Nebraska lawmakers closer on property tax fix

Small Towns

By Eric Galatas, Public News Service - Nebraska

After years of debate, Nebraska lawmakers are narrowing in on a compromise bill to address rising property taxes, a move that could resolve a crisis facing many rural farmers and ranchers. 

Land values have skyrocketed on paper over the past decade, but incomes haven't increased enough to cover bigger tax bills, and as a result, budgets for public schools and other priorities are stretched thin. 

Jordan Rasmussen, policy manager for the Center for Rural Affairs, says LB 289 is an opportunity to bring the state's tax code up to date, and he notes that with just a few changes it can benefit all Nebraskans.

"Taxes have increased, especially for our rural residents with their property taxes over the last few years,” she points out. “The state has not been bringing in the revenues necessary to help fulfill those obligations to educate our students."

Counties with high property values frequently don't qualify for state public education funding, and to keep schools open, rural districts have had to raise mill levies. 

LB 289 would lower property taxes, but as currently written, the state would make up for that lost revenue primarily by increasing sales taxes, and removing exemptions from services such as beauty shops and lawn care. 

Critics say the move is really a tax shift, and would raise taxes for nearly all Nebraskans who make purchases every day.

Rasmussen argues that providing property tax relief primarily through an increase in sales taxes would put the burden squarely on the backs of low and middle-income families. 

She says targeting revenue through income taxes is a more equitable approach, because high earners are in the best position to contribute.

"We need to find additional revenues through an increase in income taxes, or other high income-earner pieces, that could help bring better balance to our state's tax system," Rasmussen states.

She says an additional $83 million in revenue could be tapped by closing an S Corporation LLC loophole on money leaving the state, and increasing the cigarette tax even further also would help shore up state coffers. 

The Legislature is set to debate LB 289, introduced by Elkhorn Republican Sen. Lou Ann Linehan on Tuesday. 

Rasmussen's group is encouraging people to let their senators know how they feel about the new tax proposal.