Committee advances tax cut plan

March 20, 2018, 6:17 a.m. ·

IMG_0012_0.JPG

Listen To This Story

A plan to reduce property taxes on residential property and agricultural land is advancing in the Legislature, but still faces an uncertain future.


The tax plan would begin affecting taxes immediately, but would take until 2030 to achieve its full impact. When owners of ag land file their income taxes next year, they would get a credit starting at 2 percent of what they owed in property taxes for this year. Homeowners would get a credit starting at 1 percent. Those credits would increase year by year, until they reach 20 percent of property taxes owed. There would be no dollar limits for the credits on ag land, while residential credits would be limited to $25 the first year, eventually rising to $500.

Sen. Curt Friesen of Henderson suggested the proposal was too little, too late. “It doesn’t meet any of the criteria I’ve had for property tax relief. To the urban residential homeowner it brings 25 bucks. That’s not substantial, and it’s not upfront. You take ag land right now, the property tax relief that this provides is nothing. We’re talking about holding us even, at best,” Friesen said.

Sen. Lydia Brasch of Bancroft said the proposal could be improved later, but not with the state’s economy in the shape it is right now. “I think for where we’re at today, this plan is a step, and a positive step,” Brasch said.

The plan would also reduce the corporate income tax rate from just under 8 percent to just under 7 percent over a period of five years. And it contains money for workforce development, including tax subsidies for companies to train workers.

Sen. Burke Harr of Omaha said he had lobbied Gov. Pete Ricketts to include another $5 million a year for workforce development, but Ricketts told him the state couldn’t afford it. Harr said that was nothing compared to the overall cost of the bill. “This bill, if fully implemented, is going to cost $600 million a year. We can’t find $5 million? How are we going to find $600 million dollars?” Harr asked.

Sen. Jim Smith of Papillion, chairman of the Revenue Committee, said some of the cost of the plan would be covered by increased economic activity the plan would stimulate. Smith acknowledged the plan could reduce future state revenues, but downplayed the impact. “That doesn’t mean we have to have severe, deep cuts to critical services. We certainly do not want to see additional cuts to the University of Nebraska, because the University of Nebraska frankly is those means by which we will expand the economy – it’s part of our economic driver in our state. But we can find ways to increase efficiency, and as you increase efficiency in state government, you can reduce the cost of state government,” Smith said.

The Revenue Committee voted 5-3 to advance the proposal. Smith and Brasch, along with Sens. Tyson Larson, Mike Groene, and Brett Lindstrom voted in favor, with Friesen, Harr, and Sen. Paul Schumacher opposed. Ricketts, who’s been working with Smith, hailed the plan as major property tax relief, adding the Legislature needs to act on it before the session ends April 18.

The plan now will be debated by the full Legislature, where it will take a 2/3 vote, or 33 senators, to overcome an expected filibuster against it. Smith says he’s taking it one step at a time. “The path is very, very tight. I felt that we were near the end of the path prior to this coming out of committee today. So, it’s still alive and I will continue to work to get to those 33 votes. But I have no question in my mind that it’s going to be a very tough process,” Smith said.

Even if that effort succeeds, it may not resolve the issue. Friesen alluded to a petition drive currently underway that would require income tax credits for half of what everyone pays in property taxes for schools. That would cost the state more than $1 billion a year starting with property taxes collected next year. Friesen says senators need to provide a better alternative to the bill advanced Tuesday. “I guess if we don’t have the guts to fix the property tax problem here, then we should have to deal with the petition drive next year. I have said I am not in favor of the petition drive, but I thought we could fix the problem here. It doesn’t look like we can,” Friesen said.