Your rural voice: striking a property tax balance with LB 614

Your rural voice is a collection of testimony, official comments, appropriations requests, and other formal communications from the Center for Rural Affairs to government departments, officials, and more. Each item was written and delivered by our staff on behalf of you, our constituent, as we work to build a more vibrant future for rural communities.

This testimony was submitted in support of Nebraska Legislative Bill (LB) 276 to the Revenue Committee during the 2019 Nebraska legislative session.

The Center for Rural Affairs agrees that property taxes are too high and local schools and government entities are forced to be too reliant on property taxes. This reliance upon property taxes for education and local government demands even the most comprehensive property tax relief plan receive careful scrutiny as these institutions underpin the existence of rural communities. Although we recognize that farmers and ranchers often bear the greatest tax burden, our mission is to support policy that builds strong rural communities and provides opportunity for all rural people. LB 614 achieves that policy goal.

Rural Nebraskans recognize the value of the education, health care, and public safety services which their tax dollars provide. These are the services that underpin and help sustain our rural communities and residents. Yet, these residents also recognize the state of Nebraska is not fulfilling its obligation to help pay for these services, especially in the funding our K-12 school systems.

The need for additional state revenues

Years of tax cuts and exemptions have eroded the state’s ability to make the necessary investments in the services that are vital to rural Nebraska communities. Over the last decade, these tax cuts and exclusions, estimated by the Legislative Fiscal Office to have resulted in a more than $810,000,000 loss in revenues in fiscal year 2017 to 2018 alone, have obstructed the state’s ability to meet its obligations to pay for basic services. Tax cuts, coupled with the rapid rise in land values and the precipitous drop in state funding for local services, have forced schools and local governments to rely on property owners, particularly those who farm and ranch, to shoulder a disproportionate share of this funding burden. New revenue sources are necessary to correct this imbalance.

This legislation seeks to address this imbalance by bringing in additional revenues. Moreover, LB 614 outlines opportunities to generate revenues in a far less regressive manner than property taxes, where valuations often do not correlate to the ability to pay. By closing tax loopholes, like the S-Corporation/LLC exclusion and repealing the personal property tax exemption new revenues will be injected into the state budget. These are revenues needed for the state to fulfill it obligations, provide real property tax relief, and hedge against ongoing budget shortfalls.

The community impact

In addition to drawing in other sources of revenue, LB 614 will positively impact Nebraska’s communities. Rural Nebraskans understand how critical school systems, medical services, and public safety are to their communities. Loss of these assets can mean the loss of a business, the closing of a church, and a near-certain population decline. Ultimately, communities lose their identity and place on the map.

Recognizing the need for the schools and services that are the heartbeat of their communities, rural Nebraskans are not looking to relinquish their entire obligation to help pay for these community assets. They are simply asking for balance in the way in which the state meets it obligations to pay for education.

LB 614 outlines and fiscally provides a mechanism for this balance to occur. By reinstating the 20 percent allocated income tax under the Nebraska Tax Equity and Educational Opportunities Support Act, increasing the reimbursement rate for special education from 51 percent to 80 percent, and providing supplemental state aid to all school districts, the responsibility of funding K-12 education begins to return to the state.

Conclusion

Rural Nebraskans are desperate for property tax relief, but they are not asking to completely sidestep their responsibility to help fund the schools and services that uphold their communities. LB 614 strikes that balance rural Nebraska is calling for—providing immediate and actual property tax relief, by drawing in necessary revenues for the state to fulfill its obligations, including funding our schools. We strongly urge the Revenue Committee to vote LB 614 out of committee for the betterment of our schools, our rural communities, and our state.


Source

Major Tax Changes since 2006: Impact on FY17-18 Revenue Base. Legislative Fiscal Office. Dec. 14, 2017.