Despite State Credits, Local Property Taxes Will Continue to Rise

Percentages are funny things. It’s easy to tailor an amount to sound significant or small by expressing it as a percentage.

Percentages can be particularly tricky if no one asks: “percent of what?”

The property tax seems to bring out a whole list of deceptive percentages.

A property tax rate of 2% might not sound so high at first glance, except that it’s 2% of what may be your most expensive possession, every single year.

Budget season for property taxing subdivisions has brought out more information about how percentage increases in property values will impact your bill next year.

A lot of subdivisions in the Omaha area are seeing an approximately 7% increase in valuation.

But never fear, some state leaders say. The state’s property tax credit has been increased by slightly more than 20%.

20% sure sounds like more than 7%! But once again, we have to look at what these percentages are measuring.

As costly as the property tax credit is, at $275 million a year, it pales in comparison to the total property tax asking of local governments. The credit only makes a small, often ineffective difference once split among taxpayers.

For taxes due next year, residential and commercial property taxpayers will receive $104.15 in credit for every $100,000 in valuation, or an increase of $17.65 over the previous year.

For ag land owners, it’s slightly higher at $124.98 per $100,000. That’s an increase of $21.17.

Even at the seemingly “smaller” 7% increase, property taxing subdivisions that keep levies at the same rate, or increase levies, will experience a windfall that will make quick work of the increase in the property tax credit.

Just consider one political subdivision, the Metropolitan Community College board, which voted unanimously to take its 7% windfall at a gain of $4.4 million. 

If a taxpayer owned a property previously valued at $150,000, with a 7% increase, they’d now have a valuation of $160,500.

This year they paid Metro $142.50. Next year, they’d pay them $152.48.

A difference of $9.98 may not break the bank, but since we’re having fun with percentages, it’s worth noting that this one political subdivision will have gobbled up 27% of this taxpayer’s new “property tax relief.” 
 
And they will likely have to contend with a city, the county, the school board, natural resource district, and more.

Let’s say the political subdivisions don’t change their tax levies from the previous year, and the total levy rate is $2.24 (or 2.24%).

That means, before credits, the total property tax levied increased from $3,360 to $3,595; a $235 tax hike.

Just that one-year increase is 141% of what the state is offering to cover in total, and 830% of the most recent boost in the property tax credit.

In case all these big numbers are making your head spin, that simply means after receiving credit, this taxpayer is getting a less-than-0% reduction in property taxes.

Of course, as long as there are property taxes, someone will be unhappy with their bill. But the “property tax relief” approach used in Nebraska since 2007 has consistently underperformed in this manner.

Local property taxes paid per person have continued to rise even—and maybe especially—as more state money has been spent to subsidize the cost.

A few years back, the state even went to the trouble and expense of issuing postcards to remind taxpayers they were getting a property tax credit. But most don’t notice or appreciate the policy either because it’s too small or it simply doesn’t work to reduce their property taxes.

This is why I’m 100% convinced that Nebraska’s failed approach to “property tax relief” has to mature into property tax reform.