NE passes property tax relief
for Tri-State Livestock News
For the first time in 13 years, the Nebraska legislature has passed a property tax relief bill.
Senators returned to the Capitol in late July to finish the last 13 days of the 60-day session, which had been interrupted in mid-March by the COVID-19 pandemic, and at the last minute, a team of senators brokered the “Grand Compromise,” LB 1107, which married what some call an inadequate property tax relief proposal to a generous nearly billion-dollar business and economic development tax incentives package.
Numerous senators, observers and newspaper editorials have pointed out that the shotgunned legislation amounts to a massive increase in state spending at a time when revenues and the full effect of the pandemic on Nebraska’s ag economy remain unknown, and that the “relief” portion of the bill is contingent on a highly suspect set of “if’s.” As the Platte Foundation noted in its analysis, there is no guarantee that the legislature will not renege on the relief in order to fund other projects in the future.
While the individual parts of the bill, namely LB 1106 and LB 720, were heard publicly and were open to public testimony, the legislature – and specifically its outgoing speaker, Sen. Jim Scheer of Norfolk – dispensed with calls to have another public hearing for the combined package in an overstated eagerness to get the bill into law.
Forty-one of Nebraska’s 49 senators delivered the package to Gov. Pete Ricketts desk by a 41-4 vote on Thursday, Aug 13.
Ricketts signed the bill into law at a ceremony in Lincoln on Thursday, Aug. 20.
“You have passed a property tax relief bill that is generational in its scope,” Ricketts told the legislature.
But for those crying out for a fundamental and structural reform of Nebraska’s Property Taxes – which are the fourth highest in the nation – LB 1107 may disappoint.
PEANUTS TO THE GALLERY
Ricketts claimed that Nebraska property tax relief has grown four-fold since he first took office, without mentioning how much other state spending increased during that same timespan.
It is fair and justifiable to harbor skepticism until that claim of “relief” is actually delivered upon. After all, LB 1107 does nothing to address or limit the underlying asks from local taxing authorities, and makes no modifications to the underlying problems.
Under the “relief” portion of LB 1107, Nebraska property tax payers will receive a piecemeal income tax credit based on the amount of property taxes they’ve paid toward funding K-12 education. The new tax credit would be frontloaded with $125 million and grow to $375 million annually after 5 years. The existing Property Tax Credit Fund will also be supplemented with a minimum requirement of $275 million per year, plus any tax revenue generated from the gambling petition on the November ballot (if passed).
Once LB 1107 is fully actualized, Nebraska will — in theory — dole out a minimum of $650 million per year in relief, according to multiple sources. While that figure seems significant, it’s still a gamble.
While levy rates vary by county and district, for a property tax bill of $2,000, if half of the taxes collected go to schools, the tax payer will receive a 6 percent of that back as an income tax credit.
That 6 percent of $1,000 is $60 in the first year. Even at the full actualization of bill in five years, it will be between 15 and 18 percent, and that’s not taking into account fluctuations in valuations. Even a slight increase in property valuations could quickly nullify the attempts of LB 1107 to offset your tax liability.
The legislation includes language that if state tax revenue increases by more than 3.5 percent and the state’s cash reserve fund contains at least $500 million, half of that excess revenue would be funneled into the new property tax credit program. However, as Sen. Justin Wayne of Omaha noted, if state revenue stays at 3 percent, but the cost of running local government increases by 4 percent, it will amount to a net loss.
“[A]ll conservatives agree it does not solve the underlying issues,” Wayne wrote on twitter.
North Platte Senator Mike Groene described LB 1107 as “peanuts to the gallery,” during floor debate on the bill, while Sen. Steve Erdman of Bayard said that it amounts to little more than a “decrease in the increase” when it comes to the property taxes that most Nebraskans will pay.
Erdman joined Omaha Senators Ernie Chambers, Megan Hunt, and Hastings Sen. Steve Halloran in voting against the bill. Wayne didn’t vote, bringing the final roll to 41-4 with two senators not voting.
Other senators, such as Dist. 38 Sen. Dave Murman of Glenvil, reluctantly voted yes on LB 1107.
“I am not happy with the very limited relief our property taxpayers are receiving in LB 1107,” Murman wrote in a column published by the Hastings Tribune.
Murman echoed Erdman’s “decrease in the increase” comment, but defended his vote.
“I did vote for the bill because it is at least a step in the right direction to provide some nominal relief,” he wrote.
A STEEP HILL TO CLIMB, (AND A POOR ONE TO DIE ON)
Sen. Lou Ann Linehan of Elkhorn, chairwoman of the Legislature’s Revenue Committee, introduced the precursor relief bill, LB 1106, early in the session, but when the legislature was put on hold, she had to regroup her efforts.
LB 1107, a shell bill introduced by speaker Scheer, which later included Linehan’s 1106 language, had enough support to overcome the 33 vote hurdle needed to prevent a filibuster – a feat that could only have been accomplished by absorbing LB 720. LB 720, a business tax incentive package, was introduced by Sen. Mark Kolterman of Seward during the 2019 session at the asking of the Nebraska Chamber of Commerce.
Sen. Dan Hughes of Venango said in a column published by the McCook Gazette that twenty rural senators effectively shut down LB 720 in 2019, telling the Nebraska Chamber of Commerce something it had never heard before: “No.”
Unsurprisingly, the chambers of commerce have lobbied aggressively for LB 1107’s passage. Critics rightfully note that a property tax relief package was not a priority for these groups until their favored darling – The ImagiNE Act, which replaces The Nebraska Advantage Act that was set to sunset in December — needed a path to advance through the Unicameral. Another $300 million was included in the bill for the University of Nebraska’s NExT project, which seeks to leverage another $300 million in private donations to land $2.2 billion in Federal funding for a National Pandemic Response Center to be placed in Omaha.
“Instead of building nearly $1 billion in corporate welfare incentives into our state budget, lawmakers should address funding for K-12 schools and lower the sales tax, income tax rates for families, and corporate income taxes,” said Jessica Shelburn, state director for Americans for Prosperity-Nebraska. “We could have made significant changes to our tax code by using the funds built into the budget for property tax credits and business incentives to help level the playing field so all Nebraskans can thrive.”
NOT PERFECT, BUT IT’S A START
While LB 1107 has been roundly panned by the tax policy think-tanks and school orgs, reactions from the ag lobby are more mixed, ranging from effusive praise to more sober estimates.
In its press release, Nebraska Cattleman said it had “secured a major victory” for its “consistent” and “aggressive” property tax relief advocacy, hailing the relief as “historic.”
“Today’s action is the beginning of finally reversing the disproportionate burden placed on the backs of agricultural property owners in Nebraska,” Cattlemen President Ken Herz said in the release. “We are thrilled to finally achieve meaningful relief directly from the state, especially in a year frustrated by a worldwide pandemic.”
But Herz and Cattlemen buried the quiet part in their statement:
“Going forward, our members remain committed to enacting long-term, systematic reform of Nebraska’s property tax structure,” Herz said.”…particularly on the over-reliance on property taxes to support K-12 public education.”
Steve Nelson, president of Nebraska Farm Bureau, thanked senators for their votes during a taped statement posted to the group’s Youtube channel this week. However, he was not as vociferous as NC in his comments.
“A compromise really means that everybody really didn’t get everything that they wanted,” Nelson said in the video. “That would be the case on the property tax side here.”
Nelson said the amount of relief provided once LB 1107 is fully funded and actualized would be “significant” and “meaningful,” however; Nelson also said Farm Bureau would continue to push for future reforms to property taxes and the heart of the issue: how schools are funded in the state of Nebraska.
“When someone says this bill isn’t enough, I tend to agree with them – that’s true,” Nelson said. “But this bill was what was attainable at this point.”
Nelson will not be that leader leading that next charge for property tax reform, however. The Lincoln Journal Star reported Monday that after nine years of service as Farm Bureau president, Nelson plans on retiring.
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