Last week, I walked through the history of the state’s revenues from its four main sources. As I pointed out in that article, the state does not assess property taxes and, as a result, your property tax bill is not determined by the state. So, when I have constituents contact me about what I am doing to reduce their property tax burden, my first response is to contact their local school board, county commissioner, and city council representative, since they are the political subdivisions that assess the largest amount of property taxes. I also remind constituents that the Legislature has reduced the pressure on your property taxes by removing community college operating expenses from the property tax rolls at a cost of $300 million/year to the state. The Legislature also reimburses the local taxing authorities for the lost revenue created by the Homestead Exemptions provided to those who qualify.

But the largest property tax help comes from the Tier I and Tier II property tax credits that you can find on your property tax statements. Over the past three years, this credit amounts to over $1.5 million annually. So, when you see TV ads that suggest that Nebraska’s property taxes are the 4^th highest in the nation, they are referring to the “gross” tax, not the “net” tax after the state credits are applied. (It’s an election year, so many political ads are grossly misleading.)

The other step the Legislature has taken is to place caps on how much additional revenue municipalities and counties can derive from property taxes year over year. This is designed to prevent large windfalls that result from valuation increases with no corresponding decrease in the mill levy. With the caps, some political subdivisions are forced to either keep the mill levy the same or reduce the mill levy when valuation increases would generate more property taxes than permitted by law.

In the end, I do agree that property taxes are still too high and can only be fixed by either broadening the tax base (growth), reducing spending, or better diversifying the tax sources. I remain convinced that reliance on property taxes is too high, particularly for K-12 funding. I have no issue with property taxes being used to fund county expenses and our cities and villages because they are locally assessed by locally elected boards for local uses. However, I do believe that public school funding is a state mandate that should be funded to a greater extent by the state. The problem is where to find the money. I agree with much of the Governor’s plan to expand the sales tax base if we can truly shift from property taxes to sales taxes.

I also wanted to point out that the Legislature voted to reduce the maximum income tax rate from 6.85% to 3.99% over five years. This was the largest state income tax cut in state history. I was happy to vote for this change as a newly appointed Senator at the time. I was joined in that vote by then-Senators Lynn Walz and Brett Lindstrom. We knew, along with then-Governor Pete Ricketts, that having a higher state income tax rate than our neighboring states would make it difficult to keep and attract businesses to Nebraska. All we need to do is look at what is happening in Seattle and New York City to see how businesses leave states with high taxes for those with low taxes.

Similarly, I think it is important to note that the state’s incentive program, the ImagiNE Act, was passed in 2020 to replace the expiring Nebraska Advantage Act. Every state has some kind of business incentives to compete for employers. It is important to note that then-Senators Walz and Lindstrom also voted for the ImagiNE Act. I note their voting record only to show that much of our current tax and business policies were bipartisan because they are necessary. Property tax reductions are also necessary, but it has been hard to craft a plan that can gain bipartisan support and truly solve the property tax problem.

I will close with these thoughts: If we reduce one tax without equally reducing spending, we must shift the spending to another tax source. Likewise, when we exempt certain taxpayers from paying a tax, other taxpayers must make up the difference. Right now, we are experiencing increases in sales tax revenue, but reduced revenue from income taxes. We are also “spending” more, not for state government, but for property tax relief by funding property tax credits, more state aid to schools, and property tax exemptions for those who can least afford it. We need to find additional revenues to ensure the longevity of these initiatives.

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 mike.jacobson@leg.ne.gov.