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Nebraska property tax plan on legislative collision course

By GRANT SCHULTEApril 25, 2019

LINCOLN, Neb. (AP) — A proposal designed to lower property taxes by raising Nebraska’s sales and cigarette taxes appears to be on a collision course in the Legislature, with Gov. Pete Ricketts lobbying hard against it while some lawmakers say it’s a necessary fix.

Ricketts railed against the proposal Wednesday as lawmakers convened a hearing at the Capitol, but so far he hasn’t persuaded members of the tax-focused Revenue Committee to drop the measure.

The Republican governor said the bill won’t work as intended, and pointed to similar attempts in the 1990s to lower property taxes by increasing other taxes and boosting state aid to K-12 schools. Those efforts failed to fix long-term property tax increases.

“This idea that you can tax and spend in order to get more tax relief is false,” Ricketts said at a news conference, surrounded by opponents including business owners and homebuilders who could lose sales tax exemptions, a rancher and the fiscally conservative group Americans for Prosperity.

The current bill would raise Nebraska’s current 5.5% sales tax to 6.25% while eliminating a variety of sales tax exemptions, including those applied to junk food, pop and bottled water. It also would increase the state cigarette tax from 64 cents to $1 per pack. The extra revenue would go toward lowering property taxes, and the measure would also lower the percentage of property that can be taxed.

Additionally, the state would pump more than $500 million into state aid for K-12 schools to ease the burden on rural districts that rely heavily on property taxes. The state’s largest districts in Omaha and Lincoln oppose the bill, arguing that their share of state aid wouldn’t cover their growing needs.

Sen. Lou Ann Linehan, who helped develop the bill as chairwoman of the Revenue Committee, said the bill is designed to substantially reduce property taxes while ensuring that all schools get at least some state equalization aid. Property taxes have surged in rural areas with large areas of farmland but few students, shifting the burden heavily onto a small number of local farmers and ranchers.

“Any new revenue raised is going to go to property tax relief, not to other spending,” said Linehan, of Omaha.

Some senators said they opposed the proposed sales tax increase because it would force low-income people to pay more of their total income in taxes. Linehan said the bill would result in a roughly $75 increase to someone who spends $10,000 in a year.

“To a family that is really struggling and in poverty, that’s a lot when you’re trying to figure out health insurance and child care and everything else,” said Sen. Patty Pansing Brooks, of Lincoln.

Others called for an even larger sales tax increase to offset what farmers and ranchers pay in property taxes. Craig Bolz, a Palmyra farmer, said his property tax bills have risen so high that Nebraska farmers can’t compete with their counterparts in other states. Bolz said he has grown increasingly frustrated that lawmakers haven’t reversed the trend.

“I’m done. I’m tired. I’m mentally exhausted,” he said.

Ricketts said he still believes lawmakers can pass a property tax package this year that doesn’t raise other taxes. Ricketts has proposed a $51 million annual increase in the state’s property tax credit fund, which reimburses home- and landowners, and a constitutional amendment that would prevent local governments from increasing their property tax revenue by more than 3 percent per year.

Trent Loos, a Litchfield rancher who has pushed for lower property taxes, said the bill doesn’t address the underlying problem of government spending.

“Action should not be confused with progress,” he said. “Nobody who really cares about the future of Nebraska thinks we can make a short-term little fix and cure the problem.”

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Follow Grant Schulte on Twitter at https://twitter.com/GrantSchulte

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