Gov. Ricketts, Chairman Smith, & Chairwoman Brasch Propose Nebraska-Style Tax Reforms
Taylor Gage, 402-471-1970
Eric Maher, 402-471-1974
Creates a fairer system for valuing ag land for taxation purposes.
Provides income tax relief for hardworking, middle class Nebraskans.
LINCOLN – Today, Governor Pete Ricketts, Revenue Committee Chairman Jim Smith, and Agriculture Committee Chairwoman Lydia Brasch announced a tax relief package to change the way ag land is valued for property tax purposes as well as lower income taxes. The tax relief package is one of the Governor’s top legislative initiatives for the 2017 legislative session.
“When I am traveling the state, Nebraskans make it very clear that they are tired of the government taking their money,” said Governor Ricketts. “Today’s proposal cuts taxes the Nebraska way. We don’t spend money we don’t have, and we balance our budget every year. The budgets I have proposed put the state on solid fiscal footing, preparing the way for tax relief, which will help spur growth. Thank you to Senators Smith and Brasch for working with me to provide tax relief for hardworking Nebraska families.”
Over the interim, Governor Ricketts held 30 town halls to listen to the priorities of Nebraskans, and tax relief was the number one issue Nebraskans raised consistently across the state. In preparation for the legislative session, the Governor sat down with senators and worked with tax experts to solicit input and develop plans.
The two-bill tax relief package creates a better and fairer system for valuing ag land for taxation purposes as well as reduces the income tax rate for Nebraskans making $29,831 and above.
INCOME TAX RELIEF FOR MIDDLE CLASS NEBRASKANS
Under LB337, Nebraska would take the top tax rate for Nebraskans making as little as $29,831 down roughly one-tenth of one percent per year, starting in 2020, as long as the state’s revenue growth exceeds 3.5 percent. In effect, Nebraska will have a trigger when we hit 3.5 percent growth to take the top income tax rate from 6.84 percent down a little each year until it’s under six percent.
Other states have reduced taxes before reducing spending and then struggled to catch up. This plan controls spending first. If our revenue doesn’t grow fast enough, the tax rate doesn’t come down. This mechanism will protect taxpayers, and ensure the state doesn’t face a budget crisis.
AGRICULTURE VALUTION FAIRNESS ACT
Under LB338, the method for assessing property value would change from a market-based system to an income-potential approach, helping taxes to better reflect the income of Nebraska’s ag producers. Income potential is a much fairer measure, and will slow the growth of ag land valuation increases. If this system were in place for 2017, it would reduce ag land valuations by about $2.2 billion. After the bill passes, the state would transition to the new system beginning in 2019 to give local taxing entities and county assessors plenty of time to prepare.
Following the Governor’s State of the State address earlier today, Revenue Chairman Smith and Agriculture Chairwoman Brasch introduced the Governor’s tax package to the Legislature.
"Income tax reform for Nebraskan's is a top concern for our small business owners and economic developers who are working to grow Nebraska," said Senator Jim Smith of Papillion. "This tax relief will make Nebraska more attractive for job creators, investors, and site selectors as well as the families we want to attract to grow our state. I appreciate Governor Ricketts' efforts to focus attention on income tax relief."
“The recent drop in cattle prices and continued decline of crop prices have driven farm income down, while property taxes continue to rise,” said Senator Lydia Brasch of Bancroft. “It is critical that we prioritize property tax relief for the agricultural sector to ensure fairness and prosperity for Nebraska’s economy. Thank you to Governor Ricketts for his continued focus on providing tax relief to Nebraska’s farmers and ranchers.”
The Governor’s tax plan would make Nebraska more competitive with neighboring states. Income potential based property tax assessment for ag land is used in North Dakota, South Dakota, Kansas, Iowa, Wisconsin, Illinois, Indiana, and Ohio. Only Iowa has higher income tax rates than Nebraska among our bordering states. Wyoming and South Dakota have no income tax, and Colorado, Kansas, and Missouri all have lower rates.
In 2015, the Legislature adopted the Governor’s proposal to provide $408 million in direct dollar-for-dollar property tax relief over two years through the Property Tax Credit Relief Fund. This was a 45 percent increase over previous budgets. In 2016, the Legislature and the Governor successfully worked together to provide an additional $20 million annual in targeted property tax relief for ag producers, and also incentivized spending restraint in school districts by modifying the school aid formula.