Don't 'Bloomberg' Nebraska's property tax problem
Michael Bloomberg’s ill-fated presidential campaign is the latest evidence that simply spending money—even sometimes extraordinary amounts of money—cannot solve all problems. And if Bloomberg’s $500 million campaign to win American Samoa sounds silly, you might want to check out what the Nebraska Legislature’s been doing about your property taxes. Since 2007, more than $2 billion of your state sales and income taxes have been spent on Nebraska’s property tax credit fund. The state fund pays local governments for a share of what you would otherwise pay in property tax. The program began at an annual amount of $105 million and has most recently increased to $275 million. The size of this “relief” is often presented as an achievement by politicians, but the ineffective result of this spending puts Michael Bloomberg to shame. Property taxes are now about $1.8 billion higher than when the credit program began. According to the Department of Revenue, since 2009, ag land taxes have increased 105%, while residential and commercial real property taxes have increased 39% and 42%, respectively. While your bill is lower than it would otherwise be absent the credit, local governments receiving your state tax dollars are clearly under no obligation to provide a true reduction in property taxes. With state senators so far unable to reach a compromise on property tax reform that permanently reduces local property taxing authority, some legislators are pushing to boost the property tax credit fund again, from $275 million a year to $380 million. This is not a small increase, but in the grand scheme of property taxes, it means the state will pay local governments about 9% of what they levied in real property taxes in 2019. If property taxes rise next year, though, the credit will cover a smaller share of total property taxes, and senators might be back calling for another increase. It’s disappointing to see policymakers throw around such large sums of money without providing a concrete plan for how the tax system would be improved in exchange. These details are what distinguishes tax reform, which removes barriers built into the tax structure, from “tax relief.” In no particular order, here are some of the changes that could be made (in theory) with $380 million:
· Cut school district property taxing authority by 14.5% ($2.6 billion in 2019)
· End the county inheritance tax and all local personal property taxes on business equipment (Approximately $300 million)
· Eliminate property taxes for community colleges, Natural Resource Districts, and Educational Service Units with state funding ($353 million)
· Cut city property taxing authority by 84% ($451 million in 2019)
· Cut county property taxing authority by more than 50% ($719 million in 2019)
· Eliminate state motor vehicle registration taxes and fees ($265 million based on 2015 figures)
· Cut the personal income tax by 15%
· Cut the state sales tax by 23%
· Cut the corporate income tax by 90%
Some of these options may be less exciting than others and some may not address the outcry about property taxes. But they would all make a clearer, lasting change in the tax structure in Nebraska. After all, this is our money the state is spending on the property tax credit. If the state is going to spend $380 million every year, it should be used in a way that taxpayers can notice, if not appreciate. Ultimately, voters in Nebraska can decide whether they favor the current approach to property taxes when they cast their votes for Legislature and potential ballot initiatives. Like in the presidential primaries, the outcome may hinge on whether any better alternatives are still hanging around by then.
— Adam Weinberg is Communications and Outreach Director at the Platte Institute.