Historic Property Tax Relief
By Governor Pete Ricketts
October 5, 2021
Governor’s official photo here.
Nebraskans continue to tell me their top priority is relief from local government property taxes. Since taking office, addressing this issue has been my number one priority. This budget cycle—thanks to the support of farmers, ranchers, homeowners, and small businesses—we will deliver historic amounts of property tax relief.
From 2015 to 2019, I worked with the Legislature to nearly double the Property Tax Credit Relief Fund from $140 million annually to $275 million per year. In 2020, we passed a landmark property tax relief bill—LB 1107. It created a refundable property tax credit that Nebraskans were able to claim for the first time when filing their 2020 state income taxes. Additionally, the 2021 session mainline budget bill further increased the Property Tax Credit Relief Fund to $313 million annually.
During the Legislature’s regular session in 2021, we had our biggest success to date. Senators and I worked together to control spending growth and deliver a historic amount of tax relief. The current two-year budget which we agreed upon limits spending growth to 2.4%. The four biennial budgets I have worked on with the Legislature have an average annual growth rate of less than 2.5%.
While we’ve kept spending in check, we’ve also seen rapid growth in Nebraska. This growth is evident in the State’s increased revenues, which grew 19.2% beyond projections this past fiscal year (July 1, 2020 to June 30, 2021). They’re exceeding expectations again this fiscal year, having surpassed the forecast by $55 million through the first two months.
This is important because the Refundable Income Tax Credit created in LB 1107 is set to grow as tax revenues exceed expectations. Last year, the credit was worth $125 million statewide, offsetting 6% of local school property taxes. This year, the credit will jump to $548 million. This will offset 25.3% of your local school property taxes. Taxpayers will receive this credit when they file their state income taxes in 2022.
By controlling spending and growing Nebraska, we’ve been able to deliver a historic amount of tax relief. Over the next two years, Nebraskans will see over $1.9 billion of direct property tax relief and over $2 billion of estimated total tax relief. This means in the current two-year budget (FY 2021-2022 and FY 2022-2023), tax relief will represent about 20% of the State’s overall general fund budget—a historic accomplishment.
In addition to property tax relief, Senators and I agreed upon a number of other important tax measures this year.
- Veterans Tax Relief: We exempted 100% of military retirement benefits from state income taxation. This will boost our workforce by helping to retain and recruit veterans who’ve recently completed their service.
- Social Security Tax Relief: We provided a tax exemption for 50% of Social Security income that will be phased in over time.
- Ag Land Valuations Reduction: We enacted legislation to reduce ag land valuations from 75% of market value to 50% of market value for the purposes of property taxes for bond issues. This will reduce the tax burden on farmers and ranchers.
- Water Tax Exemption: We exempted residential water service from sales taxes.
- Truth in Taxation: We passed “truth-in-taxation” legislation to require local governments to notify taxpayers whenever their property tax askings are scheduled to increase more than 2%.
- Job Creator Tax Relief: We started the process to align taxes on job creator income with that of taxes on individual income.
While we’ve made progress on tax relief, there is more work to do. We need to make sure that the benefits of our state’s growth go to Nebraska families instead of local governments. We can’t afford to see our hard work get squandered by unrestrained spending from political subdivisions. Local government property taxes have increased 4.3% per year over the past decade in Nebraska. That may not sound like much, but when compounded over 10 years, it’s a 51.8% increase. By comparison, income grew 48% and inflation just 18.7% during the past decade.
Additionally, property values are rising quickly in much of the state. In my experience, local governments rarely lower their levy rates to adjust for property valuation increases. A year-over-year jump in property valuation means taxpayers see their property tax bills go up substantially, even if levy rates remain unchanged.
Earlier this year, Senator Tom Briese proposed LB 408 to cap the annual growth of local government property taxes at 3%. A limit like this would protect Nebraskans from seeing their tax bills go up faster than their family budgets can afford. Over the last six years, we’ve limited State spending growth to 2.5% annually, so it’s reasonable to cap local growth at 3%. Under LB 408, local governments would retain authority to override the 3% limit with voter approval. The override process provides flexibility to political subdivisions, but also empowers voters to block significant tax hikes. Local governments shouldn’t fear financial accountability. If there’s a need for more resources, elected officials should make that case to voters.
Last spring, we were able to get support from 29 Senators on LB 408, only 4 votes short of advancing it. As the 2022 session approaches, I’m working with Senators on new tax plans. We’ll need Nebraskans to engage in the legislative process to win support for additional tax relief.
We have historically low unemployment and strong growth in Nebraska, and the State is delivering record amounts of tax relief. But there’s still more to do. We must control spending at the local level to keep taxes low. We need to develop our workforce to fill the great-paying jobs we’re creating. And we have to promote Nebraska globally to open new markets and attract international investment. If you have questions about any of these priorities, email me at email@example.com or call 402-471-2244. I look forward to working with you to keep Nebraska growing.