Nebraska’s Department of Revenue is facing scrutiny after laying off more than a dozen employees responsible for collecting unpaid state income taxes — even as the amount owed by residents and businesses continues to climb.
According to a report sent by State Auditor Mike Foley earlier this year, Nebraska taxpayers and companies owe a combined $269.5 million in delinquent taxes, including $129 million in unpaid individual income taxes. That total has risen by more than $52 million since 2020, with most of the increase coming from individuals behind on their state tax payments.
Despite the growing backlog, the state — under orders from Governor Jim Pillen to cut $500 million from its budget — eliminated 11 revenue agent positions and two supervisory roles last week. Those agents were tasked specifically with recovering unpaid individual income taxes.
Former department employee Steve Schroeder, who spent nearly four decades with the Revenue Department before being laid off, called the move “unfathomable.” He argued that replacing human agents with automation “is a drop in the ocean to what an actual agent would do,” noting that most taxpayers want to comply but need guidance to do so.
Tax Commissioner James Kamm defended the decision, saying the department is “streamlining processes” and “leveraging technology” to maintain strong compliance and collection efforts. The new system relies on software authorized by lawmakers through the Financial Institution Data Match Act, which allows the department to automatically identify taxpayer bank accounts for potential collection.
Kamm described the technology as “one tool in our toolbox” and insisted it would not replace staff outright, though he confirmed that only income tax collection agents were let go. He added that the state is “focused on getting ready for the upcoming tax season.”
Auditor Foley expressed cautious optimism, saying he supports any method that improves tax recovery but warned that the growing delinquent balance “is becoming a problem for the agency.” He added, “Fewer people to go out and get them is a concern — unless there’s some magic software that can rope all these delinquent taxpayers in.”
As of now, it remains unclear whether Nebraska’s new automated system will effectively reduce the state’s mounting backlog of unpaid taxes — or if the layoffs will ultimately cost the state more than they save.
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