LINCOLN — One major tax package remained standing Tuesday after the death of a bill that would have benefited mainly rural property tax payers at the expense of urban ones.

The proposed tax shift created an insurmountable obstacle for Legislative Bill 640, sponsored by State Sen. Mike Groene of North Platte.

Groene acknowledged after three hours of debate that he does not have the 33 votes needed to overcome a filibuster on the measure. That means the bill is unlikely to return for continued debate. Speaker of the Legislature Jim Scheer of Norfolk requires sponsors of controversial bills to show that their proposals can advance before he will schedule them for more than three hours of debate.

Groene said he was glad for the chance to debate LB 640 and discuss the property tax burden on farm- and ranchland owners. He also took heart from a 30-3 vote in support of an amendment to the bill.

“It’s a strong message that we got a positive vote on one of the amendments,” he said.

As advanced by the Revenue Committee, LB 640 would have redistributed the $224 million a year that is now earmarked for property tax credits to all property owners.

The money would be used to provide a new type of state aid to school districts with the heaviest reliance on property taxes.

The bill also would lower the maximum school property tax levy, which would trigger a boost in aid to school districts under the existing state aid formula.

Compared with the current tax credits, the proposal would mean more tax relief for primarily rural school districts and less for more urban districts.

Supporters of LB 640 argued that the bill would help restore equity in property taxes.

Sen. Dan Hughes of Venango said a growing share of those taxes has fallen on agricultural property as prices of farmland and ranchland soared in the last decade.

“I don’t think that asking for a little bit of that shift back from the urban homeowner is out of line,” he said.

Groene said the bill fulfills the state’s constitutional mandate to provide free K-12 public education.

The measure would ensure that every school district gets back some of the income and sales tax dollars that local residents pay, he said.

Currently, 175 school districts do not qualify for state school aid, which comes out of state income and sales tax revenues. That aid goes to districts that cannot meet student needs with their property taxes.

All districts can get state special education funds and a portion of the state income taxes paid by district residents.

Opponents of LB 640 said the proposal would take relief away from taxpayers who are paying among the state’s highest property tax levies, while providing more money to taxpayers where levies are lower.

“This is like a reverse Robin Hood bill,” said Sen. Roy Baker of Lincoln. “This is a matter of taking money out of one pocket and putting it in another.”

He said he has heard concerns from farmers in the Beatrice school district, who would not see any benefit from the bill.

Sen. Kate Bolz of Lincoln questioned the stability of the proposed change. She noted that lawmakers reduce school aid spending every time the state gets in a budget bind.

Bolz also noted that 52 school districts would not get the new property tax aid under LB 640. But those districts serve 75 percent of Nebraska students.

Nebraska’s property tax credit program uses state tax dollars to offset part of the annual tax bill for property owners. The credits appear as a line on the annual property tax statement.

Under current law and if valuations remained flat, the fund would provide credits worth $89.57 per $100,000 for residential and commercial property and $107.48 per $100,000 for ag land.

Legislative debate on a tax plan supported by Gov. Pete Ricketts is slated to begin Friday.

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Martha Stoddard keeps legislators honest from The World-Herald's Lincoln bureau, where she covers news from the State Capitol. Follow her on Twitter @StoddardOWH. Phone: 402-473-9583.

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