The Property Tax Treadmill
By Governor Pete Ricketts
February 2, 2021
Governor’s official photo here.
This legislative session, Senators can take the next step towards solving Nebraska’s high property tax problem. Rising property taxes not only burden family farmers and ranchers, but they drive away businesses and prevent families from achieving the American dream of home ownership.
Since taking office, my top priority has been property tax relief. The Legislature and I have worked together to deliver $2 billion in property tax relief since 2015. Last year, we successfully enacted landmark property tax relief legislation with LB 1107, which will deliver an additional $375 million in annual property tax relief when fully implemented. The two-year budget I’ve proposed to the Unicameral would make use of this new legislation to deliver more than $1.36 billion in additional relief to Nebraskans.
While LB 1107 was major progress, we need to make sure it makes a difference in the long run. Without limits on local government, local spending increases will offset much of this property tax relief from the State. Many taxpayers may feel like they’re stuck on a treadmill. Every step forward in their earnings is at risk of being canceled out by new property tax increases.
From 2010 to 2020, local governments collectively raised property taxes 4.3% percent annually, or 51.8% total. Over the last 10 years, income only grew at 48% and inflation at 18.7%. Family budgets cannot keep up with rising taxes outpacing their growth.
It’s time to help taxpayers who are tired of high property taxes. The only way to ensure the direct relief from the State makes a difference is to slow the growth of tax askings by the 2,500 local units of government that levy property taxes. That’s why Senator Lou Ann Linehan and I have proposed LR 22CA, which amends the State’s constitution to cap local property tax increases at 3% per year. If passed this session, Nebraskans would vote on the constitutional amendment in the fall election of 2022.
Nebraskans are tired of seeing their tax bills grow faster than tax relief and their family budgets. This has been a recurring pattern over the years, and without LR 22CA we’ll see it again. In 1990, the Legislature raised the sales tax and income tax to create TEEOSA (the State’s formula for giving aid to public schools). Over three years, the amount of state aid to schools more than doubled from $253 million to $524 million at a time when school enrollment was increasing about one percent a year. While school property taxes went down for two years, they had returned to the same record high by 1993. In 1998, the Legislature increased state aid through TEEOSA by about $125 million, or a 27% increase. In 1999, property taxes still went up about $48 million. And finally in 2005, the Legislature boosted state aid another $70 million, or 10% in one year. In 2006, property taxes went up $161 million statewide.
That’s why LR 22CA is needed. The Legislature could strip away the authority of local units of government to levy property taxes at all, or the State could control levies and systems of valuation centrally. However, a cap on the annual rate of growth is the best way to protect Nebraska’s system of local control. LR 22CA slows spending growth, maintains the local decision-making Nebraskans cherish, and gives the people of Nebraska a voice in the process.
It is my belief that if the Legislature doesn’t place a reasonable limit on the growth rate of local property taxes, then voters will take matters into their own hands and strip local governments of their authority to tax property. Something similar happened 50 years ago when voters repealed the State’s authority to levy property taxes. Prohibiting the State from taxing property didn’t fix the problem because local governments could still tax with few limits.
As debate begins on LR 22CA, local government lobbyists will argue that it’s too restrictive. That simply isn’t true. Whenever local governments see the need to exceed 3% annual growth, they can ask voters to override the limit. There’s no reason for financially responsible local governments to fear extra accountability from the people in their communities. Nebraskans are responsible and civic-minded, and they willingly support needed services.
If you support property tax relief and LR 22CA, please consider reaching out to your State Senator. You can find their information at www.nebraskalegislature.gov. If you have other questions, please email me at firstname.lastname@example.org call 402-471-2244. Property taxes keep growing faster than families can afford—even with additional tax relief. It’s time for the Legislature to take decisive action, so we can keep the Good Life growing.