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This week, I’d like to discuss LB 289, the comprehensive property tax reform package advanced from the Revenue Committee. I voted in favor of the advancement of the package to allow for the Nebraska Legislature to debate this critical issue further, however, I am opposed to the provisions of the bill that deal with the tax exemptions included in the package.
The following is a list of taxes discussed in LB 289 which would go towards property tax relief: Increases the Documentary Stamp Tax from $2.25 to $3.25 per $1,000; raises the cigarette tax from $.64 per package to $1.00 per package. Increases the sales tax by a half-cent. Removes sales tax exemptions for the following: labor for repair or maintenance of motor vehicles; pet-related services; moving services; storage services; clothes cleaning services; transportation network company services; beauty and personal care services such as hair care, nail services, skin care and hair removal; tattoo or other body modification services; maintenance, painting and repair for single family homes; interior design services; limousine, taxi and other transportation services; lawn care, gardening and landscaping services; parking services; swimming pool cleaning and maintenance services; dating and social escort services; telefloral delivery services; wedding planning; weight loss programs and services; personal training services; and candy, pop, bottled water, and ice.
In total, the changes in the tax code should raise approximately $372 million dollars, which is in addition to the $224 million dollars which is already in the Property Tax Credit Fund. This relief will be delivered to Nebraska through increased state aid to schools, which would help offset the loss schools would face as LB 289 would reduce property valuations for agricultural and horticultural land to 65% and all other real property to 90% of its assessed value for taxation for school district taxation. If LB 289 were enacted, it is projected the increased biennium state aid to schools to provide for property tax relief would equal approximately $1,046,000,000 dollars.
LB 289 also provides an additional resource for Omaha Public Schools to help the district address its underfunded Omaha School Employees Retirement (OSERS) Plan. LB 289 grants OPS the authority to levy a maximum of an additional six cents which would generate approximately $13,000,000 a year. The revenue from this additional levy must be used to meet OPS’s annual required contribution to the OSERS plan. As Chairman of the Nebraska Retirement Systems Committee, I have made it clear that the State will not assume the liability of the OSERS plan. The grant of this 6 cents levy authority applies only to OPS and gives them a mechanism to meet their financial obligations.
As I stated earlier, I understand the need for property tax relief, however, I do not know if eliminating sales tax exemptions for certain industries while retaining sales tax exemptions on other industries is the way to achieve property tax relief. By doing this, the Legislature is creating winners and losers. I believe a more fair way would be to conduct an interim study to examine each and every sales tax exemption more completely and for a new bill to be introduced next year.
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