Ag land tax break stalls; personal property break moves ahead

A proposal to reduce the taxable value of agricultural land remains stuck in committee in the Nebraska Legislature. But a break on personal property taxes is moving ahead, while senators are split on the relative merits of the two approaches.

Reducing the taxable value of ag land from 75 to 65 percent of market value was a staple of last year’s campaign by Gov. Pete Ricketts, and is supported by the state’s largest farm organization, the Farm Bureau. But when the Revenue Committee voted on the proposal Wednesday, only two of eight members voted for it. Instead, the committee endorsed a proposal to lower personal property taxes – that could include everything from farmers’ tractors to business computers. In an interview Thursday, Grand Island Sen. Mike Gloor said his bill has certain advantages. "This really is related to both property tax, since it’s (a) personal property tax credit, and it’s geared more toward small businesses and the production of ag land – not the owners of ag land, but in this case, people who farm that land," he said.

In other words, the break would go to someone who owns a tractor or combine, not someone who owns a section of land. It would also go to businesses that own personal property, like machinery. The bill exempts the first $15,000 worth of personal property used to produce business income from taxation. At the statewide average tax rate, that’s about a $300 saving.

Sen. Jim Scheer of Norfolk voted against the proposal. Scheer said it’s not focused on the real problem created by double-digit annual increases in ag land values. We’re going to give 300 bucks to every business across the state of Nebraska. And we’re maybe – maybe -- going to give two-thirds of the farmers across the state of Nebraska that $300," Scheer said. "But … the other third of those farmers that are now retired and living off the income on that ground -- which has gone down, just like ag prices have -- they’re getting nothing."

Scheer was one of only two senators on the committee, along with Sen. Lydia Brasch of Bancroft, who voted to lower ag land values. Following that vote, Ricketts called the committee’s action disappointing, adding "this measure is a key component of providing meaningful property tax relief this year." Farm Bureau President Steve Nelson called that organization’s disappointment "extreme."

Critics of the ag land tax break argue that in mostly rural counties, the measure would do very little to relieve property taxes. That’s because there aren’t many homes or businesses, so lowering the value of ag land could simply result in local governments raising the property tax levy rate to bring in the same amount of money.

Scheer acknowledged the ag land proposal is not a cure-all for high property taxes on farmers. "It certainly shouldn’t be perceived as a silver bullet, but it’s at least something that we can do this year. Quite frankly, it was one of the only things that was introduced to try to do anything with ag property values. It doesn’t work for everybody. It will work for some. My point would be, for those people it helped, that’s great, and those that we didn’t, we’ll have to look at again next year. But at least we’ve done something," he said.

But Gloor argued that the perception of doing something could work against real property tax relief for the ag sector. "The way this is being sold, if I’m an urban senator, I’m going to say if this passes ‘Okay, we did our thing. And don’t come back to us and complain if you haven’t gotten what you thought was you wanted.’ And the whole discussion about more substantive change in how we pay for education in this state -- which is really where the problem lies -- goes to the back seat, as opposed to the front seat, where it needs to be," he said.

Both the ag land bill and the personal property tax proposal would cost the state about $25 million, either in additional school aid or in paying counties for lost revenue. And both have been named priority bills, meaning the contest between the two approaches may not be over.