- | Government Spending Government Spending
- | Policy Spotlights Policy Spotlights
- |
Reversing Nebraska’s Outmigration
Tax, housing, and labor reforms to grow the state
| This Policy Spotlight distills the core findings and recommendations from the Policy Brief on this topic. For the complete analysis and data, please visit the Interstate Migration Series landing page. |
Americans made nearly 34 million interstate moves between 2018 and 2023, redistributing population, income, and economic activity among the states. Nebraska ranked 38th in net interstate migration, losing over 16,000 residents and $1.5 billion in income.1Analysis of multiple explanatory variables finds that tax burden and economic freedom, alongside housing supply constraints, are the factors most closely correlated with state migration outcomes. Nebraska faces competitive pressure on multiple fronts: Tax code complexities penalize remote work and nonresident workers, housing supply runs well below regional peers, and occupational licensing burdens exceed those of neighboring states.
Tax Policy Reforms
The competitive landscape
Nebraska ranks 22nd on the Tax Foundation’s State Tax Competitiveness Index. Its “convenience of the employer” rule taxes remote workers based on their employer’s location, resulting in double taxation for individuals and a disadvantage for businesses that hire out-of-state talent. Nonresidents who work in Nebraska for even one day are also subject to Nebraska income taxes. The state also has relatively high property taxes. A comparison with neighboring states shows where reforms could improve Nebraska’s tax competitiveness:
| South Dakota & Wyoming | No state individual income tax. No corporate income tax. |
| Missouri | Top individual income tax rate of 4.7%; top corporate rate of 4%. Further cuts planned. |
| Nebraska | Top individual income tax rate of 4.55% (down from 5.2%); flat corporate rate of 5.2%. Convenience of the employer rule and nonresident income tax filing are burdensome. Above-average property tax burden. Ranks 22nd on State Tax Competitiveness Index. |
Recommended reforms
- Eliminate the convenience of the employer rule to end double taxation of out-of-state talent.
- End the one-day nonresident filing requirement and adopt a de minimis threshold for nonresidents.
- Continue improving tax competitiveness by reducing income tax rates and lowering the property tax.
Housing Policy Reforms
The supply gap
Nebraska issues about 4.5 housing permits per 1,000 residents annually—less than South Dakota’s rate (roughly 7.7 per 1,000). Tight supply raises housing costs, reduces affordability for incoming residents and workers, and diminishes Nebraska’s attractiveness relative to peer states. Because these barriers are regulatory rather than financial, targeted reforms can encourage new housing investment and construction and can improve housing affordability across the state.
Recommended reforms
- Establish a statewide accessory dwelling unit (ADU) right by requiring all municipalities to permit at least one ADU on every single-family lot, prohibit owner-occupancy requirements, and prohibit additional parking mandates. This would align Nebraska with states that have already moved in this direction, such as Iowa and Kansas.
- Reduce minimum lot size requirements in areas served by public water and sewer infrastructure. Kansas recently limited local governments’ ability to impose unnecessarily large minimum lot sizes, providing a model for expanding housing opportunities. Allowing smaller lots would lower land costs per home, encourage more efficient use of existing infrastructure, and improve housing affordability.
- Adopt a Property Ownership Fairness Act. Modeled on Arizona’s reforms, such a law would require governments to compensate property owners before enacting regulations that reduce property rights. Such protections would encourage housing investment and construction.
Labor Market Freedom Reforms
The licensing burden
While Nebraska’s labor markets are not among the most restricted in the nation, the state requires licenses for 61 out of 102 lower-income occupations—compared to neighboring South Dakota, which requires licenses for just 32 out of 102. This gap represents a meaningful barrier to economic mobility for workers seeking to enter licensed trades. Policymakers should conduct a systematic review of licensing requirements, prioritizing occupations where Nebraska’s requirements substantially exceed those of neighboring states.
The portable benefits gap
Approximately 155,000 Nebraskans work independently, yet many lack access to benefits because companies risk legal liability when providing them to nonemployees. Survey evidence shows that 80.3% of self-employed workers in the United States want to remain independent while 80.1% want portable benefits. Portable benefits legislation would allow workers to access benefits without compromising flexibility or exposing companies to legal risk.
Recommended reforms
- Review all occupational licensing laws and reduce excessive education and experience requirements, prioritizing occupations where Nebraska’s standards exceed those of nearby states.
- Enact portable benefits legislation that allows workers to create portable benefits accounts while enabling firms to contribute without triggering worker reclassification rules. This reform would modernize workforce policies, empowering businesses to innovate and enabling workers to thrive.
Notes
[1]See Jack Salmon, “Interstate Migration Trends in the United States, 2018–2023: Where Are Americans Moving, and Why?” (Mercatus Policy Brief, Mercatus Center at George Mason University, July 2026).
