A proposal to limit property taxes that go to pay for schools stalled in the Legislature Tuesday. And a requirement for out of state online retailers to collect sales tax on purchases by Nebraskans hit at least a temporary roadblock as well.
LB640 is a bill introduced by Education Committee Chairman Mike Groene that tries to hold down property taxes by limiting school districts to using them for no more than 55 percent of their budget. For districts currently above that, Groene would provide additional state aid, drawn from an existing fund that offsets every property owner’s taxes.
The net effect would benefit farmers and ranchers whose land values soared because of high commodity prices in the last decade, but who are now stuck paying high property taxes while commodity prices have dropped. Sen. Dan Hughes of Venango said the problem is affecting the whole state. “For the last two years, Sen. Friesen, myself, Sen. Groene, some of the other rural senators have sounded the alarm bells that agriculture was headed for a train wreck. We’re there,” Hughes said. “Our budget is certainly reflecting that. How do we have a billion dollar shortfall when Lincoln and Omaha appear to be booming but the rest of the state is suffering?” he continued, adding “I’m here to tell you today we’re not done suffering.”
Sen. Steve Erdman of Bayard talked about what happened to property taxes on a neighbor’s quarter section of farm ground. “He showed me his tax statement from 2003 and his total taxes, property taxes in 2003 was $125. He showed me that statement again in 2016. Nothing’s changed -- the ground’s still dryland -- nothing’s changed at all except for the value. His taxes are $1180. He went up 1100 percent (sic) in 13 years. We have a problem. Houston we have a problem,” Erdman said.
Sen. Kate Bolz of Lincoln spoke against the bill. Bolz said diverting money from the property tax credit fund would hurt her constituents. “What happens under (LB)640 is that that investment in property tax relief results actually in a property tax increase for homeowners in my district,” Bolz said.
Bolz said an analysis by Lincoln Public Schools showed the bill would increase one of her neighbor’s property taxes by about $43 on a total bill of about $3100.
Sen. Curt Friesen of Henderson acknowledged that the proposal would benefit rural areas at the expense of urban areas. “It does shift a little bit. But we have had a massive shift. We’ve had a billion dollar shift over the last 10 years from the rural to the urban areas.”
Friesen said he was referring to the amount of state aid rural districts would have gotten if their property tax valuations had remained steady instead of increasing.
But Lincoln Sen. Roy Baker, whose district includes Gage County, said the proposal would also hurt farmers who pay taxes to urban school districts with high levies. He used as an example land owned by Friesen. “If Sen. Friesen’s farm were in the Beatrice school district, he’d be paying more than double the amount of taxes for the school levy, and he would lose his current property tax credits. So people from the Beatrice district ask me ‘Why would we do something like this?’ I don’t know what to tell them. This is bizzaro world,” Baker said.
Still, Groene maintained that property tax payers everywhere would be better off: in rural areas, by the limitation on property taxes as a percentage of school budgets, and in urban areas like Lincoln, by a reduction of the maximum levy by 6.3 cents per $100 of value. Groene said school districts could only exceed that by a two-thirds vote. “Overall, (in) the long run, the taxpayers of Lincoln will do better. And your administration in your school will be forced to justify where they’re spending it and why they’re spending it instead of just grabbing that taxpayer by the neck and shaking ‘em for every penny they can get,” Groene said.
After debating for three hours without reaching a vote on the bill, lawmakers moved on to another subject. Under Speaker Jim Scheer’s policy, that means the bill won’t come up again unless proponents say they have two-thirds of the senators willing to break a filibuster, a number Friesen said he doesn’t think supporters have.
Also Tuesday, senators began second round debate on a proposal to require out of state online retailers to charge sales tax on internet purchases by Nebraskans.
Attorney General Doug Peterson issued an opinion saying the bill is unconstitutional, because it runs counter to a 1992 U.S. Supreme Court decision that said only retailers with a physical presence in a state could be required to collect sales tax. But the opinion also said the bill could be made constitutional.
Sen. Dan Watermeier, its sponsor, proposed to do that by making it voluntary for out of state retailers to collect the tax, and saying they should report to the state and consumers how much is owed if they don’t choose to collect it.
But with Sen. Ernie Chambers raising a series of objections to the language of the bill, the time set aside Tuesday for debate on the bill expired. Scheer said he would check to see if Watermeier still thinks he has enough support to reschedule the bill. Watermeier said he would try to work with Chambers and others to see if their objections can be overcome.