Legislative Testimony for LB829, The 50/50 Tax Plan
Good afternoon, Chairman Smith and members of the Revenue Committee. My name is Nicole Fox, and I am the Director of Government Relations for the Platte Institute. I am here today to testify in opposition of this bill.
The Platte Institute believes something must be done, and we appreciate Sen. Erdman and supporters of this bill for their clarity of how much property tax relief they are seeking. This proposal would have the state to pick up roughly 30% of the property taxes we all pay. That may not be of interest to many groups in opposition, but it does create the basis for an honest discussion of what we all want out of state tax reform.
The Tax Foundation ranks Nebraska as having the 7th highest property tax rates in the country and the 12th highest when measured on a per capita basis. Clearly the state needs a solution and the Platte Institute supports a path forward to reducing them, but not at the expense of raising other taxes that would harm the state’s economic growth.
The reason this plan exists, and may become a ballot initiative, is because many Nebraskans want significant property tax relief and feel they have been taken for granted as taxpayers. We are concerned about the impact of rising state taxes on Nebraska’s economic growth, which could be a consequence of this bill.
If it were adopted, LB829 would leave the hardest work of tax reform unfinished, which is deciding who is going to pay the additional taxes necessary to fund these credits, plus what the state spends now. Simply offering a credit for property taxes paid does not solve the underlying problem of local government spending.
Unfortunately, this state is too deeply divided and factionalized on the issue of how taxes should be paid to figure that out right now, particularly in our current budget situation. From the committee level, to the floor of the Legislature, to the governor’s desk, there are far too many barriers in the way of reaching a consensus on which current tax expenditures would be eliminated, or which spending cuts would be made, even if 33 senators agreed that this tax credit, as designed, was a good idea.
Besides LB829 being costly now, there is nothing in this bill capping its future costs. Any school district would be foolish not to levy a $1.05 property tax levy if they can get away with it, because half would be paid back to their voters by the state, no matter how high valuations go.
In addition, this bill does nothing to address the high tax burden on those that do not own property. According to the Tax Foundation, Nebraska has the 15th highest income tax rate in the nation and one of the highest in the region. Unfortunately, we can’t just pay people 50% of what they pay in school district property taxes without either making major cuts to the budget or enacting very large state tax increases.
We have some other proposals in this year’s session that use a similar tax credit approach that are more achievable in the budget situation we have. If we’re going to say no to this proposal, the Platte Institute believes we ought to carefully consider how to arrive at a consensus on something else. If the Legislature does nothing, this proposal may be on the November ballot, and whether it succeeds or fails, that will mean a lot of time and money spent by a lot of people, followed by a lot of disappointment.
We’ve got to hear the people testifying in support of this plan, put our differences aside, and find some consensus about how to lighten the tax burden for the majority of the people of this state while preventing new barriers from being created in our tax system.
The Platte Institute believes the state needs to address the property tax burden, but this bill is not the answer. It would be a shame to replace the property tax with high income taxes and other state taxes that are detrimental to economic growth.
Thank you and I would be happy to take any questions from the committee.