State needs to go beyond tax relief to true tax reform

Wednesday, September 5, 2018

Economics 101 courses usually include a discussion of “guns vs. butter,” i.e., whatever is spent on national defense can’t be spent on consumer goods.

The formula is ignored on the national level — guns AND butter, thanks to deficit spending — but Nebraska can’t have its cake and eat it, too, thanks to the requirement for a balanced budget.

The model breaks down somewhat for the state budget, but our leaders have had difficulty delivering the butter of property tax relief while paying for the “guns” that guard our prisoners, deliver medical care for needy individuals and monthly checks for state retirees.

Supporting that state budget has made it harder for farmers and homeowners to afford the property that makes their lifestyle possible.

The Platte Institute, a conservative think-tank, has compiled some of the numbers that explain Nebraska’s dilemma in a new report at PlatteInstitute.org/Policy.

It’s especially relevant information in the face of the proposed Medicaid expansion initiative that will appear on November’s ballot.

Property taxes, the majority going to local schools and the rest to local governments, are imposed and spent by locally elected bodies, so the state is limited in what it can do.

Add to that the decline in the commodity prices, and it’s no surprise there’s a state budget squeeze.

According to the report:

— Nebraska spends $11.8 billion a year, or $6,180 per person. State efforts to reduce local property taxes include the TEEOSA state education aid formula, homestead exemptions and personal property tax reimbursement.

— State revenue has grown 3.7 percent per year over the past five years, below the 36-year average of 4.7 percent. Fiscal 2016 and 2017 saw the third lowest back-to-back revenue growth over the past 36 years and the third lowest budget growth over 17 biennial budgets.

Since 1998, Medicaid spending has grown 5.7 percent, corrections 5.4 percent and state retirement 6.4 percent. That growth has come at the expense of appropriations for state colleges and universities, 2.6 percent growth, and state aid to public school districts, an average growth of 3.9 percent. Direct aid to cities and counties was cut completely.

Whether we’re buying guns or butter, Nebraska needs to go beyond simple property tax relief to find a truly fair, equitable way to support responsible state spending.

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  • Much has been said about high property taxes in Nebraska. The State Chamber of Commerce pointed out today that Nebraska income tax is also very high! In fact Nebraska is higher than South Dakota, Wyoming, Kansas and Iowa. Only Missouri is higher in the range of neighboring states. Property tax reduction would help primarily those with large ag land holdings and would most likely not attract people or industry to the state. Income tax reduction would help all income tax payers including ag producers. With the new sales tax on internet purchases, dollars will be available to do tax relief....expanded Medicare however will take a huge chunk of those dollars. Which tax relief will help retain folks living in Nebraska and bring new people and jobs to the state....income or property?

    -- Posted by dennis on Wed, Sep 5, 2018, at 4:09 PM
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