Property tax proposal draws some support, lots of criticism

Sen. Lou Ann Linehan testifies before the Revenue Committee Wednesday (Photo by Fred Knapp, NET News)
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April 24, 2019 - 11:21pm

A proposal to lower property taxes by raising other taxes ran into a host of objections, and drew some support, at a public hearing Wednesday.

Sen. Lou Ann Linehan, chair of the Legislature’s Revenue Committee, introduced the plan. Linehan said the goal is to decrease property taxes by raising Nebraska’s state support for schools, the largest single user of property tax dollars. “Ever since I’ve been elected, I’ve heard that we don’t pick up our fair share – we are 46th or 47th or 48th in the country. We are moving ourselves up to 20th in the country. And we’re committing that we’re going to stay there,” she said.

Art Neitfeld, who farms along the Nebraska-Kansas border, supported the proposal. “Approximately one-third of my land is in Kansas, where the tax rate is roughly one third as high as Nebraska taxes. The average farmer probably pays 10 or more times as much to support our schools and counties as the average town or city person, and with these constant tax increases and lower commodity prices, we just can’t take it  anymore,” he said.

The proposal drew opposition from representatives of groups whose products or services would now be taxed. Among them was Matt Innis, a contractor who objected to taxing heating, ventilating, and air conditioning services. “Refrigerant leak in the middle of July or August in Nebraska? You’re looking at $1,500 to repair. With this you’re over $1,600 now,” Innis said.

Sen. Mike Groene, one of the authors of the plan, asked Innis about a tradeoff. Groene said his house was caught in a flood, and he has to pay $2,000 to replace a furnace. “(On) two thousand dollars, I’m going to pay a $125 tax. That’s one time. I will get a $400 tax every year reduction in my property taxes.   Do you think most homeowners would take that?” Groene asked.

“I’m thinking that most homeowners don’t believe that you will live within your means,” Innis replied.

Doug Kagan of Nebraska Taxpayers for Freedom picked up on that theme. The proposal talks about capping school tax increases at the rate of inflation plus new construction. But Kagan said existing budget limits don’t work. “There already exist several spending lid exceptions, transforming lids presently into what we call ‘Swiss cheese’ lids, and future legislatures conveniently could blast off the cap,” he said.

Businessman Joe Murray said there was only one way to fix that problem. The spending cap “needs to be in the constitution rather than just a statute,” he said. “Past attempts with similar bills failed to stop the growth of property taxes, because of a lack of airtight caps that can only be assured by being in the constitution.”

The proposal would hike the state sales tax rate by ¾ of a cent. Sen. Patty Pansing Brooks was among those worried about the effect on low-income people.

Linehan said if someone in poverty spent $10,000 a year, that would cost them only $75 more. But Pansing Brooks said that could be significant to seniors on a fixed income, or low income families. “Even $75 to a family that’s really struggling and in poverty, that’s a lot when they’re trying to figure out health insurance, child care, and everything else that’s going on,” she said.

Linehan countered. “You also mentioned seniors, and seniors are one of the groups that are hardest hit by property taxes,” she said.

“Yes, but also by a regressive sales tax,” Pansing Brooks replied.

Another area of disagreement was how the additional state aid to schools would be distributed. Under the proposal, much of that aid would go to smaller, more rural schools that currently get little aid, and rely heavily on property taxes.

Andy Rikli,  superintendent of the suburban Omaha Papillion-LaVista community schools, questioned the fairness of that distribution. “Rural school districts certainly have their own challenges and I certainly understand, coming from a farm family myself, that ag producers need help,” he said. “But the majority of Nebraska’s most vulnerable children live in our largest, most equalized districts. This includes children living in poverty, children who do not understand the English language, and those who are the most profoundly disabled. It seems reasonable that the state equalization formula would not only funnel more money to the larger districts, but more importantly to those districts where the needs are the most profound.”

Representatives of some farm groups testified neutral on the proposal, suggesting that additional services should be taxed in order to raise more money for more property tax relief. Representatives of some business groups opposed the proposal, saying it would hurt the state’s economic climate.

The last person to testify, John Hansen of the Nebraska Farmers Union, said by his count, four people had testified in favor, 12 neutral, and 49 opposed to the plan.

Even though he was officially against it, Hansen said a coalition he represents wants to continue to work to make sure something passes this year. The Revenue Committee is expected to meet Thursday afternoon to discuss possible changes to the proposal.



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