Legislative Testimony: LB 958, Property Tax Limits

Legislative Testimony: LB 958, Property Tax Limits

Chairman Gloor and Members of the Revenue Committee, my name is Jim Vokal and I am the CEO of the Platte Institute for Economic Research. Thank you for this opportunity to speak in support of LB 958.

LB 958, the Property Tax Relief Initiative, would slow the growth of property taxes levied by political subdivisions by tightening current spending limits and levy limit overrides on local governments. This approach would strengthen spending restraint to reduce the reliance on property taxes.

As the Committee is well aware, the Tax Foundation ranks Nebraska’s mean property tax rate as the 7th highest[1] in the nation and the 13th highest in per capita collection.[2]

Local spending in Nebraska has ballooned in recent years, consuming an ever increasing share of the state GDP. In 2015, local spending was roughly 11 percent of Nebraska’s gross state product. The only states with proportionally higher local government spending were Mississippi and New York.[3] Additionally, the U.S. Census Bureau calculated that in Nebraska, local property taxation raised nearly $3.1 billion in 2013, or 77 percent of local tax revenues.[4]

These startling statistics demonstrate that local spending restraint is essential to control property taxes in Nebraska. LB 958 would encourage local governments to do this by limiting the budgeted growth of restricted funds.

Specifically, the bill strikes the exclusions for capital improvements, sinking funds for equipment purchases, and expenditures in support of interlocal agreements. According to research done by Mercatus for the Platte Institute, checks on political subdivisions are most effective when bound to spending rather than revenue.[5] LB 958 follows this approach.

As noted in our 2013 study, “Building on Success: A Guide to Fair, Simple, Pro-Growth Tax Reform for Nebraska,” released in conjunction with the Tax Foundation, valuation limits are not effective without corresponding restrictions on spending and levies.[6] With our existing levy caps, and additional restraints on overrides for bonded indebtedness, the structural changes contained in LB 958 will help moderate the growth of property taxes collected from year to year on agricultural land in Nebraska more than a direct change to ag’s assessment ratio.

Lasting change is better achieved by changing the rules of the game that shape the budget process. The pain Nebraskans feel from high property taxes is due to the financial burden applied by high rates, which are the product of local spending. Still, LB 958 would maintain local control and permit voters to override levy limits in special circumstances.

Thank you for this opportunity to testify today, and I ask that you advance this bill out of committee. I am happy to answer any questions.


[1] Walczak, Jared. “How High Are Property Taxes in Your State?” Tax Foundation, Aug. 13, 2015. http://taxfoundation.org/blog/how-high-are-property-taxes-your-state


[2] “Nebraska: The facts on Nebraska’s Tax Climate.” Tax Foundation, http://taxfoundation.org/state-tax-climate/nebraska


[3] “Comparison of State and Local Government Spending in the United States, Fiscal Year 2015.” Spending by state. USGovernmentSpending.com http://www.usgovernmentspending.com/compare_state_spending_2015pF0L


[4] U.S. Census Bureau, State and Local Government Finances, 2013, http://www.census.gov/govs/local/


[5] Mitchell, Matthew and Nick Tuszynski, “Institutions and State Spending: An Overview.” Platte Institute for Economic Research and the Mercatus Center at George Mason University. November 2012, p. 5-6. https://s3.amazonaws.com/platteinstitute-org-wp-uploads-live/uploads/2020/05/Institutions-and-State-Spending.pdf


[6] Drenkard, Scott and Joseph Henchman, “Building on Success: A Guide to Fair, Simple, Pro-Growth Tax Reform for Nebraska.” Tax Foundation, Center for State Tax Policy, October 2013, p. 38 http://taxfoundation.org/sites/taxfoundation.org/files/docs/building_on_success_nebraska.pdf

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