount of earned tax credits, the amount of credit used by tax types, the amount of qualified investments, and the number of jobs. These data provide reliable indicators for future tax credit claims. Because industrial investment associated with tax credit is influenced by the business cycle, US macroeconomic forecasts from IHS Global Insight are adapted for projecting business activity that generates the earning and use of incentive tax credits.

The table below provides two estimates of employment due to LB 775. The first, labeled “Estimated Number of New Jobs for Qualifying Tax Credits,” is an estimate of the number of FTE jobs that will be used to qualify for tax credits by year. The second estimate, “Estimated Net New Economic Job Increases (Decreases),” is an estimate of the total number of new jobs created as a result of LB 775 program investment. This number is smaller than the first number, which represents more of an accounting number of employees at a project, because a number of these jobs would have occurred without the incentive tax credits under LB 775. The second number includes both direct and indirect employment in Nebraska. That is, it includes both the direct new economic jobs at the projects and the indirect new jobs throughout the Nebraska economy that are created to support the new investment and direct employment due to LB 775.

1A more detailed description of the TRAIN model is available upon request.


Projected Revenue Gains or (Losses) of Employment and Investment Growth Act,
Quality Jobs Act, and Invest Nebraska Act
for Tax Years 1987-2021 by Fiscal Year

Summary
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
Revenue Generated by ITC $67,823,419 $64,645,113 $67,782,078 $70,789,530 $68,290,205 $64,165,534

Tax Credits Used
        Income Tax
        Sales and Use Tax
                Total Tax Credits Used


64,773,348
51,495,940
$116,269,289


58,805,284
49,004,404
$107,809,688


53,833,405
44,861,171
$98,694,576

50,160,526
41,800,438
$91,960,964

51,461,432
42,884,527
$94,345,958


47,700,240
39,750,200
$87,450,441

Direct Sales and Use Tax Refunds $22,608,929 $25,481,044 $24,261,774 $20,233,181 $11,538,331 $4,549,257
Revenue Gain (Loss)
Cumulative
(71,054,799)
($412,992,863)
(68,645,618)
($481,638,481)
(55,174,271)
($536,812,753)
(41,404,615)
($578,217,367)
(37,594,085)
($615,811,452)
(27,834,164)
($643,645,616)
Tax Credits Earned
Tax Credits Recaptured
Tax Credits Expired
Tax Credit Balance
111,761,171
3,585,556
8,726,711
$746,755,087
71,017,934
2,430,132
11,456,481
$696,076,719
53,431,504
2,380,189
9,940,358
$638,493,099
43,577,467
2,429,964
8,596,184
$579,083,454
29,109,635
2,726,564
9,033,887
$502,086,680
16,567,421
2,710,481
9,550,724
$418,942,455
Estimated Employment
     Estimated Number of New Jobs
          for Qualifying Tax Credits
     Estimated Net New Economic Job
          Increases (Decreases)

 
4,951
 
2,027

 
3,146
 
1,542

 
2,367
 
2,553

 
1,930
 
2,367

 
1,290
 
2,161

 
734
 
1,858
 
Summary
 2015-16 
 2016-17 
 2017-18 
 2018-19 
 2019-20 
 2020-21 
Revenue Generated by ITC $58,800,005 $53,443,091 $47,725,481 $41,343,281 $34,618,691 $27,585,629
Tax Credits Used
       Income Tax
       Sales and Use Tax
              Total Tax Credits Used

44,170,618
36,808,848 $80,979,466
     
35,271,322
29,392,768 $64,664,090
     
27,743,729
23,119,774 $50,863,504
     
23,280,103
19,400,086 $42,680,190
     
18,755,237
15,629,364 $34,384,600
     
14,081,657
11,734,714 $25,816,371
Direct Sales and Use Tax Refund $1,066,737 $0 $0 $0 $0 $0
Revenue Gain (Loss)
Cumulative
(23,246,198)
($666,891,813)
(11,220,999)
($678,112,812)
(3,138,022)
($681,250,835)
(1,336,908)
($682,587,743)
234,090
($682,353,653)
1,769,258 ($680,584,395)
Tax Credits Earned
Tax Credits Recaptured
Tax Credits Expired
Tax Credit Balance
6,496,325
2,535,466
9,715,527 $332,208,321
-        
2,556,533
9,367,336
$255,620,362
-        
2,591,801
9,252,732
$192,912,325
-       
2,624,169
9,384,041
$138,223,925
-        
2,603,690
9,454,072
$91,781,563
-        
2,582,332
9,434,742
$53,948,118
Estimated Employment
     Estimated Number of New Jobs
          for Qualifying Tax Credits
     Estimated Net New Economic Job
          Increases (Decreases)

 
-     
 
1,565

 
-     
 
1,172

 
-     
 
907

 
-     
 
653

 
-     
 
475

 
-     
 
329

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