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All I want for Christmas is property tax relief!
Nebraskans pay too much in property taxes. According to the Tax Foundation, Nebraskans pay the seventh highest property taxes in the nation. Nebraskans pay 1.65 percent of their home’s value in property taxes every year. The best state in the country for property taxes is Hawaii, where homeowners pay only 0.28 percent of their home’s value. Most importantly, though, we pay more in property taxes than any of our neighboring states. In Wyoming, for example, homeowners pay only 0.51 percent and in Colorado homeowners pay only 0.59 percent.
Nebraskans pay too much in combined state and local taxes as well! According to John R. Bartle, Dean of the College of Public Affairs and Community Service at the University of Nebraska, Omaha, Nebraska’s combined state and local revenues collected per capita continue to be higher than the national average as well as higher than all the other states in the West North Central region of the country.
So, why are property taxes in Nebraska so high? I have long maintained that Nebraska does not have a revenue problem; instead, we have a spending problem. So, the primary culprit is how we spend our hard-earned taxpayer dollars.
One of the items we spend a lot of money on is education. Among the 50 states, Nebraska ranks 17th in the nation in per pupil spending, according to the website, “Governing.” In 2014 (the latest year with statistics) Nebraska spent $11,726 per pupil in K-12 education. By way of comparison, Utah spent only $6,500 per pupil. Most importantly, though, Nebraska’s per pupil spending was higher than in all of our neighboring states, except Wyoming. South Dakota, for example, spent only $8,881 per pupil and Colorado spent only $8,985 per pupil. Nebraska’s K-12 public schools are over reliant upon property taxes, receiving 49 percent of their funding from property taxes compared to the national average of only 29 percent. Worst in the State is the Adams Central School District, which receives 83 percent of its funding from property taxes.
Another reason our property taxes are so high is due to tax increment financing (TIF). When TIF monies are abused for economic development, the result is lost revenues appropriated for local expenses. Property taxes collected from TIF financed properties are often designated for non-local expenditures, and the result is that other property owners have to make up the difference in lost revenues.
Another reason our property taxes are out of control is due to too many tax exemptions. For instance, estimates for the Nebraska Advantage Act show that by the end of 2017 businesses will have received $295,000,000 in tax credits, while in 2018 they will receive $358,000,000. For the year 2020 estimates for tax credits from the Nebraska Advantage Act are projected to reach $500,000,000. Without a way to measure the results of these kinds of tax credits, the burden may soon become unbearable for the State.
Some businesses simply abuse their tax exemptions. Perhaps, the worst case of abusing a property tax exemption came when Goodwill Omaha claimed an exemption as a non-profit business while paying their executives six figure salaries but subjecting their disabled workers to subminimum pay. Because Goodwill Omaha was able to get away with claiming non-profit status, last year the city of Omaha lost somewhere between $300,000 – $400,000 in property tax revenues.
For these reasons, and more, in January I will introduce the 50/50 plan as a bill for property tax relief. The 50/50 plan will allow property owners to receive half of that portion of their property taxes which go to fund public education as a credit or refund on their Nebraska State income tax return. The Liberal approach for how to pay for the 50/50 will be to raise your sales taxes and income taxes, but the conservative approach will be to make cuts in the State’s budget. When you consider that Nebraska has 629.6 full-time government employees for every 10,000 people compared to the national average of only 537.6, it is not difficult to imagine ways we can pay for the 50/50 plan without having to raise your income taxes or sales taxes.