The Nebraska Legislature is scheduled to begin debate on LB 461 later this week. Tucked within this compilation bill, posed to cut income and corporate tax rates, is a proposal to change the way agricultural and horticultural land is valued.
While this change in ag land valuation is positioned as the property tax relief Nebraska’s agricultural community has been calling for, rural and urban residents alike should be wary.
Known as the Agricultural Valuation Fairness Act, ag land valuations would be shifted from a market-based assessment to one based on income potential, while also requiring valuations to fall within 55 to 65 percent of actual value. Statewide valuations would be capped at 3.5 percent over the prior year. If voted into law, the bill would be implemented in January 2018.
Even in summary, questions arise as to the bill’s ability to provide immediate and effective property tax relief. When will landowners begin to see reductions in valuations? How was it determined that a 3.5 percent cap in valuations would result in property tax savings? Will this change in valuation result in more tax relief than is currently offered through the property tax credit fund?
Beyond the mechanics of the bill remain the questions of the bill’s impact upon counties and schools. How will schools make up for the loss of revenue? If the state has not fully funded education in 12 of the last 15 years, will the state be able to do so after this bill passes? Will schools and counties turn to increased levies to meet current needs?
And there remains the question asked by ag landowners across the state, how will this legislation change my property tax bill?
Amidst the unknowns, one thing is evident, LB 461 is not the property tax relief bill that Nebraskans have called for. While the current system is not working, passing LB 461 will only exacerbate the over reliance on property tax by creating added gaps in funding. Nebraska’s property taxpayers deserve better, and the legislature can and must do so.
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