News Release: Conference Call on Property Tax Reform

NEWS RELEASE from the Platte Institute

 Get Real About Property Taxes Summary

Contact: Adam Weinberg
(402) 452-3737
aweinberg@platteinstitute.org

Polls Shows Nebraskans Support Stricter Property Tax Limits
Voters May Decide Issue If Senators Fall Short on Reforms

OMAHA, NE – A new report from the Platte Institute says eliminating Nebraska’s many sales tax exemptions is the key to major property tax reform. That will mean big changes for Nebraskans, but if lawmakers don’t act on an ambitious cut to property taxes in 2020, voters might force through major changes with a property tax ballot initiative anyway.

The Platte Institute report: Get Real About Property Taxes, 2^nd Edition by Sarah Curry and Adam Weinberg, is now available at PlatteInstitute.org/Policy. A PDF copy of the report with other media resources is available here. A summary is attached to this release.

A news conference call to discuss the report will be held TODAY, Wednesday, September 4 at 10:30 a.m. Central Time. To call in, dial (605) 475-4000, Access Code: 106202#. The call may be recorded for broadcast and will include Q&A.

The new edition of the report includes updated poll results from the eight legislative districts represented by senators serving on the Unicameral’s Revenue Committee, which determines the tax policies taken up by the Legislature. Nearly 3,000 Nebraskans were polled on their views on property taxes and potential alternatives, including elimination of sales tax exemptions.

Overall, 62% of voters favored a new state law placing stronger limits on local property tax levies or valuations, 51% supported a firmer cap on increases in local government spending, while a plurality (47%) said they would be willing to pay sales taxes on exempt goods and services if the receipts were used to reduce property taxes. Eliminating sales tax exemptions was opposed by 33% of respondents and 21% were unsure.

The Revenue Committee has previously advanced legislation that would remove a range of sales tax exemptions to afford paying down local property taxes, but their proposals still face an uphill battle in the full Legislature, where a filibuster has prevented a plan from advancing.

“In 2019, Nebraska state senators debated legislation to expand Nebraska’s sales tax to about thirty new goods and services. As ambitious as these proposals were, the policy was criticized from many possible angles,” Curry and Weinberg write.

Critics ran the gamut, from taxpayers who wanted bigger cuts to property taxes, to advocates for low-income residents and businesses who felt the exemptions targeted for elimination were selected unfairly.

There are 117 sales tax exemptions in Nebraska, preventing state and local sales taxes from being collected on most purchases currently made. The Platte Institute and research organizations like the Tax Foundation advise that states should end all sales tax exemptions on final consumer purchases, exempting only business inputs. Businesses could be provided with an identifying card to use when an exempt purchase is made. The report says revenues from ending the exemptions should be used to reduce property and sales tax rates.

Most services sold in Nebraska are currently exempt from sales tax. While most goods are taxable, major categories of consumer spending on goods are exempt, including most groceries and gasoline. Resistance to taxing these sales can be fierce.    

“Perhaps ironically, one of the only ways to effectively mitigate these concerns is to go even farther in ambitiously expanding the sales tax to more goods and services…The fewer exemptions there are, the more revenue would be available to reduce the sales tax rate on all of these purchases or to address other concerns legislators may have, in addition to property taxes,” Curry and Weinberg write.

Here are other highlights from the report:

• Since the repeal of the state property tax in 1967, local property taxes collected per person have nearly doubled in Nebraska, even after adjusting for inflation. Despite the state now budgeting to spend $275 million a year on relief programs, property taxes have never been higher.
   
• Nebraska’s sales tax rates have more than doubled since the introduction of the tax, which was created following the repeal of the state property tax. The original state sales tax rate was 2.5%. It now stands at 5.5%, in addition to local sales taxes, which can add up to 2% to the combined sales tax rate.  
   
• To succeed where past relief efforts have failed, property tax reform must require any additional state revenues raised to be combined with new limits that cut the property taxing authority of local political subdivisions. Reductions to levies, assessment ratios, annual increases in overall valuations, or local spending should all be considered as policies that can aid in achieving revenue-neutral tax reform.
   
• Nebraska collects sales taxes on 81 types of services, while neighboring South Dakota collects sales tax on 152 services. South Dakota uses the additional revenues from its broad-based sales tax to forgo personal and corporate income taxes, in addition to levying lower property and sales tax rates.
   
• Nebraskans polled were closely divided on support for a voter-approved countywide sales tax to reduce property taxes. The idea was favored by 41%, while 40% were against the proposal, which would require a change in state law. Support tended to be stronger in rural districts, while opposition was higher in urban districts.
   
• The proposed property tax ballot initiative, which would require the state to rebate 35% of real property taxes through the income tax, would consume approximately 28% of state revenues. At current property tax levels, the initial cost would be $1.3 billion. However, if property taxes continue to increase at their current rate, the bill would rise to $1.5 billion by 2024. Since the proposed ballot measure is a constitutional amendment, it would still remain the law unless a new amendment were passed. That means even if property taxes were cut by 20% following the adoption of the initiative, the state would still have to pay more than $1 billion in rebates annually.  
   

To schedule an interview with Sarah Curry or Adam Weinberg, please contact Adam Weinberg at (402) 452-3737 or email aweinberg@platteinstitute.org.

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The Platte Institute advances policies that remove barriers to growth and opportunity in Nebraska. For more media resources, please visit PlatteInstitute.org/Media.