The Speaker announced this week that he intends to keep bills moving that have made it to Select File, but will only schedule priority bills for General File debate. He has also cautioned that there is a good possibility that some priority bills will not be scheduled for debate due to time constraints. He may also choose not to reschedule bills that were filibustered on General File and are likely to be filibustered going forward. With that said, he may require Senators whose bill struggled on General File to show a vote card ensuring the votes are there to keep the bill moving. The Speaker wants to hear as many priority bills as possible.

During my time at the Legislature, I have seen many bills that were intended to improve the lives of Nebraskans. Unfortunately, many such bills create unintended consequences. Bills intended to reduce property taxes are among those bills. Our state Constitution mandates that land in Nebraska be taxed “uniformly and proportionately” with the exception of land designated as “agricultural and horticultural.” It may be valued as a separate and distinct class of land and shall be valued at less than full market value. 

Valuing land using this method is known as the “uniformity” clause in the Constitution and ensures that all classes of real estate are valued consistently based on comparable sales for each type of real estate. It is not perfect, but it requires certain classes of real estate (other than ag) to be valued at 100% of fair market value. 

So why is ag valued differently? The answer is that the value of ag land does not track with returns from all other classes of real estate due to the influence of outside investors. Today, many buyers of agricultural land buy the land because it is a “hard” asset that is also a hedge against inflation. 

At one time, agricultural land values tracked closely with the return on the land. For example, a quarter section of land in Clay County in 2018 would sell for approximately $8,000/acre and could be cash rented for up to $400/acre. Since that time, the value of the same land has risen to $14,000/acre, and the cash rent has actually fallen or remained the same at approximately $375/acre. Using $75/acre taxes and a cash rent of $350 equates to 21.4% property taxes of the income and reduces the income to $275/acre or a net return on investment of 1.964%. No other class of real estate is taxed at that level. This example uses a valuation of 75% of the actual fair market value. Meanwhile, other classes of real estate tend to have real estate taxes in the range of 10% of actual income, moving in concert with values.

LR12CA is Senator Kauth’s priority bill. It is a proposed Constitutional amendment to change the uniformity clause and eliminate the ag value exception. After visiting with her, the ag exception was restored, but the problem with the original text of the bill was to limit taxation of each class of real estate to 1.5% of full market value. The problem, of course, with this clause is that ag land could see a $14,000 farm taxed at up to as high as $210/acre with a cash rent income of $375.00.

The one redeeming quality of the bill was to limit annual increases in value up to the consumer price index (CPI) or 3%. There would be carve-outs if the property is sold under certain circumstances. In the end, if the bill moves forward, it will do so with only this change to the Constitution.

The original intent of the bill was very good, but the unintended consequences would have been very harmful to agriculture and come at a time when agriculture is least able to afford this cost. I appreciate Senator Kauth’s willingness to modify the bill before moving it forward.

It is a privilege to represent you in the Nebraska Legislature, and I look forward to hearing from you regarding issues that are important to you. I can be reached at 402-471-2729 or by emailing me at mjacobson@leg.ne.gov.