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The Revenue Committee advanced a package of tax cuts to the full Legislature on a 6-2 vote after several months of work. However, LB 461 contains approximately $10 in income tax relief for every $1 in property tax relief. Earlier, I had stated that I could only support income tax relief if it provided $1 in income tax relief for every $10 in property tax relief.
The total annual cost for this package in ten years would be approximately $450 million. During the upcoming two years, when the state is facing a significant budget shortfall, any loss in revenue would be countered with the suspension of two tax credits – the New Markets Job Growth Investment Act and the Nebraska Historic Tax Credit.
Beginning next year, agricultural land would no longer be valued using market value based on comparable sales. Instead, valuation would be based on the income-capacity of the land. The legislation would ensure that the capitalization rate established resulted in an aggregate agricultural use value that is between 55% and 65% of its actual value. The state average agricultural use value would be capped at 3.5% over the previous year.
In 2019, the top corporate income tax rate would be reduced from 7.81% to 7.59%. The two lowest individual income tax rates of 2.46% and 3.51% would be combined at a rate of 3.25%. In an effort to help low-income workers, the Earned Income Tax Credit would be increased from 10% to 11% of the federal earned income tax credits, further increasing to 12% in 2020.
Beginning in 2020, LB 461 proposes to reduce the top individual income tax rate of 6.84% and the top corporate income tax rate of 7.59% to 5.99%. This would occur over a number of years if the projected growth in state revenue is at least 3.5% for the individual income tax rate reduction and 4.0% for the corporate income tax rate reduction.
Although not part of the package, the Revenue Committee advanced another bill that deals with property taxes. As amended, LB 640 proposes to cap property taxes at 55% of a school’s general fund revenue. However, the funding for this would come from the Property Tax Credit Fund, which now provides $224 million annually in property tax relief to taxpayers. Although I believe that there is a disproportionate burden on property taxes to fund our schools, particularly in rural areas, I also believe that the Property Tax Credit Fund is a good way to provide dollar for dollar relief to property taxpayers.
I am disappointed with the options that have been placed before the Legislature dealing with tax relief. I will work with other senators to determine if alternative measures can garner sufficient support.
The Governor signed LB 46 this past week, the bill I introduced authorizing “Choose Life” license plates. He emphasized that this is the first pro-life legislation passed in the last 6 years.
The Appropriations Committee is finishing its work on the next biennial budget. This has been a very difficult task due to the significant shortfall facing the state.
As we begin to discuss tax relief measures and budgetary issues, I encourage your input. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My email address is email@example.com and my telephone number is (402) 471-2733.
I have been appointed to chair a Special Committee of the Legislature to hear a challenge to Senator Ernie Chambers’ qualifications to represent his legislative district. The challenger unsuccessfully ran against Senator Chambers in the general election. He then filed a qualification challenge, as allowed by state law and legislative rules, questioning whether Senator Chambers has satisfied the Nebraska Constitution’s residency requirement.
The Special Committee is made up of seven legislators, including myself. The committee hired outside legal counsel, former Supreme Court Judge William Connolly. At our first meeting, the Special Committee discussed jurisdictional issues and determined that the challenger had met all statutory requirements for filing his challenge. A second meeting was held to approve an order regarding procedures for the hearing on the merits of the challenge and to set the hearing date. The hearing is scheduled for April 7th in the State Capitol.
I introduced LB 46 to authorize the Department of Motor Vehicles to design “Choose Life” license plates. The design is to reflect support for the protection of Nebraska’s children. Choose Life license plates, which allow motorists to show support for pregnant mothers and the unborn, are available in 29 states. The additional revenue brought in through the sale of the plates would be used to supplement federal funds available for the Temporary Assistance for Needy Families program. TANF provides cash assistance to low-income families with minor children and is used to pay for family living expenses, such as rent, utilities, food, clothing and other necessities. LB 46 was given second-round approval this week and is now ready for final reading.
The Appropriations Committee, on which I serve, has completed the public hearing process on all bills referred to the committee, and has heard from state agencies. We will now begin post-hearing budget reviews. Our final recommendations are due to the entire Legislature by the 70th legislative day, which falls on April 24 of this year.
Farm profits in Nebraska were expected to fall to just over $4 billion in 2016, down from a high of approximately $7.5 billion in 2013. The valuation of agricultural land is beginning to decrease but not to the extent that farm income has fallen. A local economist recently noted that local taxing authorities have continued to increase property taxes on farmland, even with sharply lower farm income. Between 2013 and 2014, assessed values of farmland for a 10-state rural region increased by 11.4%, while farm earnings fell by 18%. During this time, local governments increased K-12 school spending per student by a median 3.3%, with Nebraska showing a 7.3% increase, the highest among the 10 states.
This illustrates the critical need to decrease property taxes, yet some senators in the Legislature and the Governor are still focusing on income tax relief, as well as property tax relief. The only way I could support any income tax relief is if we offered $10 of property tax relief for every $1 of income tax relief. However, the feasibility of offering any tax relief will depend on budget negotiations, as the state is facing a $1 billion shortfall. The Appropriations Committee is in the process of cutting spending significantly, something that also must be done on the local level. These cuts are difficult to make but the alternative is an increase in taxes.
As the public hearing process nears completion and the Legislature discusses bills with priority status, I encourage you to inform me of your opinions. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509. My email address is firstname.lastname@example.org and my telephone number is (402) 471-2733.
This past week was overshadowed by an incident at Tecumseh State Correctional Institution. Unfortunately, two inmates lost their lives. Two years ago, an incident escalated into a riot on Mother’s Day. On Thursday, staff were able to quickly bring the situation under control and no staff were hurt. Although we still have a long road ahead, I see the procedural improvements that staff have implemented. I commend the employees at TSCI and other state institutions for their commitment to work in our correctional system, as their job is dangerous, but very important. I also want to recognize the Johnson County Sheriff, the fire and rescue squad, and the county attorney who are also highly involved during these situations. I was able to visit with some employees the night of the incident and saw first-hand their determination in keeping the public safe.
LB 45 authorizes military honor plates for reservists. I introduced this bill at the request of a constituent who served for 10 years as an army reservist and had a service-connected injury. He was surprised to find out that he did not qualify for the military honor plates. LB 45 was passed by the Legislature on Friday on a vote of 46-1.
LB 46, authorizing the creation of Choose Life license plates, received first-round approval this past week from the Legislature. The Department of Motor Vehicles would create a design reflecting support for the protection of Nebraska’s children. Twenty-nine other states allow motorists to show their support for pregnant women and the unborn through the purchase of such plates.
I introduced LB 545 before the Appropriations Committee this past week. This bill would increase the appropriation to the Property Tax Credit program by $200 million per year in each of the next three years. The property tax relief offered through this program appears on every taxpayer’s property tax statement. LB 545 would increase the current annual appropriation of $224 million to $824 million.
Of the combined revenue used for governmental services, property taxes currently account for approximately 48%, income taxes 33%, and sales taxes 19%. In 2000, property taxes accounted for 42%, income taxes 35%, and sales tax 23% of total revenue for government services. Since that time, the share of revenue from the sales tax has decreased, the share of revenue from the income tax has decreased, but the share of revenue from the property tax has increased significantly. LB 545 is projected to lower the share of the tax burden from property taxes to approximately 40%, more evenly balancing the revenue streams.
Our last major tax reform 25 years ago increased state aid to schools significantly in an effort to decrease our reliance on property taxes to fund our public schools. One problem associated with this type of property tax relief is whether it results in dollar for dollar tax relief or if it allows for increased spending. By increasing the funding to the Property Tax Credit program, it truly does provide dollar for dollar property tax relief.
Nebraskans pay the 7th highest property taxes in the country. Over the last 10 years, the valuation of agricultural land has increased 176%, compared to a 35% increase in residential valuation. Nebraska farmers and ranchers represent less than 3% of the state’s population but pay more than 30% of the total property taxes collected statewide. In the majority of the state, agricultural land comprises more than 60% of a school district’s total valuation base. Rural landowners are disproportionately funding our rural school districts, even though all residents of the school district benefit equally from having their children educated in our public schools. Even though valuation of agricultural land has increased substantially more than other classifications of land, all property taxes are too high.
The Legislature is also facing a significant shortfall in the budget for the next two years. We are in the midst of cutting funding for government agencies and services. Although it will be difficult, I think we must also address property taxes. Legislation has been introduced to broaden the base of the sales tax. I am opposed to a tax increase, but am open to a redistribution of funding in order to offer property tax relief.
As senators and committees finish up the process of selecting their priority bills for this session, I encourage you to contact me with your thoughts and opinions on this legislation. I can be reached at District #1, P.O. Box 94604, State Capitol, Lincoln, NE 68509.