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The Nebraska Farm Bureau Federation has put forth a proposal to raise the state’s sales tax by 1% and to broaden the base in order to generate funds for property tax relief for agricultural, residential, and commercial taxpayers. There are some voices outside of the agricultural community with a tendency to push back on paying additional sales tax for agricultural property tax relief, but it is important to remember the broader picture. Over the past 5-6 years, the agricultural property taxpayers have been subsiding the state operating budget, owing in large part to unprecedented increases in agricultural land values which drastically impacted the state TEEOSA aid formula. These changes brought down the burden on the state general fund budget. As a result, there has been a significant tax shift in the past few years from the state’s general fund onto the backs of local agricultural producers, to the tune of $133 million in 2015 alone. Agricultural land does not benefit from the property tax relief provided by a city sales tax that reduces real estate taxes within that city.
As I’ve stated many times before, I think that property taxes on agricultural real estate aren’t equitable. Agricultural land is not only a production input, it serves as the nest egg for the retirement of a great many people, both urban and rural, not any different than the stocks, bonds, 401(K)s, or CDs for others. And yet those other retirement assets are not taxed on an annual basis. As a business input, it is unbalanced in its taxation. Most business inputs which are used in manufacturing a product are not taxed as agricultural acres are. Another way of looking at it is this: Agricultural acres are the same to the business of farming as a client base is to any other business. If you are a lawyer and you have a list of clients, should you be taxed on that list, regardless of whether some or any of those clients used you for any legal services over the past year? That client list is much like a farmer’s acres, which are taxed year after year, regardless of their use or profit to their owner. That lawyer’s client list is also part of the determined value of the business when it is sold, just like those acres.
I would add that property taxes are not a problem only for the farmer. Nebraska has slowly moved into the top ten states with the highest property taxes, and property taxes make up nearly half of all taxes paid at the state level, when considered in comparison to income and sales tax. Our high property tax rates are hurting our ability to attract new businesses into Nebraska. I agree with much of what the Nebraska Farm Bureau Federation has had to say on the issue of property tax reform, and I look forward to finding a solution in 2017 which will make taxation in Nebraska equitable, and help to make our state a more attractive place to have a farm, a business, and a family. Please send me your feedback on this. I would like to hear how property taxes have impacted you, your farm, your home in town, your business, or someone close to you.