What’s with the pink card that I got in the mail titled, “NOTICE OF PROPOSED TAX INCREASE”?

If you have received a large pink card in the mail recently, your taxes might be going up. Under recent “Truth in Taxation” legislation, a political subdivision (city, county, school district, community college) whose proposed budget exceeds the 2% growth rate plus the political subdivision’s real growth percentage must notify taxpayers on a postcard and hold a mandatory joint hearing explaining why they are increasing your taxes. The cards will outline the 2022 tax assessed value of your property compared to the 2021 value and estimate changes in your property tax based on the new valuation and the “old” mill levy. It is shown as an estimate because the new mill levy will not be set until all taxing authorities have approved their budgets.

The joint hearings are your opportunity to voice your opinion of the political subdivision and their proposed budget. Political subdivisions will not finalize their budgets until after these hearings. Once budgets are approved, then the new consolidated mill levy will be set and the actual tax bill will be determined.

As I mentioned in prior columns, property taxes are only levied by local political subdivisions. The State has no ability to levy a property tax. So, controlling property taxes means holding the line at the local level. The Legislature does, however, have some ability to indirectly reduce property taxes in a couple ways.

First, the Legislature must avoid imposing any “unfunded mandates” on local political subdivisions, whose implementation would need to be paid for with local property taxes. Second, the Legislature can make changes in the TEEOSA formula which distributes funds to local school districts. The formula is based on each district’s “needs” as determined by the number of students and other factors, and is also based on “resources,” meaning the value of the property in the school district. As a result, the formula is designed to distribute more funds to the larger cities and forces the rural areas of the state that have large agricultural land bases to pay their own way. Many of the school districts in District 42 are considered “equalized,” which means they get no funding from TEEOSA. This is unfair and simply wrong!

The third thing the Legislature can do is return your money to you through other state tax mechanisms. This year, I was pleased to support the greatest property tax benefit afforded to Nebraska property tax payers in history. In addition to reducing the highest income tax rate and eliminating the tax on Social Security and military retirement, LB873 significantly increased the amount of income tax credit available based on property taxes paid to fund public schools and community colleges.

The LB873 tax credits will ramp up over the next few years. In the 2020 tax year, the state income tax credit was approximately 6% of the amount paid to fund your local school district. In the 2021 tax year, this amount grew to 25% of the amount you paid toward your local public school district. For the 2022 tax year, you will receive approximately a 30% income tax rebate of the property taxes you paid for your local school district and your local community college.

The income tax credit is paid regardless of your state income tax bill; however, you are required to apply for the credit to receive the refund. If you did not apply for the credit when you filed your 2021 income tax return, it is not too late! Simply complete the form available on the Department of Revenue’s website: https://revenue.nebraska.gov/about/nebraska-property-tax-credit

I encourage all property owners in District 42 to apply for the income tax credit, and attend public budget hearings held by your local political subdivisions. Political subdivisions want your input on how they can best serve you.

If you’d like to discuss taxes or any other issue, please feel free to reach out to me at mjacobson@leg.ne.gov or 402-471-2729. My door is always open!