Property tax relief, so close, yet so far
Tax reform in Nebraska. Has the improbable become impossible?
In the waning days of the session, a classic battle between the Executive and Legislative branches looms large. The Governor wants property tax relief but no increases in other taxes or tax shifts. The Legislature says it needs increases or shifts to fund property tax relief.
In a promising—albeit fleeting—development, the Legislature’s Revenue Committee drafted a plan to reduce property taxes by increasing state aid to K-12 education. That was the top recommendation of the Legislature’s 2013 Tax Modernization Committee to reduce property taxes.
But the search for new revenue to fund the increase and the tweaking of the legendary state school aid formula remain problematic.
If the Governor’s campaign to rally opposition to the plan and a seven-hour hearing on the proposal are an indication, anything beyond the usual Band-Aid approach may not happen this session, or anytime soon. Only four proponents spoke for, while another 36 spoke against it, or in a carefully crafted neutral capacity.
Opposition came from cities, urban schools, chambers of commerce, the Nebraska State Education Association, policy think tanks, retailers, real estate agents and contractors.
Even the Nebraska Farm Bureau and allied ag organizations—by far the biggest proponents of property tax relief—told lawmakers while they approved of an increase in the state sales tax rate and broadening of the base, they want the state to maintain the current property tax credit fund.
Critics say that an increase in the state sales tax rate by three-quarters of a cent, taking it from 5.5 cents to 6.25 cents, is regressive and puts more of a load on low and middle-income residents who pay more of their income in sales taxes than do wealthier residents. Some suggest pairing it with an increase in the state’s Earned Income Tax Credit.
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