Nebraska’s term-limited lawmakers may make final push for stronger property tax relief • Nebraska Examiner
LINCOLN – Like a phoenix rising from the ashes, Nebraska’s term-ending lawmakers made what may be their final demand Thursday: They want to revive more comprehensive property tax relief plans before their time in the legislature ends.
State Senator Justin Wayne of Omaha outlined three options Thursday afternoon for his colleagues to consider ahead of an expected second debate on House Bill 34. LB 34 is the Finance Committee’s proposal to address rising property taxes, the main goal of the special session.
Almost immediately, members of Wayne’s 2016 senators jumped on the bandwagon, again demanding more options than those left to them on Tuesday.
On Tuesday, LB 34 was initially confronted with a 122-page amendment, but then ended up with 43 pages with three components:
- “Advance” income tax credits for property taxes paid so that they appear on the property tax bill and owners do not have to report the credit on their tax returns.
- Increase allowable property tax credits to fund K-12 schools to $750 million in the first year.
- Limiting the annual growth of property tax revenues for local and county governments to the higher of the inflation rate or 0% in times of deflation.
The last months in office for some
At least 15 legislators will not be running for re-election in January, including 13 who are finishing their terms after eight years in office, including Wayne. Many of them say LB 34 could be the last train to leave the station on property tax relief, but that they want more.
State Senator Joni Albrecht of Thurston: “I’m not leaving here with what we have now. How do you get home? We’re going to do what we have to do.”
State Senator Lynne Walz of Fremont: “I don’t think that’s enough. But I think there’s a whole other issue that we haven’t talked about yet: economic development.”
State Senator Carol Blood of Bellevue: “I regret not being here next year because I would keep fighting, but I don’t want to leave without doing something.”
Senator Mike McDonnell of Omaha: “It doesn’t have to be these three options. We can be as creative as we want.”
“We should do something special”
Wayne has said if the current version of LB 34 is all that lawmakers pass, it could have been done “via email” or in a conference call. He and others have suggested going home if that’s all that’s left on the table.
Instead, his new ideas would expand LB 34, which would currently provide about 3% of the new relief ($185 million), to 25% or 40% of the total relief on top of existing programs. If his proposals are not supported, he urged lawmakers to target existing tax credits to those who need them most.
“The entire state of Nebraska is expecting us to do something now,” Wayne said. “We’re in a special session, we should do something special.”
State Senator Steve Erdman of Bayard is also fighting for what he sees as a “solution” and not just a “Band-Aid on an amputation,” as he describes LB 34 and other Revenue Committee plans.
Erdman has encouraged lawmakers to adopt his proposal for an EPIC option excise tax, which would completely eliminate property, income and sales taxes.
A way forward, with caution
Walz and Blood urge caution and ask lawmakers to work with local authorities, such as municipalities and counties, to ensure services are not compromised and new, unfunded mandates are not passed on.
“There is absolutely no way to solve the property tax problem unless we grow our state and generate new revenue,” Walz said.
Blood said that includes raising the local cap on annual property tax revenue to 3%, or the rate of inflation, rather than 0% during times of deflation. She also criticized lawmakers for failing to consider other sources of revenue, such as creating a new income tax bracket.
Much of the frustration that had built up after LB 34 was drastically reduced from a roughly 30% cut in property taxes to just 3% halfway through debate Tuesday, at which point top lawmakers pivoted to a “stripped down” plan with “absolutely minimal” components.
Each of Wayne’s three plans would build on the current LB 34 in the following manner and would build on each other in succession. A change in school funding was not part of the plans Wayne circulated.
“This may not be the answer, but I think it’s the first time people can sit down and find out what we’re doing,” Wayne said.
Option 1 (a “better way to implement the new 3% relief”)
A different percentage of the available tax credits would apply to owners of different types of property. Wayne said this would help differentiate the “grandma next door” from commercial property owners, businesses and landowners from other states:
- “Owner-occupied” residential properties: 100% of the applicable credit.
- Agricultural land: 100% of the applicable credit.
- Residential rent: 95% of the applicable credit.
- Commercial real estate: 50% of the applicable loan amount.
This option would also value residential property at a rate lower than its actual market value, with one rate for owner-occupied housing and another for rental housing. This would require a constitutional amendment.
Option 2 (a reduction in property tax by 25%)
New tax credits would be created to fund the state’s 23 natural resource districts (about $95 million annually), and the state would reimburse county jails for operating and maintenance costs. The state would also have to reduce assessed values and pay for the changes in value. This would require the state to pay for:
- Owner-occupied property: 5% of the assessed value.
- Agricultural land: 27% of the estimated value.
- Residential rent: 5% of the estimated value.
- Commercial properties: 0% of the assessed value (no adjustment).
This option would also include LB 73 and LB 39 by McDonnell and State Senator Kathleen Kauth of Omaha, respectively.
McDonnell’s LB 73 would expand income eligibility to include adjustments due to changes in the Federal Housing Finance Agency’s home price index that are higher than Consumer Price Index inflation.
Kauth’s LB 39 would restore property tax exemption eligibility to some Nebraska residents who were eligible for the past three years but were no longer eligible due to rising valuations.
With the expanded tax relief, Wayne would induce the state to increase the “sin tax” on six goods:
- Cigarettes – $1 per pack of 20 (was 64 cents).
- Liquor – $5 per gallon (was $3.75 per gallon).
- E-cigarettes (vapes) – 30% wholesale price (versus a split excise tax of 5 cents per millilitre on disposable vape liquids and 10% wholesale price on other electronic nicotine products).
- Keno (lottery) – 20% of gross proceeds (previously 2%).
- Games of skill – 20% of net operating revenue per ATM (previously 5%).
New sales taxes would be imposed on 33 services, eliminating various exemptions for goods and services, including tattoos, skin care services, lobbying and charter flights.
A new VAT exemption is to be introduced for household electricity.
Option 3 (40% reduction in property tax)
The cut in corporate and personal income tax rates would be paused for one year through 2028 to save another $250 million. By 2029, those rates would still reach 3.99%.
The third option would also include Wayne’s LB 47, which would eliminate the franchise tax on financial institutions and have them pay the corporate tax instead. Candy and soft drinks would also be taxed under the plan.
Renters would receive additional relief through an income tax cut of up to $2,200 or the full amount of rent paid in the tax year. This is similar to LB 740 in 2022 by Senator Wendy DeBoer of Omaha, which proposed a deduction of up to $3,000.
In addition, the tax allowance for earned income would be increased from 10% of the nationwide allowance to 15%.
Wayne-New-Property-Tax-Plans
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