Platte Institute: Nebraska needs property tax reform
SCOTTSBLUFF — Nebraska needs to look at fundamental property tax reform and change how those taxes are structured before taxpayers can see real reductions in their property tax bills.
That’s the conclusion of Platte Institute Policy Director Sarah Curry in her latest policy brief “Nebraska’s Crowded Budget and Its Impact on Property Taxes.”
“We’ve seen property tax relief programs for about a decade but our taxes aren’t going down,” Curry said in a conference call with statewide media last week. Spending more money on property tax relief only puts more pressure on other areas of the state budget and it’s not fixing the problem.”
According to Curry’s research, Nebraska’s average revenue growth is 4.7 percent. Any program that spends more than that is crowding out other areas of state government, including property tax relief.
“We haven’t been getting the revenue growth necessary to fund a basic level of government,” Curry said. “That’s why there are across the board cuts. Even then, there hasn’t been a lot of room to play with for extra money.”
One area she identified that could help is expanding the sales tax base by eliminating many of the exemptions.
“I don’t advocate for the state to create or raise any additional taxes on the people. We’re already taxed enough,” Curry said. “We have a narrow sales tax base with lots of exemptions. If we broaden the sales tax base to include services, the state could collect more and maybe even lower the rate.”
Nebraska District 48 State Senator John Stinner said a group he worked with a few years ago was able to identify a possible $700 million in sales tax exemptions that could be eliminated, some in the service industry.
“In 1969, consumer spending in the service industry was about 30 to 40 percent of the economy,” Stinner said. “The service industry now makes up almost 80 percent of the economy. The tax code hasn’t been adjusted accordingly.”
Stinner added that many areas of the budget are mandated by the federal government. Aid to individuals, including Medicaid, developmental disability assistance, child welfare is among them.
“Over the past 20 years, the category of aid to individuals has increased about 5.7 percent,” Stinner said. “That takes up about 35 percent of our budget today.”
Higher education and K-12 education take up another 45 percent of the budget.
“Another element we haven’t solved is how to deal with the state’s corrections problem,” he said. “That area is also growing at a faster pace than the average 4.7 percent revenue growth.”
Nebraska District 47 State Senator Steve Erdman said the Legislature needs to make reforms in every area – and especially cut spending.
“The state budget doubled over the last 15 years and the state population is basically stagnant,” he said. “We have a spending problem, not a revenue shortfall problem. The only way to fix our tax problem and lower taxes is to cut spending. No one’s willing to talk about that, even our governor.”
An example Erdman gave was from 2001. The Legislature returned for a special session because of a revenue shortfall. Senators cut spending 10 percent across the board for every state government agency.
“Every one of those entities that collect tax dollars are still here today,” he said. “They all figured out a way to make it work. They can do it again if we had the intestinal fortitude to make them do it.”
The current Platte Institute report is the second of a three-part series on property taxes. The first, “Trends in Nebraska State Spending,” was published last July. An upcoming policy paper will consider property tax reform options, as Nebraska ranks seventh highest in the nation for property taxes.