Committee Gives Quick Approval to New Property Tax Limit

A bill to prevent automatic property tax increases has quickly advanced out of the Nebraska Legislature’s Revenue Committee and will head to the entire Unicameral for debate.

Sen. Lou Ann Linehan is the Chairwoman of the Revenue Committee. Her Legislative Bill 103 won strong support in a 7-0 committee vote. The Platte Institute testified in support of the bill. 

LB103 would give property taxpayers an additional opportunity to challenge tax increases due to rising property valuations.

Local property tax bills are calculated by taking the property tax rate (known to many as the levy) and multiplying that figure against the property’s assessment value. When assessed valuations increase, but tax levies remain the same, property taxes increase.

LB103 would require levies to be adjusted to account for changes in valuation.

As one example, if a taxing subdivision saw an overall valuation increase of 20 percent, the property tax levy rate would be reduced by 20 percent, leaving local revenues where they were before. Of course, the impact on individual taxpayers may vary. If your own property value grew by more than 20 percent, you’d still pay any additional increase, and if your increase was less than 20 percent or your value declined, you’d see a cut if the required levy reduction stayed in place.

However, local governments would still have the ability to bring the levy back up and access the added revenues. But first, a special public hearing must be scheduled and advertised. Then, local boards would be required to take a recorded vote on any increased amount in tax.

Taxpayers could attend the hearing and discuss their support or opposition for any increase.

In opposition testimony before the Revenue Committee, representatives for some political subdivisions said this process already occurs when property-taxing boards adopt their annual budgets. These budgets designate the levy rate to be used against the year’s newest valuation. Their argument is that taxpayers and residents can attend these meetings now, and mostly choose not to.

There is plenty of truth to this observation. Taxpayers who care about property taxes should be doing a better job staying engaged with local boards. But holding a separate, public hearing with a board vote on a potential tax increase is a great way to help taxpayers understand those stakes and to hold local officials accountable.

In our view, there’s more urgency to holding a meeting about a tax increase than a meeting about a budget, which may be an obscure subject for most taxpayers.

LB103 also aligns well with the property tax reform policies voters say they want from the Legislature. In a Platte Institute poll conducted in January, nearly 3,000 voters represented by members of the Revenue Committee were asked about additional property tax limitations. In total, 62 percent of voters said they favored a new state law to place further restrictions on the ability of local boards to collect property taxes through tax rates or valuations. Only 17 percent opposed the idea, while 21 percent were unsure.

LB103 is not the only approach the Legislature needs to take on property tax reform, but it can be a powerful and forward-looking addition to any plan to reduce property taxes.

As of this writing, LB103 has not yet been added to the legislative schedule for first-round debate, but it should receive its first vote soon, giving the full Legislature a chance to weigh in.