Responsible Tax Reform

April 11, 2017 Leave a comment


By Governor Pete Ricketts

One of my top priorities as Governor is to reduce the tax burden on all Nebraskans to grow our state.  The Tax Foundation ranks Nebraska 14th highest for income tax collections per capita and USA Today rates us 5th highest for property taxes.  We can, and must, do better.

 

As I travel Nebraska, people share with me their personal stories about how taxes are hurting their families and businesses.  Roxie and her husband run a small restaurant and family farm near Fremont.  Last year they took out a second mortgage on their house to pay their property and income tax bill.  For Roxie, tax reform is the difference between keeping the business and farm, or shuttering their operation. This is not an isolated situation.  I hear these stories from Nebraskans in every corner of our state.  Each story deepens my resolve to deliver better tax policy to Nebraskans.

 

I have been working closely with Revenue Committee Chair Jim Smith and Agriculture Committee Chair Lydia Brasch to put together a tax reform package that will provide meaningful tax relief to families and small business owners now.

Nebraskans in every county want to see a change in how property taxes are assessed, and families want to keep more of the money they earn.   This is why this tax reform package reforms both ag land valuations and reduces income taxes.

 

Property tax reform must be delivered for our farm and ranch families.  Income taxes must be reduced to help our hardworking families, grow small business opportunities, and create new and good-paying jobs.  To get either one of these goals accomplished, we are going to have to work together and do both.

 

Last week, the Revenue Committee advanced a comprehensive tax reform package in LB461 that includes both the property and income tax reforms I announced at the beginning of this session.  The package will go to the full Legislature very soon.  Here are the top five things you should know about the tax plan:

 

  • Property Tax Reform First: The plan changes the way ag land is valued for taxation purposes beginning in 2018, moving from a comparable market sales approach to valuing land based on its income potential.  Functionally, this plan would have reduced ag land property valuations by $12 billion if it had been in place in 2017.  This would have been an average reduction of 12 percent statewide.  With flat levies, this would have reduced property tax on ag land by about $147 million in 2017.  This plan also protects our K-12 schools with a projected investment of over $30 million each year in the state aid formula.
  • Incremental Income Tax Relief: Starting in 2020, reduces the top income tax rate incrementally from 6.84 percent to 5.99 percent, but only if state revenues are expected to grow by 3.5 percent or more.

 

  • Tax Credits for Low-Income Families: Starting in 2019, the plan provides tax credits for low-income families, increases the personal exemption credit, and expands the existing Earned Income Tax Credit.  The plan contains approximately $7 million of new tax credits a year for low-income Nebraska families.

 

  • Corporate Tax Relief to Create Jobs: The plan incrementally reduces the top corporate income tax rate from 7.81 percent to 5.99 percent to help make Nebraska more attractive to new companies or companies looking to expand.  After an initial reduction to 7.59 percent, the plan makes continued incremental reductions only if state revenues are projected to grow by 4 percent or more starting in 2020.

 

  • Tax Relief for All Nebraskans: Nebraskans of all income levels will see tax relief on their income under this plan.  Middle and low-income Nebraskans will see the biggest percentage reduction in income taxes.

 

This is responsible tax reform that delivers relief to the Nebraskans who need it most, and is sustainable even as we work to restrain our growth in spending.  Tax reform will grow Nebraska unleashing long-term growth on Main Street and in agriculture by allowing working Nebraskans to keep more of the money they earn.

 

You might wonder how we can pass tax reform at the same time we are working to balance the budget.  None of the proposed reforms would adversely impact the budget, or require cuts to the upcoming two-year budget.  This tax reform plan is designed to protect state budget needs and investments in education and public safety.

 

I urge you to contact your senator immediately and encourage them to control the growth in government and support tax reform this year.  Special interests in the State Capitol do not want to see any relief pass this year, because they want to see more government spending.  Visit www.NebraskaLegislature.gov for information on how to contact your senator.  If you have additional thoughts on tax reform that you’d like to share with me, please contact my office atpete.ricketts@nebraska.gov or 402-471-2244.

 

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The Long Game on Property Taxes

January 21, 2016 Leave a comment


By Governor Pete Ricketts

Last week, I delivered my second State of the State address to the Unicameral, and then I went on the road for 10 statewide stops to talk directly with Nebraskans in South Sioux City, Columbus, Grand Island, Hastings, North Platte, Sidney, Scottsbluff, Alliance, Valentine, and Fremont.  Not surprisingly, property taxes were the top issue again, but this time there is an increased sense of urgency to see progress.

 

Many Nebraskans continue to be concerned about their options as property taxes continue to rise.  For example, Mary Lou in North Platte showed me this year’s property tax bill.  In 2015, her taxes went up almost 36 percent year over year on top of a 20 percent increase from 2014.  If property taxes continue to increase at this pace, families like Mary Lou’s may be forced to sell land their family homesteaded generations ago—just to pay their tax bill.

 

This isn’t just a rural or agricultural issue.  Valuations are on the rise for commercial and residential property as well.  Many Nebraska taxpayers are on fixed income and have no ability to manage fast-paced valuation increases.  In some cases, the American Dream of owning a home is becoming more difficult for hardworking families.  Statewide property valuations from 2003-2013 increased by about 77 percent.  With ag land values rising even more rapidly than residential, property taxes on farmers and ranchers during the same time period increased by 137 percent.

 

As a point of reference, property taxes make up about 40 percent of total taxes paid in Nebraska, while sales and income taxes combined come out to over 50 percent.

 

Property tax valuations are based on a three-year rolling average of a property’s actual value.  The rolling average is an attempt to prevent dramatic increases based on an isolated economic event.  Practically, this also means that if values rise rapidly for a couple years, and then level out or fall, the annually assessed valuation may still increase during years three, four, and five until the highest values are removed from the average.  While we all feel the pinch of increased property taxes, ag  producers, who are seeing a down trend in commodity prices, are still experiencing a significant increase in property taxes each year.  This reality has families like Mary Lou’s facing the possibility of literally losing their family farm.  The economic pressure experienced by the ag industry, which represents 25 percent of the Nebraska economy, impacts all of us.

 

Property taxes have been a major focus of my policy initiatives since I’ve had the honor of serving as your Governor.  Last year, we were able to provide $408 million in direct dollar-for-dollar property tax relief to Nebraskans through the Property Tax Credit Relief Fund, an over 45 percent increase from previous budgets.  While it was important to provide immediate relief, we must do more.

 

It is a challenge for state officials to take on the property tax problem directly because property taxes are imposed and collected by your local government including cities, counties, school districts, natural resource districts, community colleges, and educational service units.  State officials are limited to determining the parameters for local collection.

 

This year, I’ve worked with Revenue Committee Chairman Mike Gloor and Education Committee Chairwoman Kate Sullivan to propose a property tax relief package to make structural changes and begin to provide long-term relief through fiscal restraint.  Our bill will tighten spending and levy limits and limit the statewide aggregate growth of agricultural property valuations to three percent.

 

The $408 million in direct tax relief in the budget the Legislature and I agreed upon is significant, but property tax relief continues to be a priority because we can do more.  My property tax relief package encourages fiscal discipline, transparency, and accountability in local government, while maintaining local control over budgeting decisions.

 

We are working on your behalf at the state level, but we need your help at the local level.  Here are a few suggestions for how you can help support property tax relief for your community:

 

Consider attending budget meetings for local government and share your property tax bill, urge fiscal restraint in budgeting, and look for ways to achieve tax relief by lowering the levy.  You can find information about how to contact local government by visiting some of these websites:

 

 

You may also contact your state senator to urge them to support the property tax package introduced at my request by Chairwoman Sullivan and Chairman Gloor.  You can find their contact information at www.NebraskaLegislature.gov.

 

If you have any questions about how property taxes are levied or the tax relief package we are working on this legislative session, please contact my office by emailingpete.ricketts@nebraska.gov or by calling 402-471-2244.  I look forward to hearing from you!

 

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Center Urges Return to Balanced Taxes in Nebraska

February 20, 2015 Leave a comment


The Nebraska Legislature’s Revenue Committee is hearing public testimony on LB 280 and LB 357 – two legislative proposals to make major changes to Nebraska’s tax system.

 

For years, the Center for Rural Affairs has called for a balanced approach to funding schools and local governments. That’s why we support LB 280, because it is the only balanced tax plan before the Legislature.

Jon Bailey, Rural Policy Director

Center for Rural Affairs

 

LB 280 is a bill sponsored by Senator Al Davis, which proposes to reduce property taxes for school funding purposes only, expand resources for schools, reduce reliance on property taxes through a local income tax for schools, and increase state aid to schools through a method that balances the interests of all Nebraska schools.

 

“As Nebraskans have heard for decades, the real tax debate in this state should be how to provide meaningful and sustainable property tax reform in a state where local governmental entities are too reliant upon property taxes,” said Jon Bailey, Director of the Rural Public Policy Program at the Center for Rural Affairs. “There now seems to be a consensus among the citizens, the Legislature, and the new administration that the time has come to provide meaningful and sustainable property tax reform.”

 

We believe LB 280 provides the opportunity for meaningful and sustainable property reductions, particularly in rural areas, Bailey added. However, the real question, and a serious question the Revenue committee must begin to answer must be how can Nebraska enact meaningful property tax reform and also avoid harmful cuts to schools and other key services?

 

According to Bailey’s testimony, these questions are particularly crucial for rural Nebraska. The vast majority of our state is property rich, but people poor – an increasingly smaller number of rural residents are paying the freight for our schools and our local government. Data show that residents in areas with high amounts of agricultural land pay more in combined income and property taxes than residents of areas with the least amount of agricultural land, both on a per-capita basis and as a share of income.

 

“For years, the Center for Rural Affairs has called for a balanced approach to funding schools and local governments,” Bailey continued. “A third from income taxes, a third from property taxes and a third from sales taxes – the three legged stool. The current extreme reliance on property taxes for schools and local governments shows how far that three legged stool is out of balance.”

 

That’s why the Center supports LB 280, because it is the only balanced tax plan before the Legislature, concluded Bailey. It is the only comprehensive tax plan that recognizes that property taxes and school funding drive each other, and the only comprehensive tax plan  proposes to significantly reform that connection.

 

To view or download copies of Bailey’s Center for Rural Affairs testimony go to:

 

LB 280 [http://www.cfra.org/Testimony-LB-280]

LB 357 [http://www.cfra.org/Testimony-Opposition-LB-357]

 

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