The writer, of Albion, represents District 41 in the Nebraska Legislature.
As one reflects on the failed effort on property tax relief in this past legislative session, it would be easy to point fingers. But now is not the time to assign blame for our inability to get the job done. Instead, now is the time to take stock of what happened and lay the groundwork for a path forward.
Various proposals for property tax relief were put forth. In the waning days of the session, the debate boiled down to either the governor’s proposal, which was Legislative Bill 947, or the new revenue concept embodied in LB 1084, which I introduced.
The governor’s LB 947 would have taken future state revenues and directed them to corporate income tax relief and to what would be essentially a rebate of property taxes phased in over 10 years, and even longer for residential property owners. LB 1084 would have generated sales, excise and income tax revenue to be directed to immediate property tax relief. With neither approach garnering the necessary votes to move forward, the issue was unfortunately left unresolved.
Although we didn’t achieve the tax reform sought, I believe there are some takeaways to help guide our future discussion of property tax policy. First, all of our residents deserve property tax relief. Hence, property tax relief cannot be unreasonably weighted in favor of a certain segment of property owners. Furthermore, responsible tax policy should identify the path forward. We cannot jeopardize funding for core responsibilities of state government in the name of property tax relief. Finally, it is important that tax policy not be constrained by rigid adherence to ideological or political parameters. In other words, we must be willing to work across the aisle and be willing to compromise in an effort to do what is best for Nebraskans.
During the interim, discussions will be held and strategies devised for property tax relief. This will take place in the shadow of a looming petition effort that, if put on the ballot and approved by voters in November, would require the state to reimburse Nebraska taxpayers for approximately 30 percent of their property tax bill. Some might suggest the looming ballot proposal adds a sense of urgency to the issue, but I believe that we are already at a tipping point on tax policy — with or without the ballot issue.
There will be proposals to control local spending, or to change TEEOSA, the state’s school funding formula, in an effort to address the property tax issue. And, yes, these are legitimate strategies. But I believe there is one concept essential to any effort to providing immediate and substantial property tax relief. And that is changing how we pay for things by replacing property taxes with other forms of revenue. The only responsible way to do this is to identify those revenue sources. That was the concept embodied in LB 1084, and that is sustainable, revenue-neutral tax reform.
Opponents of property tax relief will mistakenly try to vilify this approach as a tax shift or a tax increase. In doing so, they fail to recognize that tax reform by definition entails a shifting of the burden. Revenue-neutral tax reform is not a tax increase. And one need only to examine our tax structure in Nebraska, particularly K-12 funding, to realize why tax reform is absolutely necessary.
In Nebraska, property taxes supply half of the funding for K-12 education. At the same time, less than 20 percent is derived from income tax sources or from state, local and motor vehicle sales tax. This is one of the reasons why in Nebraska, we collect massively more in property taxes than state, local and motor vehicle sales taxes combined, and substantially more than corporate and individual income tax. This unsustainable reliance on property taxes is why we must deliver the property tax reform Nebraskans are demanding.
It is absolutely critical that we develop a plan for comprehensive, sustainable tax reform — failure to do so may leave our property taxpayers high and dry, once again. This will entail making some tough decisions. But as legislators, we were elected to make tough decisions. This is our opportunity to step up, work together as a body, and deliver.