LINCOLN — A legislative committee struggling to craft a property tax relief plan hasn’t agreed on an exact proposal yet, but it has at least agreed on an approach to the problem.
The Legislature’s Revenue Committee voiced agreement on Friday that a multi-year plan to address high property taxes should first target help for farmers and ranchers, with a particular emphasis on relief in school districts with high property tax levies, such as in bedroom communities like Seward, York and Blair.
“We’re driving the train in the first direction,” said State Sen. Lou Ann Linehan of Elkhorn, the committee’s chairwoman, after the eight-member committee met Friday.
That the committee reached some consensus on an initial approach is somewhat of an accomplishment. Throughout the summer and fall, committee members have voiced divergent opinions about a wide variety of proposals to address the state’s traditionally high property taxes, which rank among the highest in the U.S.
Some have proposed amending a proposal that failed to advance last year, Legislative Bill 289, which called for new sales taxes on junk food, pop and other items; that new revenue would be targeted toward reducing property taxes. Other senators said that proposal is dead.
Some lawmakers said the simplest solution would be to increase the state’s property tax credit program, which gives about a $104 credit on the property tax bill of the owner of a $100,000 home. Other senators call the credit program unfair and not a solution.
But with state tax revenue trending upward, lawmakers — as well as Gov. Pete Ricketts — are now looking at a new approach that uses the surplus of tax revenue, about $100 million a year, to increase state aid to schools and thus lower local property taxes.
Under the plan discussed Friday by the Revenue Committee, valuations of agricultural land would be dropped from 75% to 55% when it comes to computing taxes for K-12 education in the first year of the new plan. In addition, local schools would get $100 million in additional state aid, either distributed on a per-pupil basis or as a percentage of a district’s overall costs. That would tend to help rural school districts, which now get very little in state aid.
Linehan said the plan would eventually lower the valuation of residential and commercial property by 20 percentage points as well, from 100% of market value to 80%. But how quickly that could happen would depend on how much surplus state tax revenue is generated. It may take three years or longer, the senator said.
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The governor, during a conference call last week during a trade mission in Germany, said it was “imperative” that lawmakers pass a property tax relief plan during the 2020 session, given the extra revenue available.
“We’re going to get something done,” Ricketts said.
Linehan said Friday that her latest plan hasn’t been vetted by the governor, though she believes it fits with his philosophy of using money from spending cuts, or excess tax revenue, to provide property tax relief.
Two other state senators on the Revenue Committee said that while agreeing on a first-year approach was important, the details still need to be hammered out.
“These were very broad, general principles,” said Sen. Curt Friesen of Henderson.
Omaha Sen. John McCollister said the big question is whether any Revenue Committee proposal will be significant enough to stave off a petition drive that seeks a dramatic tax cut. The so-called 35 Percent Solution, if it qualifies for the 2020 ballot and is approved by voters, would provide a state income tax credit equal to 35% of a person’s property taxes.
Ricketts and some state lawmakers said that if the initiative passes, it would create fiscal chaos for the state, which would have to scramble to pay $1.5 billion in tax credits by either slashing state services or raising taxes. Backers of the 35 Percent Solution disagree, saying it will force state lawmakers to cut property taxes after years of doing little.
Meet the Nebraska state senators
Here are the 49 state senators of Nebraska's 106th Legislature. You can click here to find your state senator.