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Your property tax bill is the product of two independent factors: the assessed valuation of your property and the levy rate set by the local government that spends the money. Neither of these values remains constant from year to year. Fluctuations in assessments, levy rates, and total taxes due create unpredictability in the tax bill for property owners.
For example, if a local government’s budget grows by 3% that does not mean your individual tax bill will increase that rate. Instead, valuation changes impacted by property sales far from your property and unrelated to your local market may increase your valuation dramatically. You may see the levy rate decrease, yet your total amount paid increase due to valuation increases of property across your taxing district. Changes in the valuation mix of different classes of property and a shift in the distribution of property value may result in your farm home taxes actually going down, while the taxes paid on your Ag land increases.
With both components of the property tax equation in flux from year to year, it is no wonder taxpayers are frustrated. During my four years in the Legislature, various proposals have been introduced that attempt to address the consequences of the current property tax system in Nebraska. Few have passed and none have fundamentally corrected the structural problem that exists. This session I have introduced a constitutional amendment, LR290CA, which would bring simplicity, transparency, neutrality, and stability to the property tax system in Nebraska.
If adopted by Nebraska voters, all property in Nebraska would be valued for property tax purposes at its market value on the date the owner of the property assumed title, determined by the actual purchase price. That valuation would not change until the property is sold to a new owner.
Fair market value of any property is only truly known when there is a willing buyer and a willing seller, both of whom know the uses and capability of the property, and money changes hands. Until that transaction occurs again, any valuation is an estimate at best. A home buyer in another community who is willing to pay more for a particular house based on their individual family wealth should not impact your tax bill. Investors who pay high prices for land on the other end of the county should not result in an increase in taxes for a young farmer trying to make a living on their family farm. New commercial developments subsidized by TIF projects should not raise the costs for an established business operating for decades in the town square.
If adopted, many of the frustrations of property tax payers would be eliminated. Gone are fluctuating valuations, equalization protests, and tax bills that make budgeting for families impossible. The complex and often confusing appraisal process is replaced with a simple and fully transparent valuation: the price on your bill of sale. Until you sell it and realize any increase in value, it does not change. Total property values in a district would have a more predictable rate of growth from year to year, providing greater stability to local governments and taxpayers alike. The system is neutral for all classes of taxpayers, since individual buying decisions, and those alone, determine your valuation for property tax purposes. The personal choices of other buyers will not cost other taxpayers on their own property.
This is a bold, structural change to how the market value of property is determined. Statutory changes to levy limits, both high and low, will need to be changed. Nevertheless, in the face of inaction by the Legislature to make incremental statutory changes to the current system, I feel compelled to place a bold, structural change before the public to consider. Many proposals fail to meet the standards of simplicity, transparency, stability, and neutrality. This structural change to determining market value of property embodies them all.