Nebraska property taxes

If you’re a farmer or landowner in Nebraska, chances are you have a keen eye focused on the Nebraska Legislature lately, as Governor Ricketts’ Property Tax reform bill, LB461, saw first round debate in Nebraska legislative talks on Friday, April 21st. This fact, in itself, marks an important milestone, as it’s the first time in the past 10 years that a bill addressing property tax relief has seen floor debate.

Obviously, Ricketts and many other state senators have heard a loud and clear message from their constituents: It’s time for Nebraska to shed its rank as the 5th-highest taxing state in the nation and focus on providing real tax relief to farmers and landowners.

The bill—officially the 2017 Nebraska Taxpayer Reform Act, LB461—is slated as a comprehensive tax reform package. According to Ricketts, the bill would seek to:

  1. Change the property valuation method from a market-based system to an income-potential assessment, said to be a more fair measure, and used by the majority of surrounding states
  2. Cap the statewide land valuation growth at 3.5 percent, which, had this been in place during the last ten years, would have changed the ag land valuations from 252 percent to 36 percent
  3. Protects K-12 education, by investing more than 30 million dollars into the state aid formula

Had LB461 been in place in 2017, according to proponents, it would have reduced state ag land valuations by $12 billion and have reduced ag land property taxes by 12 percent statewide—a $147 million tax savings for farmers and landowners.

The Platte Institute, a non-profit, non-partisan independent think tank based in Omaha, delved further into the nuances of the bill, finding that, because the bill requires state revenue projections to meet certain growth targets (revenue growth “triggers”,) the result would benefit taxpayers without compromising the state budget.

These revenue growth triggers are said to enable tax rate reductions without making cuts to state spending by dedicating a portion of new state revenue growth to tax reform—so long as state revenues meet certain benchmarks. Of the states who have employed such revenue growth triggers, those built into LB461 would be “the most cautious yet adopted by any state,” according to the Tax Foundation’s testimony to the Revenue Committee in February.

That being said, the bill still has its detractors, who say that the bill represents a tax cut to the wealthy. According to the Nebraska Farmers Union, the bill places more emphasis on income tax reduction than property tax reduction, and jeopardizes future school funding. According to the Nebraska Farmers Union website, LB461 would create further imbalance between income, sales, and property taxes by giving $400 million of income tax cuts, thereby putting even more pressure on property taxes to address potential state budget shortfalls.

However one looks at the issue, it’s clear that state senators have recognized the need for meaningful property tax relief, and will continue to focus their efforts to provide relief to farmers and landowners.

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Sources consulted: “Quick Guide to LB461.” Nebraska Farmers Union. 19 Apr. 2017. Web. 26 Apr. 2017.  Weinburg, Adam. “News Conference Call: LB461 Will Grow State & Family Budgets.” Platte Institute. 17 Apr. 2017. Web. 26 Apr. 2017.

As farmers and landowners look toward the 2017 growing season, they’re also keeping a close eye on the Nebraska State Legislature. Several bills addressing property tax relief are on the Legislative agenda, and farmers and landowners are keenly interested in seeing some form of progress in this arena.

Leading the charge is newly elected state senator and Albion farmer Tom Briese, who has introduced two bills to address the imbalance in Nebraska’s tax structure, citing Nebraska’s 5th-worst ranking for property taxes. He says:

According to Nebraska Farm Bureau, Nebraskans pay roughly 2.5 times more in property taxes than in state sales taxes. If we include local sales taxes, U.S. Census Bureau data suggests Nebraskans pay 56 percent more in property taxes than in sales taxes. Census Bureau data also indicates we pay 36 percent more in sales taxes than in state individual and corporate income taxes combined.

Seeking to lessen these tax burdens, Briese’s LB 313 would raise sales tax revenue by increasing the sales tax rate to 6.5 percent. This bill, coupled with LB 312, which would expand the sales tax base to include more goods and services, would provide significant tax relief in a fair, consistent way—that isn’t fueled by special interests.

Briese proposes that both bills provide for diverting a portion of the revenue raised to reimburse consumers with a newly created property tax credit fund, to be distributed to owners of real property.

Briese also argues that tax relief cannot be just about changing the tax structure; it must also address spending.

Jim Vokel, Chief Executive Officer of the Omaha-based think tank Platte Institute for Economic Research, agrees that Nebraskans need property tax relief, but disagrees with Briese’s approach of higher sales taxes.

“Tax reform should be achieved through broader bases, lower tax rates, and controlled spending, not increased tax rates and more spending,” contends Vokel.

Other bills up for discussion are LB338 and LB640. LB338, also known as the “Agricultural Valuation Fairness Act,” proposes that “all agricultural and horticultural land will be assessed based on its capacity to produce income.” This bill would limit aggregate annual valuation increases to 3.5 percent.

LB640 prioritize funds from the Property Tax Credit Relief fund to the state education funding formula, the goal being to reduce education tax levies in equalized districts, and capping the percentage of property tax support in unequalized districts.

Introduced by State Senator Mike Groene, LB640 would “give long range tax equity in school funding.” According to the bill’s statement of intent, “It eliminates the effect of valuation inflation, it puts local control into local school funding by making local school boards justify any additional property tax asking to fill the gap above the 75% factor. It will also eliminate some of the shielding effect that the property tax credit gives local government entities for spending increases.”

Hopefully, state lawmakers can come to a consensus about the best way to move forward with these proposals, and  provide more relief to hard-working farmers and landowners across the state.

Sources consulted:  Briese, Tom. “It’s time the Legislature provides property tax relief.” Omaha World Herald. 03 Mar. 2017. Web. 09 Mar. 2017.  “LB313 – Increase the sales tax rate and provide property tax credits.” Platte Institute for Economic Research. 22 Feb. 2017. Web. 09 Mar. 2017.


Property Taxes for Nebraska Landowners

One of the many challenges facing Nebraska landowners are high property taxes and they continue to be a top concern, and for good reason: The Tax Foundation’s 2015 State Business Tax Climate Index ranked Nebraska 12th highest in property taxes and 26th highest in income taxes in the nation.

In fact, property taxes account for 48 percent of the total combined property, income, and sales tax collections statewide.

Perhaps this is why Nebraska Governor Pete Ricketts has made property tax relief the top priority of his administration. Ricketts has been working with Sen. Mike Gloor of Grand Island, chairman of the Legislature’s Revenue Committee, and Sen. Kate Sullivan of Cedar Rapids, Education Committee Chairwoman. The two senators are sponsoring bills—LB958 and LB959—that would tighten limits on budget growth and levy increases for all local governments, and slow the rise in government-assessed cropland values across the state—measures that Ricketts calls “tools to help local governing entities control spending.”

Last month, Governor Ricketts announced the specifics of the proposed amendment to the property tax relief bills, both of which passed first round approval in the legislature. As promised, the proposed amendments include a limit on the carryover of unused restricted funds by community colleges to 3 percent, as well as additional direct property tax relief for ag land property taxpayers.

This is welcome news to landowners across the state. Last year’s efforts by state leaders, who voted to inject $64 million a year into Nebraska’s property tax credit program, created in 2007, and which boosted the amount of state assistance for property taxes by 45 percent, was seen by many as a good start, but more relief is needed.

Looking at the specifics, the amendments would limit statewide aggregate growth in ag land valuations to 3 percent, and further tighten spending limits applying to local governments. The valuation change would trigger millions of dollars in additional state aid to school districts. Other changes would tighten spending among school districts and restrict the amount districts can carry over from year to year.

Still, landowners continue to see increases on their tax bills. Critics of the bill charge that much of these increases may be attributed to rising land values over the last decade that accompanied soaring grain prices, and not all because of local governments increasing their rates. Land values still haven’t adjusted as grain prices plummet, although they are beginning to level out.

However, it is likely that Governor Ricketts will continue to work with senators to make more structural changes in order to better balance the tax system. Despite what critics say, 51 percent of total school spending in Nebraska comes from property taxes, while the national average is only 32 percent.

In the meantime, landowners across the state will continue to push for needed relief.

“I hope to do tax reform every year,” Governor Ricketts said. “We didn’t get to be a high-tax state overnight. We’re not going to fix it overnight.”

Sources consulted: Gage, Taylor. “Gov. Ricketts, Revenue Committee Agree to Compromise on Tax Reforms.” State of Nebraska. 17 Mar. 2016. Web. 07 Apr. 2016.
Pluhacek, Zach. “Ricketts Backs ‘Structural Change’ to Cut Growth in Property Taxes.” Lincoln Journal Star. Lincoln Journal Star. 16 Jan. 2016. Web. 07 Apr. 2016.