LINCOLN, Neb. (AP) — With their session nearly halfway over, Nebraska lawmakers are still trying to unite behind a plan to lower property taxes amid uncertainty over how to cover the cost.
Members of the tax-focused Revenue Committee are sorting through their options but signaled that they’re open to a sales tax increase — an idea certain to face resistance from Nebraska businesses.
They also floated the idea of a corporate and personal income tax cut to help build support for package while eliminating sales tax exemptions on items such as candy, soft drinks and lawn-care services. If committee members agree to the idea, they’ll have to sell it to the entire Legislature.
At the same time, lawmakers face the prospect of a new property tax-cutting statewide ballot measure that might appear on the 2020 general election ballot. A similar campaign was abruptly halted last year, but conservative activists are circulating new petitions to revive it.
Sen. Lou Ann Linehan, chairwoman of the Revenue Committee, said she’s concerned that, if lawmakers don’t act this year, the petition drive will succeed in putting the issue on the ballot and voters will pass it. That would force lawmakers to drastically cut spending to comply with the mandate.
Property taxes are levied by local governments, but the ballot measure would force the state to reimburse 35 percent of all the property taxes paid.
“If we don’t do something, the petition drive will gather enough signatures and it’ll pass,” Linehan said. “We’ll have a crisis.”
Sen. Steve Erdman, of Bayard, who is active in the campaign, said supporters will only end the ballot drive if lawmakers pass a bill that makes a noticeable reduction in property taxes.
Erdman said he’s still hopeful that members of the Revenue Committee will reach an agreement.
“They will come up with a package that makes sense, and I think it could very well be significant,” said Erdman, who is not on the committee. “At least we’ll have an opportunity to have that discussion.”
Business groups say they understand the need to lower property taxes but promise to fight any effort to raise Nebraska’s sales tax rate. Gov. Pete Ricketts has also said he opposes any “tax shift” that lowers one tax by increasing another.
“Raising the sales tax rate is a non-starter,” said Jamie Karl, a vice president for the Nebraska Chamber of Commerce and Industry. “It makes up a significant part of the overall tax burden that businesses face in this state.”
Karl said property taxes are primarily the purview of local school districts and counties, and he argued that the state already spends about one-third of its budget on aid to local governments.
Linehan said slowing the rapid growth of property taxes will likely require the state to generate revenue through a sales tax increase or by eliminating specific sales tax exemptions. She said she would only support the increase if it’s used to reduce property taxes.
“We are not raising revenue to do more spending,” she said.
Linehan said she will also continue to push a proposal by Ricketts to cap yearly increases in local government tax collections at 3 percent per year. Taxpayers would keep any amount in excess unless voters approve a larger increase.
Sen. Tom Briese, an Albion farmer and Revenue Committee member, said he’s optimistic lawmakers will pass something this year given that many city residents have seen dramatic increases in their property taxes, following a trend that has beset farmers for several years.
“That changes the dynamic considerably,” Briese said. “We’re at a tipping point in this (Legislature). I feel like the stars are aligning.”
Sen. Curt Friesen, a Henderson farmer who serves on the committee, said he’s open to any option, including raising sales or income taxes, if it helps build support for a package that helps farmers and ranchers.
Friesen said it’s unrealistic to expect local governments to cut their spending enough to lower property taxes themselves, given the pressure they face to cover the costs of education, roads and other services.
“We’re irreparably damaging our number one industry” with high property taxes, he said. “It’s going to take years to come out of this.”