LINCOLN — Gov. Pete Ricketts called attaining property tax relief the “Insuperable Monster” in a recent column.

If you don’t have a dictionary handy, “insuperable” means “insurmountable.”

Insuperable was used 30 years ago in a headline in the Lincoln Journal Star, discussing how the Nebraska Legislature would be trying again, and probably failing, to provide property tax relief for the state’s farmers and homeowners.

Fast forward to today, when state lawmakers are about to convene for their 90-day session in 2019.

The top issue? Once again, it’s that insuperable monster, property taxes.  According to the Tax Foundation, Nebraska’s property taxes are the 11th highest in the country.

The Republican governor, in his Nov. 19 column, opined that Nebraska can slay the dragon by doing three things: controlling spending by local governments, changing how property is valued for tax purposes and avoiding shifting the tax load.

But there’s wide disagreement about that.

Why hasn’t the state provided extensive relief from property taxes? Here are five reasons cited during several interviews with lawmakers and policymakers:

1. State spending can’t be cut quickly enough, or deeply enough, to provide meaningful property tax reductions.

The state doesn’t collect property taxes — they are assessed by local school districts, cities, counties and other governments. However, the state could help cut those taxes either by pumping money into those local governments or by expanding the current property tax credit that is used to reduce individual tax bills. But how do you cut to finance those things? Less state aid to K-12 schools? Fewer state troopers on the road? Reduced tax incentives for businesses to expand or relocate to Nebraska?

Former State Sen. Galen Hadley of Kearney, who led a task force on ”tax modernization” in 2013, said a colleague once described the options as “do you kick grandma and grandpa out of the nursing home or lay off the kindergarten teacher?”

“Cuts aren’t popular,” Hadley said. “If there was an easy answer, it would have already been done.”

Recent budget shortfalls, which required reductions in state spending, have made it harder to enact major property tax reductions. In addition, tax changes enacted by the Legislature from 2005 to 2015 reduced the state’s available general funds by about $800 million, which also makes tax cuts harder to achieve. Some of those changes, he added, resulted in tax reductions, including the indexing of income tax brackets for inflation and increasing the property tax credits provided to landowners

2. It’s going to take a tax shift.

Ricketts, a no-tax-increase conservative, has his veto pen waiting for any bill that contains any kind of tax shift. He considers a tax shift the same as a tax increase, and he opposes both.

But there are many — including allies of the governor — who believe that the state’s tax system is out of balance and that it will take a tax shift of some kind to lower property taxes.

The Platte Institute, of which Ricketts was a founder, recently came out in support of raising other tax revenues to provide property tax relief. Jim Vokal, the chief executive officer of the Platte group, said that doesn’t mean raising other taxes, just broadening the sales and income tax bases by doing away with exemptions and tax breaks. That, he said, would allow for a reduction in tax rates overall.

“Every lobbyist in the world is going to argue that their sales tax exemption should remain, but everyone is going to have to give a little bit,” Vokal said.

State Sen. Tom Briese of Albion, who laid out an ambitious plan of tax shifts and elimination of exemptions during the 2018 session, said a tax shift has already occurred due to rising values of agricultural land, leaving farmers and ranchers with an unreasonably high portion of the property tax bill.

“What we need to do is reverse that shift,” Briese said. “To vilify a tax ‘shift’ as a four-letter word is wrong.”

3. It would take a crisis, and we may be there.

The history of the State Legislature has been that it acts most swiftly when there’s a crisis at hand. The state’s farmers and ranchers, who have seen their property tax bills explode, say a crisis is upon them, especially with low prices for crops and a trade war blocking access to some major markets. But are urban homeowners screaming as loudly for property tax reductions?

Renee Fry of the Open Sky Policy Institute said she’s heard from newly elected urban legislators who got grilled about high property taxes. She said it’s starting to feel like the late 1980s, when concerns about equal educational opportunities in K-12 schools fueled the landmark state aid to schools bill, Legislative Bill 1059, which, for a few years, reduced property taxes.

Vokal, of the Platte Institute, said the state faces another crisis — it is falling behind other states in reforming taxes. He listed 13 states that have recently enacted tax reforms.

4. It’s not a property tax problem, it’s a school funding problem.

That’s because the bulk of property taxes we pay — about 60 percent — goes to fund K-12 education. Property taxes are levied by school districts and other local governments, so it’s harder to impact at the state level.

Plus, there’s widespread dissatisfaction with how state aid to local schools is distributed, particularly to rural schools.

“I don’t think you can fix (property taxes) until you fix school funding,” said State Sen. Lou Ann Linehan of Elkhorn, who is a candidate to lead the tax-writing Revenue Committee.

The problem, she said, is that too many school districts — about 175 of the state’s 245 districts — don’t get any of the “equalization” aid from the state. That needs to be addressed, Linehan said.

Then there’s the debate over K-12 spending. Conservatives, like Sen. Mike Groene of North Platte, believe that schools can reduce spending without affecting educational outcomes. But the state’s powerful teachers union, the Nebraska State Education Association, has long argued that the state lags behind in its support of public education and that cuts do affect quality.

5. Everyone will have to give up something.

Farm groups want property tax reductions, business groups primarily want income tax cuts, and groups that advocate for the poor, education and good roads don’t want cuts in their programs. It makes for lots of competing interests.

When you shift taxes, some people or entities will be paying taxes they hadn’t paid before. Are you ready for a sales tax on haircuts? On home remodeling? On admission to the Henry Doorly Zoo? Will business groups surrender some tax incentives to lower taxes overall?

The big dogs on tax issues at the State Capitol — the business sector, farm groups and education organizations — would have to come together on a compromise, one that hasn’t been found yet. And any solution would need 33 votes of the 49 senators to overcome a likely filibuster by opponents of the plan.

It’s created a stalemate, according to Groene, who believes that more would get done if state lawmakers were elected on a partisan basis, with senators working as a political team rather than as free agents.

“There’s too much vote trading in a nonpartisan legislature,” he said.

Reporter - Regional/state issues

Paul covers state government and affiliated issues. He specializes in tax and transportation issues, following the governor and the state prison system. Follow him on Twitter @PaulHammelOWH. Phone: 402-473-9584.

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