A proposal to use state sales and income tax dollars to offset property taxes for farmers and ranchers ran into opposition, before senators advanced a watered-down version in the Nebraska Legislature Thursday.
As farmland values rose in recent years, property taxes paid by owners of agricultural land have risen faster than those on home or business owners. To offset that, the Revenue Committee and Gov. Pete Ricketts proposed a $30 million increase to an existing property tax credit fund, all directed to agricultural landowners.
Sen. Al Davis of Hyannis said the proposal was important. "This property tax credit piece for agriculture addresses the problem that agriculture has had. It’s targeted and it gets the relief to where it’s needed. And it isn’t enough -- I get that -- but it’s something that will be beneficial to agriculture the time is now we can’t wait another year," Davis said.
Davis said over the last four years, one of his constituents has seen property taxes on a quarter section of land – 160 acres – increase from from $4,300 to $5,900. The proposed credit would lower than amount by about $133. But Davis’s constituent’s taxes could still go up. If that land’s value increases by the statewide average of 8 percent projected by the Revenue Department, taxes would increase about $470. After a $133 credit, the increase would still be $337.
Sen. Jim Smith of Papillion objected to the fact that all of the $30 million in proposed credits would go to benefit agriculture. "It’s not fair to all Nebraska taxpayers. Our families are hurting. Our small businesses are hurting. We have to do something for them," Smith said.
Smith proposed adding income tax cuts to the bill. But Sen. Mike Gloor, chairman of the Revenue Committee, complained that would shift the focus of relief from where it was most needed.
Sen. Tanya Cook of Omaha took issue with the idea that farmers need tax relief help in order to be able to keep on farming. She contrasted that with her urban constituents. "Let’s say they lose their job or they’re unable to afford their home or their lifestyles. The answer is ‘You need to get out of that big house’ or ‘You need to get rid of that cellphone,’ or ‘What about that fancy car?’ I’m not hearing that same thing when it comes to the burden of property tax for rich landowners," Cook said.
Sen. John Kuehn of Heartwell supported the proposal. But Kuehn said there is a deeper issue. "No other level of government has seen the increases in budgeting, the increases in spending over the last decade that local governments have. So while we’re taking a first step at addressing some of the disparities that have emerged, as we’ve seen differential increases in valuation among different classes of property, ultimately we have to get back to the issue of discussing local spending," Kuehn said.
Local governments include schools, cities, counties, and community colleges. Sen. Laura Ebke of Crete talked about the effect of using state money to offset such costs. "Property tax relief alone will ultimately result in some sort of shift. Well, now you’ve got to pay for it. As long as government expenses are going up you’ve got to pay for it. So if we take money out we’re going to have to pay more in income taxes or we’re going to have to continue to spend down on the cash reserves," Ebke said.
Sen. Mike Groene of North Platte used a colorful metaphor to express his displeasure with using state sales and income tax dollars to replace property tax dollars to support spending by local governments. "This is like the pimp giving an extra ten bucks in commission for every trick to the prostitute, but then raising her heroin $15. That’s what we’re doing here. We just offset the spending a little bit. We take Peter’s money and we give it to Paul," Groene said.
Sen. Paul Schumacher of Columbus said that given current tax and spending policies, people should not expect too much from the proposal. "There is very little if any wiggle room in the system. And expecting any dramatic changes in taxes is like expecting magic," Schumacher said.
Compromising with senators reluctant to advance the bill, Gloor agreed to reduce the proposed credit to farmers from $30 million to $20 million. He also promised to support removing budget controls proposed for community colleges at the next stage of debate. Senators then 39-2 to give first round approval to the bill.