Legislative Testimony for LB947: The Nebraska Property Tax Cuts and Opportunities Act
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 support of LB947.
Now that even the federal government has passed major tax relief, voter impatience for state and local tax reform is reaching a breaking point.
If there’s no significant action in this legislative session, Nebraskans could force a property tax ballot initiative. If it passes, the state would likely be forced to significantly cut spending on services and increase state tax rates at the same time.
LB947 offers a reasonable path to steer the state away from this kind of uncertainty. It would have the state taking a greater role in property tax relief for Nebraskans in the years ahead, while safeguarding the state budget from unrealistic promises.
The Property Tax Credit Relief Fund is due for a redesign, and LB947 provides a solid model.
A few years back we published a study by Drs. John Anderson and Eric Thompson at UNL that referenced making the state’s property tax relief programs more targeted. Right now, the property tax fund provides credits for all properties, and increases the share of the credit a taxpayer receives on their property tax bill based on assessed valuations.
LB947 converts those existing funds into residential and agricultural refundable income tax credits, and importantly, places more limitations on who can claim those credits and how much can be claimed.
This would help alleviate the criticism that the property tax credit relief fund was too small for average taxpayers to notice. By ending some credits, and adding caps, most taxpayers will receive a larger tax credit than they are receiving today, all with existing funds.
Out-of-state landowners will be less likely to receive credits. Commercial properties will no longer be eligible either, and exemptions for personal property tax will be ended. In exchange, however, these business taxpayers will receive some modest income tax relief.
As the country is already seeing with federal tax reform, which significantly reduced corporate income tax rates, enacting income tax relief when possible does remove barriers to better economic opportunities for working Americans. The income tax reductions in LB947 are modest, but they are fully funded under this plan, and would still significantly improve the state’s tax climate.
In Iowa, their Legislature is currently discussing how to leverage federal tax reform to reduce personal income tax rates. We may not have the flexibility to do as much as they’re contemplating this year on income tax, but this bill does allow some room to slightly reduce personal income tax rates, which are also burdening Nebraska’s taxpayers.
On the corporate side, right now, every state west of the Missouri River until California has a lower corporate income tax than Nebraska. We are usually among the 15 highest. Under LB947, Nebraska would have a much better competitive position, being ranked lower or within one percent of the corporate tax rates of 35 other states and the District of Columbia.
Of course, no one should be under the impression that LB947 will end all the criticisms of our tax system. But the bill would grow the property tax relief commitment provided by the state for our taxpayers in the greatest need, and improve a major weakness of our income tax policy, within the confines of the state’s limited budget.