As the Legislature readies for the 108^th biennium, many have their wish list of goals completed for the coming two years. As a rural Senator, I have heard loud and clear the call to further reduce property taxes. I hear it from farmers, I hear it from seniors, and I hear it from businesses. I have also read articles suggesting that the Legislature needs to “find the courage” to reduce property taxes. So, let me be clear; I hear you!

The first step to tax reform is understanding what we are already doing, including how property taxes are assessed, who assesses them, and what role the Legislature can and cannot play in reducing property taxes.

The State of Nebraska does not assess or collect a property tax. Property taxes are ONLY assessed by LOCAL political subdivisions. School districts account for the largest portion of the property tax requests and, generally, for more than 50% of the property tax bill. Although conservative spending is important for reducing taxes, many local school boards will tell you they face many challenges when crafting a responsible budget.

A huge portion of school district budgets are consumed by payroll costs to hire the teachers and administrators. Nebraska’s teacher shortage means sometimes districts have no choice but to enhance teacher salaries and benefits to fill the void. In addition, salaries must meet certain minimums to avoid an appeal to the Court of Industrial Relations and there are multiple Federal and State mandates that public schools also must meet. Of course, the cost of maintaining facilities, buses, and activities are also necessary components of the budget.

So, what can the Legislature do to help? The best thing we can do is work hand-in-hand with local governments, educational institutions, and industries to grow Nebraska’s economy. That includes ensuring we have a skilled workforce, creating a climate to start and grow small businesses, and expanding opportunities to attract and expand major corporations.

As we work to grow our state, there are other measures we can also take to ease the burden on property tax payers. First, the Legislature can fix the TEEOSA formula to provide more state aid to rural “equalized” school districts. This of course will mean either taking aid from urban schools, which would require the support from urban senators, or create a mechanism to provide additional aid. If we do the latter, where will the funding come from? If that answer is to raise the sales tax rate or reduce sales tax exemptions, then how much do we increase the sales tax or what exemptions do we eliminate? How do th​​ose new taxes impact seniors and farmers? We could also raise income taxes, but since our income tax rates are by far the highest of any state in the region, this is clearly a nonstarter if you are planning to get 33 votes to force a vote.

As an alternative to increasing state funding for schools, the Legislature could reduce state mandates such as requiring certain course work to be offered outside of core subjects like reading, writing, math, and science. In many cases, additional mandated courses require more teachers to be hired even when they are already in short supply or not available at all.

Finally, we could try to rebalance how we tax real estate. Ideas could include: reducing the rate at which agricultural land is taxed (currently 75% of market value). We could also look at taxing all real estate based on income produced from the land instead of based on its value. Ranchers are especially feeling the burden of property taxes this year because rainfall is short and they cannot maintain normal stocking rates. Additionally, dryland farmers in years like this literally produce no crop, but continue to pay property taxes as if the land was producing.

No matter what the plan,​​ it must be able to elicit wide support. Although it takes 25 votes to pass a bill, 33 votes are required to end a filibuster. If history is any indication, we can expect any changes to sales tax rates, school funding, or property taxes to attract a filibuster. This will mean taking strategic steps to create a plan and rally votes from a div​​erse group of senators.

Fortunately, we know it can be done. The Legislature’s passage of LB​873​ in 2022 made huge strides in reducing the net tax liability for all Nebraskans. Not only did we approve the full phase-out of the state tax on Social Security, but the Legislature also approved a reduction in the top income tax rate for individuals and corporations over the next few years. Most importantly, the Legislature approved an income tax rebate based on the amount of property taxes paid toward the relevant public school and community college. In 2022, property tax payers could receive a 30% rebate, up from 25% in 2021. The rebate must be claimed when you file your income tax paperwork. If you do not file an income tax return, you can go to the Nebraska Department of Revenue’s and download a form to claim the rebate.

In the end, I will do all I can to accomplish further reductions in your tax liability. It has nothing to do with “courage” but everything to do with “perseverance” and strategy. If you have any questions or comments regarding property taxes or the income tax rebate, please feel free to reach out to me at 402-471-2729, or email me at mjacobson@leg.ne.gov. My door is always open!