AP NEWS

Nebraska headed for property tax showdown and ballot drive

May 5, 2019

LINCOLN, Neb. (AP) — A proposal that seeks to lower Nebraska’s property taxes by raising other taxes will face its biggest hurdle yet on Tuesday when lawmakers begin debate on the measure against the backdrop of a new property tax ballot campaign that could lead to sharp spending cuts.

The legislative proposal faces strong opposition from Gov. Pete Ricketts, and getting it through the one-house Legislature will require support from at least 33 of Nebraska’s 49 senators to overcome an expected filibuster.

Meanwhile, conservative activists who have lost faith in lawmakers are preparing to take the issue to voters in the 2020 election. Some frustrated senators have already endorsed the ballot measure, which would guarantee taxpayers a 35 percent state refund on their local property tax payments. It would cost the state an estimated $1.1 billion a year out of a budget that currently calls for about $4.5 billion in annual spending.

“We’ve never had the intestinal fortitude to make necessary cuts in spending,” said Sen. Steve Erdman, of Bayard. “This will force the Legislature to make cuts.”

Erdman said he hasn’t seen the latest version of the legislative property tax bill and doesn’t know whether he’ll support it.

Paul Von Behren, president of the ballot campaign TRUE Nebraskans, said lawmakers have introduced more than 500 property tax bills since 2000, yet average property taxes have risen more than 250 percent in that time. Von Behren said he expects no action from lawmakers this year, given that local government officials are lukewarm on the current tax bill and Ricketts is actively fighting it.

“We have the makings of a first-class stalemate,” he said. “I don’t believe the people who actually want to do something will be able to do it.”

Supporters of the bill say it would provide a large net savings for farmers, ranchers and homeowners throughout the state even if they end up paying more in other taxes. It’s a better approach than Nebraska’s current practice of using the state’s property tax credit fund, said Sen. Mike Groene, of North Platte.

Groene, a fiscal conservative who helped craft the bill, said property taxes have continued to rise even as lawmakers and governors dumped more money into the tax credit.

“It hasn’t worked,” Groene said. “It hasn’t done what it’s supposed to do.”

The property tax credit fund distributes state tax money to local governments and can only be used to lower property tax bills. Ricketts is proposing a $51 million annual increase for the fund, nearly doubling the yearly allocation since he took office in 2015.

Ricketts has railed against the property tax bill floated by lawmakers, pointing to past plans that boosted aid to local governments in a failed effort to lower property taxes. The current bill was crafted by the tax-focused Revenue Committee, which is composed of seven Republicans and one Democrat. Two Republican senators abstained from voting on it.

The measure would impose a half-cent sales tax increase and levy sales taxes on 29 services that are currently exempt. The list would raise the cost of haircuts, tattoos, moving services, lawn care, candy, pop, bottled water, weight-loss programs, ride-hailing services and professional home maintenance, among other items.

Because sales taxes disproportionately hurt the poor, the bill would expand Nebraska’s earned income tax credit, which benefits low-income taxpayers.

It also would boost state funding for all K-12 schools while restricting the taxing power of mid-sized and larger schools that already receive state equalization aid.

Nebraska’s cigarette tax would increase from 64 cents to $1 per pack — higher than neighboring Colorado, Missouri and Wyoming, but still lower than Iowa, Kansas and South Dakota.

Paying for the measure would also require lawmakers to take $119.5 million out of the property tax credit fund, leaving it with a balance of $104.5 million.

Sen. Lou Ann Linehan, the Revenue Committee’s chairwoman, said she’s not a big fan of the fund because it provides a relatively small benefit to taxpayers. Linehan said the new tax package isn’t perfect, but lawmakers can always change it next year if it doesn’t work as intended.

“We’re trying something brand, brand new,” she said. “It’s a little nerve-wracking for everyone. It’s nerve-wracking for our schools. It’s nerve wracking for the property owners. It’s nerve-wracking for 49 state senators.”

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