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The next Legislative session promises to focus on the distribution of the tax burden among Nebraska taxpayers. This is driven by agriculture interests focused on a more equitable distribution of property taxes in rural communities and urban interests focused on decreasing the income tax rates for business. Determining what is “fair” and “equitable” begins with an understanding of the taxes you are actually paying.
The proportion of sales, income, and property tax paid by any individual, family, or business is highly variable. Purchasing habits and whether you frequently shop in a community with a local sales tax means next door neighbors can pay varying amount of sales tax. Comparable sized local business owners differ between those who file their income tax return at the personal rate rather than the corporate rate. Farmers with parcels of ag land of comparable value across the road from each other can pay different property tax due to variance in levies set by school districts, NRDs, and other political subdivisions.
How taxes are collected also impacts the perception of a tax burden. Sitting down to write a check for my property taxes and quarterly estimates for my income taxes makes them quite evident to me. Although I may note the sales tax charged on my receipts while shopping, I don’t have an actual number for what each of those small point-of-sale charges add up to over the course of a year. Automatic withholding from a paycheck is less obvious than making a deliberate transfer of dollars. Many miscellaneous taxes and fees are not immediately apparent, like the gas tax or telecommunication fees.
Therefore, it can be a challenge to determine the direct impact of a change of tax policy to a specific taxpayer. Increasing the number of goods or services that are subject to sales tax to fund property tax relief may make the check you write to the county treasurer smaller, but you may pay more total tax over the course of a year with many larger, less obvious sales tax transactions.
As a proportion of total tax receipts for state and local government in Nebraska, the distribution of the source of revenue has remained relatively unchanged over the past ten years. In the fiscal year ending 2005, sales taxes represented 23% of the revenue generated, with income taxes making up 30% and property taxes 43%. A decade later, in 2015, sales tax had decreased to 19%, while income rose to 32% and property taxes to 47%. The slight shift of the mix toward property taxes represents the greater growth of local government spending compared to state spending. However, the general distribution remains unchanged over a decade.
Distribution of the property tax burden among different types of property owners is dependent on the mix of property in any given political subdivision. While ag land makes up 31% of the total property taxes collected statewide, in Kearney County it represents 69% of total property taxes. Within District 38, the proportion ranges from 30% in Buffalo County to 80% in Franklin County. This variability is in part geographic, part economic. Policy changes applied statewide have very different impacts from community to community.
As a voter and taxpayer, it may be useful to track your tax expenses over the course of a month and make a comparison of the different taxes you pay. Shifting taxes from one source to another is not a straightforward solution for tax relief. It may merely obscure the transparency of the taxes you pay. The only direct means of tax relief is control of spending.