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It was a quiet week around the Capitol and district, so I thought it would be a good time to write about ongoing conversations involving property tax relief and government spending reforms. Given the complexities of these issues, I plan to write about them over the next few weeks. This week, I will focus on taxes.
As I’ve written in the past, there is no quick fix to reducing the property tax burden. To achieve meaningful property tax relief, we need to build a broad coalition of Senators representing both urban and rural interests. This is necessary because my colleagues representing urban areas will tell you that they are looking for income tax relief and opposed to eliminating any sales tax exemptions. There are also a few of my colleagues who do not support any tax relief – income or property.
Property taxes were instituted in 1857 by Nebraska’s territorial legislature. When Nebraska became a state in 1867, the state and local political subdivisions began levying property taxes. Nebraska did so until 1966, when voters adopted a constitutional amendment abolishing the use of property taxes to fund state government. Since 1967, property taxes have been exclusively collected by local political subdivisions and is the primary source of their revenue to fund local government – this includes counties, municipalities and school districts.
In 1967, the Legislature enacted the Nebraska Revenue Act implementing a statewide income tax and also created sales and use taxes. For the most part, this was done to replace the loss of state revenue from property taxes. This was when the “three-legged stool” was proposed to fund state and local government. In theory, most state and local government services would be funded by one-third income tax, one-third property tax, and one-third sales tax. In reality, this never came to fruition.
According to the State of Nebraska Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2017, Nebraska collected $4.956 billion in tax revenue. Income tax accounted for 50.6% of the total amount collected at $2.506 billion. Sales and use taxes comprised almost 37% at $1.834 billion. Other taxes – such as petroleum, excise, and business and franchise taxes – represented more than 12% at $614 million. In comparison, local governmental entities levied almost $4.1 billion dollars statewide during 2017. Please remember that property taxes are collected by county treasurers and distributed to local political subdivisions. The State of Nebraska does not receive any revenue from property taxes.
For a brief historical perspective, below is a summary for 2015 and 2016.
|Sales and Use Taxes||$1,833,701,000||36.8%||$ 1,828,465,000||36.9%|
|Total State Revenues|| $ 4,982,509,000
These numbers demonstrate that over the past three fiscal years, total state tax revenues have declined more than $26 million or .5%. At the same time property taxes have increased more than $273 million or 7% over the last three calendar years. It is not surprising that property taxpayers feel they are a shouldering a larger burden of funding local and state government services.
I will be discussing government spending in next week’s column. In the meantime, if we can be of assistance to you in any way, please do not hesitate to contact my office. My door is open and I have made it a goal to be accessible to the constituents of our district. Please stop by any time. My e-mail address is email@example.com, and the office phone number is 402-471-2756. Todd and Katie are always available to assist you with your needs. If I am not immediately available, please do not hesitate to work with them to address any issues that you may need assistance.