Sen. Smith’s Revenue Committee Still Far Short of Providing Property Tax Reform

Following a four-day break, the Legislature is due back at the Capitol.  The Revenue Committee is planning to meet today to discuss proposals that can be brought together into a package to provide tax relief. Last week, Senator Jim Smith offered a proposal that would treat the property tax relief fund as a slush fund, thus raising property taxes on Nebraskan home and property owners.

This week the Revenue Committee is expected to discuss LB640, introduced by Sen. Mike Groene. The legislation attempts to provide property tax relief by capping property taxes as a percentage of school budgets.

Under current tax policy, Nebraska ranks 49th in its reliance on property taxes to fund local schools. The intent of LB640 is to try to reduce the current overreliance on property owners to fund education, which would create a more balanced and equitable system. There are a number of unanswered questions  – including how utilizing the Property Tax Credit Fund to pay for LB 640 pencils out for property owners – but we will continue to monitor discussions around this particular proposal closely in hopes that it can be the vehicle that balances the three legs to the stool of tax policy.

As we have mentioned time and time again, property taxes account for 48 percent of all state and local revenues while income taxes account for a third and sales taxes account for 19 percent. Under current tax policy, the stool is very lopsided, with the property tax leg measuring nearly 1 ½ times longer than the income tax leg.

Reform for Nebraska’s Future appreciates Senator Groene’s proposal and his efforts to address the property tax problem in Nebraska. We are calling on all members of the Revenue Committee to work with Senator Groene and other champions, including Senator Friesen, to create a more balanced system. We also encourage the members of the Revenue Committee to renounce Senator Jim Smith’s proposal of treating the property tax relief fund as a slush fund which only worsens the problem. In order to provide property tax relief, dollars to offset property taxes should be increased, not lessened as Senator Smith is proposing.

At this stage, the Revenue Committee has done little to provide a package that would provide property tax reform. Despite his claims that he supports property tax reform, the only portion of Senator Smith’s proposal that includes property tax reform is LB338, introduced by Senator Brasch. This bill changes the way agricultural land is valued and has received lukewarm support, even from agricultural groups. Even worse, this bill does absolutely nothing for homeowners.

What is missing from the discussions is how the Revenue Committee plans to fund any of their proposals. Senator Smith last week said that LB640 would be the most contentious piece of their negotiations for an overall package, but failed to recognize any attempts to fund the current proposals being considered other than his proposal to raid the property tax relief fund. LB44, introduced by Senator Dan Watermeier could provide this missing piece to the puzzle.  The same goes for LB 312 and LB 313 introduced by Albion, Nebraska Senator Tom Briese.