Legislative Testimony for LR22CA: Constitutional amendment to limit the total amount of property tax revenue that may be raised by political subdivisions

Good morning, Chairwoman Linehan and members of the Revenue Committee. The Platte Institute is in SUPPORT of this legislation.

For property tax reform to deliver significant and sustainable results for Nebraskans, additional property tax limitations will have to be paired with any new revenues raised by the state and local governments.

LR22CA is one potential option that can help slow the growth of the property tax burden moving forward. If paired with broader tax reforms, it could facilitate an overall shift to reduced reliance on property taxes to fund local government.

The exceptions provided for in this constitutional amendment will prevent an arbitrary situation where political subdivisions could not pay their bills. Not including bonds or real growth associated with new construction are valuable and realistic to be exempt from the cap.

We appreciate Sen. Linehan’s inclusion of a real growth exemption to address the critiques this proposal garnered in 2019. The accommodation for a political subdivision’s real growth will help to mitigate many of those concerns.

We also support the provision allowing voter-approved overrides of the property tax revenue growth limit. However, we would like to suggest to the committee that an amendment be drafted to allow these override votes to only take place during a general or primary election. This will ensure more voter turnout and a higher percentage of property taxpayers voicing their opinion for the override decision.

Another benefit of this cap is that there is no prohibition on the total revenue of a political subdivision growing at an annual rate greater than 3%. In the case of school districts, for example, revenue sources like state aid, motor vehicle taxes, or fines are not included in the calculation. In cities, local option sales tax, occupation tax, and utility rates would not be included in this figure.

It should also be acknowledged that this policy is not the only property tax limitation that needs to be considered by the Legislature. For example, our combined current levy rates are well over $2.00 in many jurisdictions, and though this amendment would prevent the burden from growing at a fast pace, it would not reduce property taxes.

Overall, LR22CA is a good starting point for additional property tax limitations, and it avoids many of the unfair pitfalls of other property tax caps. But it should not be the end of the property tax reform discussion if the Legislature wants to reduce the overall property tax burden.