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Even at this late hour, I have not given up my quest for providing significant property tax relief. What we have passed so far does not provide the relief I had hoped for, but it’s moving in the right direction. So far we have provided $204 million per year for the property tax relief fund and $19.8 million in personal property tax relief.
Property owners will be getting a tax credit total of what amounts to $95.00 per $100,000 of valuation. And, there will be an exemption from property tax on the first $10,000 of valuation of tangible personal property.
I realize this does not fix the problem many rural property owners have with high property taxes. Several of my rural colleagues and I have gotten the message across to the rest of the legislative body that we will not stop asking for a solution in tax relief. What we need is a fundamental change in how we fund education in order to achieve a permanent solution to our high property taxes.
However, lowering property taxes will not be an easy fix. It may come at a price, because as the old adage goes: “You can’t get something for nothing.” There’s no doubt about it, a solution will necessitate a tax shift. I’m sure we could find some cost savings within education’s budget but it will not be enough to provide the property tax relief we are looking for. Some Senators are looking at increasing sales taxes and some are considering eliminating tax exemptions granted by prior Legislatures. There are literally hundreds of exemptions to the state sales tax. I would continue to oppose any sales tax on inputs for any industry.
The way our schools are financed through the Tax Equity and Educational Opportunities Support Act (TEEOSA), over 65% of the property taxes I pay go to finance education. We spend close to one billion dollars administered under the TEEOSA formula and currently only 35% of school districts receive state equalization aid.
In 2013 the Tax Modernization Committee held public hearings across the state and heard from Nebraska citizens that their taxes – specifically, their property taxes – were too high. The first recommendation made by the committee regarding property taxes was to increase the state aid commitment to schools to offset property tax use and reduce property taxes as a share of total state and local taxes.
Separate Legislative Resolutions (LR 344 and LR 332) have been introduced by both the Education Committee and the Revenue Committee to address the recommendation made by the Tax Modernization Committee. Studies will be carried out and public hearings will be held this coming fall. At the conclusion of the studies each committee will report their findings to the Legislature. I am optimistic the information gathered will generate legislation to introduce in the next legislative session.
It’s encouraging to read the list of introduced Interim Study Resolutions dealing with taxes. Some of those include: 1) whether imposition of a sales or income tax upon the sale of agricultural land may provide funding for a targeted property tax relief fund for agricultural property owners; 2) income tax rates; 3) current method of using adjusted property valuation as the primary measurement of local resources in Nebraska’s public education funding formula; 4) procedure for and use of like-kind exchanges under the Internal Revenue Code and their impact on the taxable value of agricultural and horticultural land; procedures and categories used by county assessor to classify types of land for valuation and taxation purposes; and 5) tax revenues for public schools.
A worthy reminder is the 2014 Legislature enacted several proposals that lowered taxes. Military retirees benefitted with a tax exemption of either: up to 40% of their military retirement from state income tax for 7 years, or they could exclude 15% of their military retirement income at age 67 and for all subsequent years.
Indexing brackets in the state income tax code, were implemented at the beginning of this year. It significantly reduced “bracket creep” when brackets are not adjusted for inflation. Exempted was increased income thresholds under which social security income is taxed.
Sales tax exemptions were given for net energy billings for customer-generators of electric service and for agriculture machinery repair and replacement parts used in commercial agriculture. These items account for millions of dollars of tax relief but did little for property taxes. Hopefully next year we will address this issue.