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Long-Term Property Tax Reform

By Governor Pete Ricketts

February 13, 2017

 

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Property taxes are without a doubt the number one topic I hear about as I travel the state.  No matter where you go, Nebraskans feel the impact of the high property taxes that have earned our state the unpleasant distinction of ranking 5th highest in the nation according to USA Today.  Nebraska’s number one industry, agriculture, has been hardest hit by property taxes with a 137 percent increase between 2003 and 2013.  Last week I shared with you the details of my plan to cut income taxes, and this week I’m sharing my plans for property tax reform for agricultural land.

 

In my first two years as Governor, I have made property taxes my number one focus.  Working with the Legislature in 2015, we increased the property tax credit relief fund by over 45 percent, and returned over $400 million in direct property tax relief.  In 2016, we added an additional $40 million over two years directly targeted at ag property taxpayers, and provided incentives for responsible budgeting by our school districts.  In recent months, the Revenue Department issued guidance on how to identify property sales that distort market information used for tax purposes.

 

We didn’t get into this high property tax situation overnight, and it’s going to take several additional steps to get out of it.  During this legislative session, I’m working with Ag Committee Chairwoman Lydia Brasch on LB338, the Agricultural Valuation Fairness Act.  This proposal is long-term, structural reform of our method for assessing property value for ag land.  The Agricultural Valuation Fairness Act would move assessments for ag land from a market-based system to an income-potential approach, helping valuations 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 have reduced ag land valuations by about $2.2 billion.

 

The income-potential valuation system is one Nebraskans have suggested to me during my travels across the state.  In conversations about property taxes, many people have noted how similar ag states have benefited from an income-potential valuation system.  Ag states with this system include North Dakota, South Dakota, Kansas, Iowa, Wisconsin, Illinois, Indiana, and Ohio.  This system is much fairer, more standard, and will help make us more competitive.  That’s why this concept is supported by many ag groups including Nebraska Farm Bureau, Nebraska Cattlemen, Nebraska Pork Producers, and the Nebraska Corn Growers.

 

Long-term, structural ag property valuation reform is not only important to Nebraska’s farm and ranch families, but also to Main Street.  In fact, one in four Nebraska jobs is tied to agriculture.   Current, commodity prices have contributed to a downturn in state revenues and the need to bring our state budget back into balance.  When agriculture is strong, Nebraska is strong.

 

Addressing high property taxes has to be a partnership between state and local governments.  While state government may set the framework for how property taxes are collected, local government makes the spending decisions that impact taxes.  Only local governments like schools, cities, and counties have the authority to levy property taxes.  When the ag values increased, some local governments did not lower the local levies which caused increases in taxes.  It is important that local governments do not see sharp increases in valuation as an opportunity to spend more.  It is critical that you, the taxpayer, engage local government boards and officials and support their efforts to control spending and provide tax relief to help alleviate our high tax burden.

 

If we are going to get major, structural reform of ag property taxes done this session, urban and rural senators will have to come together on an overall tax reform package.  That is why I have offered both income and property tax reform proposals this year.  If you want to see the Legislature take action on tax reform, I encourage you to contact your state senator.  You can find all of their information at www.NebraskaLegislature.gov.  As always, you are welcome to contact my office on any matter by emailing pete.ricketts@nebraska.gov or by calling 402-471-2244.

 

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