Property tax relief is out of sight in Nebraska
May 1, 2018
Agricultural land owners in Nebraska will have to wait another year for property tax relief.
After the state legislature failed to pass a bill with property tax relief this year, a ballot initiative was planned and signatures had been collected.
The ballot initiative, patterned after LB 829, which was introduced by Senator Steve Erdman (District 47-Morrill County), created a fifty percent refundable income tax credit for property taxes paid for K-12 public education. The tax credit would be for farm, residential and commercial property owners, and it was estimated that it would create a $1.1 billion shortfall in the state budget.
Unexpectedly and abruptly, the ballot initiative was canceled by the group that was behind it. The "Yes to Property Tax Relief" committee announced on April 27 that the petition drive was ended.
Although the ballot initiative promised a form of relief for ag land owners, it wasn't a panacea. Collecting the required 85,000 signatures by early July didn't seem to be a problem, but there were other obstacles.
Per Nebraska law, ballot initiatives can be one-topic only; thus, the initiative addressed property tax relief but did not address how the anticipated shortfall it would create would be paid for. Groups that would have felt a possible increase in sales or income taxes to make up the deficit might have been opponents, and if the initiative had passed in the November election, the Legislature would have to determine how the deficit would be paid for.
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John Hibbing, a professor of political science at the University of Nebraska-Lincoln, had thought the ballot initiative would get on the November election ballot but his opinion was that it would not pass. "It's a little bit irresponsible to say we'll have these cuts, and not say how they will be paid for," he said. "Because it will rip a $1.1 billion hole in the Nebraska state budget, there (would have been) a lot of forces against it." He pointed out the population spread in the state. "We've got well over half the state of Nebraska living in three counties, and they don't have quite the same concerns as the rest of the state. A lot of them own property, but you need to help them along as to how this benefits them as well as farmers and ranchers."
The lack of support of the ballot initiative by Governor Pete Ricketts could have contributed to the challenges. Gov. Ricketts endorsed LB 947, the only bill addressing property tax relief that made it out of committee during the 2018 legislative session. Dave Welsch, a retired farmer from Seward County and president of the Milford School Board, said that Ricketts' lack of support for the initiative would not have helped its cause. "We have a governor who has a lot of financial resources behind him. If he has something he does or doesn't want to happen, he can fund the messages out there, to influence a lot of voters," Welsch said, "whether or not those messages are the whole truth or not."
Merlyn Nielsen, a retired University of Nebraska-Lincoln animal science professor and farmer in Seward County, suggests that the state should tax other wealth besides property. "Why do we believe we should only tax real estate when there are so many other forms of wealth we don't tax?" he said. Stocks, bonds, and mutual funds are other forms of wealth that might be taxed, he suggested. "If we would tax all forms of wealth, not just real estate, that would be an interesting solution to our problems."
Gov. Ricketts has emphasized no new taxes during his term, which is another obstacle to property tax reform, Nielsen said. "The big dilemma from the governor's leadership is any time we talk about sales tax, (Ricketts) says that's a tax increase. I say, if you're reducing property taxes while increasing sales tax, and the total tax bill to the citizens is the same, it's not an increase, it's a shift."
Trent Fellers, spokesman for the "Yes to Property Tax Relief" committee said there were several issues behind canceling the initiative. "There are a lot of mitigating factors around it. These things take a tremendous amount of resources, and we also had issues with the legislature and the chatter around the possibility of them not implementing it fully. So we decided to take a step back, reload and come back with a better idea."
That "better idea" might, according to Fellers, be a constitutional amendment, which would "have more staying power," he said. A constitutional amendment requires a vote of the people, and could be put on the ballot through the legislature or through a signature petition. Right now, the committee hasn't decided what the next step is, but they think another plan will be more fruitful than the cancelled ballot initiative. "I think we can go back and put something together that would have a much better appeal."
Welsch, who has been a Milford School board member for twenty years and prior to that, a school board member for a Class 1 country school, didn't think that the ballot initiative would have passed. "My gut feeling was that the initiative only addressed property tax relief. It did not address how to pay for that relief, and that was a big concern." The $1.1 billion deficit created by the property tax credit would have been about one-quarter of the state's budget of $4.4 billion.
For Welsch, it's not just the fact that property taxes are too high, it's the fact that public education is not property funded. "That's the whole point of this, is that we need a stable form of adequate funding for schools. That stable form is not property taxes, especially in rural areas." Out of 254 school districts in the state of Nebraska, 178 receive no state funding. Nationally, on avreage, public schools receive 29 of their funding from local property taxes; in Nebraska, that number is 49 percent.
Unity is part of the answer, Nielsen said. "Agriculture has not been unified enough, and that's something that needs to be improved. I'm not sure whether it's because everybody wants to look like they're the leader and have the answers, but we need to be better unified and get together behind a single answer."
What will it take to see property tax relief for land owners in Nebraska? According to Welsch, it will take "thirty-three senators (the number needed to move a bill forward in the Neb. legislature) that and I know it's going to take a lot of hard work and sacrifice to get it done."