A fresh attempt at addressing Nebraska’s property tax challenges is underway, and it may even include legalizing online sports betting. Sen. Jana Hughes recently introduced a fresh tax plan (LB9) during a unique legislative session, receiving preliminary support from crucial interest groups.
Special Session in the Legislature
In July, the opening day of the extraordinary legislative session at the Capitol, Sen. Jana Hughes and Sen. Merv Riepe of Ralston reviewed documents together. Hughes’ tax plan (LB9) obtained preliminary backing from key interest groups.
Different Approach Proposed
The new proposal was developed as a countermeasure to Nebraska Gov. Jim Pillen’s contentious property tax relief plan and aims to dramatically reduce high property tax charges. The bill was put forward by a cross-party group of lawmakers and aims to cut local school districts’ maximum property tax rate by 80 cents over ten years – a stinging 76% reduction.
This proposal would require the maximum levy per $100 of taxable property value to fall from $1.05 to 65 cents next year, gradually decreasing further until it reaches 25 cents in 2034. Such reductions would necessitate approximately $1 billion in added state support for public schools next year with an additional annual sum of $253 million every two years following that.
Challenges with Funding
The initial costs would be covered by expedited use of existing property tax credits amounting to about $560 million leaving a funding shortage of around $440 million without funding resources specified which calculations suggest could be filled through negotiations in The Legislature. Gov. Jim Pillen’s previous strategy relying on raised sales taxes met opposition and ultimately did not succeed.
Support and Resistance
The plan proposed by Hughes has escaped much of the opposition that hindered Pillen’s approach. A mixture of legislators and key organizations, including the Nebraska Farmers Union and Nebraska Farm Bureau, expressed either support or neutrality. In contrast, business organizations such as the Nebraska Chamber of Commerce critiqued the proposal for lacking clarity about the scale of property tax issues.
Endorsement from Public Sector
The Schools Taking Action for Nebraska Children’s Education (STANCE) representatives from districts like Centennial Public School as well as others such as The Nebraska Rural Community Schools Association showed their backing for LB9. Jason Richters president of Centennial Public-School Board and a farmer iterated importance of retaining local control over public schools something that had raised considerable concerns with Pillen’s proposal.
Richters said, “People in Nebraska are deeply committed to maintaining local supervision over their schools and children’s education – thus they won’t risk these for a few more tax relief dollars. “
Issues Raised by Business Sector
Faced with broad public sector backing the plan was opposed by business groups. Notable among them was Bryan Slone, President of The Nebraska Chamber of Commerce who raised objections to LB9, stating it didn’t quantify how much property taxes have to reduced (40-50%) to compete with other states.
He also referred to modern state funding mechanisms using income, property and sales taxes which he saw as the “three-legged stool” upon which statewide revenues were based upon which he argued were becoming increasingly dependent on property taxes following legislative action in recent years which has seen cuts both at corporate and individual levels. Despite falling revenues projected due to previous income tax reductions Gov. Pillen has prioritized substantial property tax reductions.
Revenue Increasing Suggestions
Support for LB9 might dwindle if proposals for new revenue generation become part of the law. During a discussion with Sen. Eliot Bostar, Rieker conceded that the Farm Bureau would revoke its support if farm input or equipment were to be taxed.
During this special session, lawmakers have introduced 81 laws and 24 changes to the constitution. These suggestions are:
- Legalizing Marijuana: Two Omaha senators suggested making marijuana legal and taxing it for recreational usage. Sen. Justin Wayne’s bill (LB52) includes a tax of 25% on farmers and a sales tax of 25% for consumers. Sen. Terrell McKinney’s legislation (LB71) proposes an excise tax and retail tax of 16% on cannabis goods, with profits going to property tax credits and public-school funding.
- Mansion Tax: Sen (Bill). Carol Blood has proposed in her legislation (LB36) putting in place a real estate transfer tax of 1.25% on single-family homes valued over $800,000.
- Luxury Goods Taxes: Sen Wayne’s proposal (Bill) LB54 introduces a 2.25% taxation rate on luxury products such as vehicles over $50,000 price bracket jewelry more than $5000 and clothing higher than $1000.
- Capital Gains Tax: Another proposal from Senator Wayne (Bill: LB51) seeks taxing unrealized capital gains by 10%. This rate is expected decrement down to reach 7% by the year 2027.
- Excise Duty on Ammo: Yet another from Sen Wayne’s productive legislative flurry is Bill LB65 regarding introduction of an excise duty at the rate of 5% applicable towards ammunition purchases to fund property tax credits alongside various other grant schemes.
- TEEOSA Sunset: Sen Steve Halloran’s proposal (Bill LB81) envisages termination of the Tax Equity and Educational Opportunities Support Act (TEEOSA) by the year 2027 and then finding a new process for extending state aid to schools.
- Legal Actions on taxation: Sen. Julie Slama has brought several amendments in the constitution to permit individuals to legally challenge political subdivisions when new taxes are levied, or tax rates increased without voter approval. .
- Diverse Method for Property Taxation: Constitutional Amendment proposed by Omaha Sen. Mike McDonnell’s (LR24CA) proposes a unique approach for taxing residential properties.
Final Remarks
The alternative tax scheme proposed by Sen. Jana Hughes suggestion received a largely favorable response during public consultation sessions, with several of influential interest groups and lawmakers supporting it. However, it will be an uphill task identifying provisions for sustainable funding without displeasing critical industry sectors. It will be absolutely vital balancing relief on property taxes alongside sustainable funding as legislation sessions continue.
