Where Does Reform for Nebraska’s Future Stand on LB640?

The tax debate is about to really heat up next week in the Nebraska Legislature as pieces of legislation get their opening act on the floor. While this debate is just beginning at the Capitol, the debate about property tax reform has been raging throughout Nebraska for years. One piece of legislation in particular is already causing heated discussion throughout the state.

Looking to provide some relief to the heavy burden on property tax payers in Nebraska, LB640 is intended to reduce Nebraska’s dependence on property taxpayers for school funding. This proposal looks to take the $224 million currently in the Property Tax Credit Fund use it to help fund schools that are heavily reliant on property tax reform.

In its original draft, LB640 would look to bring aid to school districts that are 60 percent property tax-funded. Because schools already rely on property taxes at a disproportionate rate, an amendment was offered that would lower that number to 55 percent. This is not enough and in reality should be lowered to below 40 percent in order to ensure more balance.

In reality, LB640 falls far short of achieving the much needed comprehensive tax reform that Nebraskans are desperate for. The Nebraska Legislature would not be having a debate on school levies if state and local revenues were more balanced between property, sales, and income taxes, as RNF has been championing for since early January.

Currently our system relies on 48 percent of property taxes as state revenue, while income tax accounts for 32 percent and sales tax 19 percent. This unbalanced system is the root of the issue that is causing so much debate within our state.

Another bill that is being discussed is LB461 and is also inadequate in its current form. LB461 tries to bring together a package of property and income tax cuts in hopes of providing a little something for everyone. The only problem is that LB461 provides almost nothing for property taxpayers.

As it is currently drafted, LB461 incorporates LB338, which provides little if any relief for agricultural property owners while providing absolutely nothing for Nebraska’s homeowners, whose property tax rates increased by 36 percent over the past decade. In Omaha alone, rates have been reported as increasing as much as 800 percent from last year alone.

LB461, in its current form needs work. There are a number of palatable proposals that could be incorporated into bills that would provide meaningful property tax reform and we hope that legislators will consider them.

Moving into next week lawmakers need to remember that Band Aid legislation that merely just provide minimal relief is no longer the answer in the property tax debate. Nebraskans have made clear that meaningful property tax reform is their top priority and we hope that legislators will heed their call.