Property Tax Reform: Nebraska’s Own Family Feud
We asked over 300 Nebraskans what they thought about property tax reform. The results may show opportunities for progress, but could also explain why major changes have been so elusive in Nebraska.
First a disclaimer: this was not a scientific poll—it’s an online survey promoted through email, social media, and local newspapers. Think of it less like a Gallup poll and more like the answers on Family Feud. The figures used here are also rounded.
Still, these answers may give us a better sense of what many Nebraskans may be thinking when they ask the Legislature for property tax relief.
1. Where do you believe property tax reform should rank on the list of priorities for the Nebraska Legislature?
Forty-eight percent of respondents said that property tax reform should be the most important priority of the Unicameral. An additional 37 percent said it should be an important priority, while 10 percent said it was somewhat important, and 5 percent said it was not at all important.
2. To your knowledge, what level of government is responsible for levying property taxes?
How many Nebraskans know that the state itself doesn’t set the tax rates they pay on their homes, land, and business equipment?
As it turns out, 74 percent of my respondents were well-informed that local governments levy property taxes. That still means over one quarter believe the state is responsible for setting their property taxes.
3. On a scale from 1-10 how much of a financial worry are property taxes for you? One indicates you never worry about property taxes, while 10 means property taxes are a major worry for you.
Twenty-nine percent of respondents said property taxes are a major financial worry for them, ranking their concern as a 10. More than 60 percent ranked their financial concern between 8 and 10, while 23 percent ranked their worries about property taxes between 1 and 5.
Unsurprisingly, those who rank the property tax issue as a higher priority also express more financial worry with property taxes. Respondents who believe property tax is the most important issue average 8.7. Those who call property tax somewhat important average 4.5 and respondents who don’t think property tax is important at all rank 4.1 on average.
4. What aspect of property taxes do you find most objectionable?
We wanted to know what taxpayers really have against property taxes.
In addition to four common objections about property taxes, respondents had the option to reject all of the proposed objections—and 10 percent did just that—along with another group nearing 10 percent that had their own thoughts on the problem.
Forty-one percent of respondents said they agree with the objection that property taxes in Nebraska cost too much compared with other states. The runner-up, at 17 percent, was the perception that property taxes are “rent” on something you already own. Some free-form responses also opposed taxes in general.
An additional 10 percent of respondents said their objection was that the amount of tax they owe is not consistent with their ability to pay, and 10 percent agreed that increases in property taxes were difficult to budget or plan around.
5. Are you willing to pay other taxes in exchange for paying less property tax?
This is where the rubber begins to meet the road. We wanted to know if taxpayer dislike for property tax was strong enough to create a willingness to pay other taxes instead.
In this survey, most respondents are open to the idea. Sixty-one percent of respondents said they would be willing to pay other taxes for property tax reform. Thirty-nine percent said they were unwilling to pay other taxes.
Taxpayers on both sides of this question expressed nearly the same level of financial worry about property taxes on average. Taxpayers who believed the state was responsible for levying property taxes were slightly more likely to say they did not want to pay other taxes, however.
While 61 percent is a fairly decisive margin for tax reform that uses new revenues, if this majority were converted into votes in the Unicameral, it would still not be enough to overcome a legislative filibuster.
6. Which taxes would you rather pay more of in exchange for paying less property tax? You may select more than one.
We wanted to know what new burdens taxpayers were willing to shoulder personally instead of the current level of property taxes.
Some of the responses demonstrate wishful thinking that someone else will pay. For example, 46 percent said they’d pay more cigarette tax in exchange for property tax reform, but only about 17 percent of all Nebraskans are smokers who actually pay cigarette tax.
That may mean cigarette tax is a good bargaining chip politically, but it doesn’t tell us much about where the money is going to come from to pay for major tax reform.
That said, the clear winner as the alternative source of revenue was sales tax, with 55 percent saying they would be willing to pay more in exchange for lower property taxes. No other tax type received a majority. Second was cigarette tax at 46 percent, followed by fees at 20 percent, income tax at 16 percent, and gas tax at 16 percent.
7. If you are willing to pay more sales tax, which of the following purchases would you be willing to pay sales taxes on in exchange for a lower property tax?
The desirability of the sales tax may relate to a feeling among many that it is more voluntary than property or income tax. But sales tax is unique from the other taxes because many of the purchases Nebraskans make are currently exempt from tax. We wanted to tighten the vise once more and get taxpayers who said they favored paying more sales tax to make a tough choice about where they were willing to pay more.
You can definitely notice a drop-off in enthusiasm once we start asking for specifics.
While 55 percent of the survey respondents said they were willing to pay more sales tax in the previous question, at most only 46 percent could agree on a specific exempt purchase on which they’d be willing to pay sales taxes.
Still, a few trends emerged. The largest number of respondents agreed with paying sales tax on personal care (46 percent), transportation (44 percent), and household services (38 percent). Thirty-two percent also favored collecting sales taxes on accounting, legal, or investment advice services.
About 28 percent of the respondents rejected all of the possible additions to the sales tax base.
Only a minority of respondents expressed willingness to pay tax on some purchases that might be considered traditional third rails: 27 percent favored sales taxes on motor vehicle repair services, 25 percent would accept a sales tax on groceries and veterinary services, and 21 percent said they would accept paying sales tax on gasoline. The lowest ranking option listed was visits to the doctor, dentist, or optometrist, which received only 15 percent support.
In the “other” section, some respondents noted sources including online sales from out-of-state, or soft drinks and candy, which are a subset of groceries that many states tax regardless of their policies toward other unprepared foods.
8. Once again, if you wouldn't mind paying more sales tax for property tax reform: Given the choice, would you rather pay a higher sales tax rate (ex. 8% instead of 7%) or pay sales tax on purchases you do not pay on currently?
This question tests whether changing the sales tax rate could influence how taxpayers feel about paying this tax on additional goods and services. Respondents were closely split between keeping the sales tax rate where it is, raising it, or reducing the rate. Thirty percent said they would rather pay the same rate with additional purchases.
Twenty-eight percent would accept expanding the base to add more purchases but prefer a lower sales tax rate. Twenty-six percent said they would rather raise the sales tax rate instead of expanding the sales tax base.
9. Would you be willing to pay a higher total amount in state and local taxes than you pay now if you were guaranteed to pay less property tax in the future?
Would Nebraskans accept a net tax increase in order to lower their property taxes?
Most said no, although the margin was not very large. Fifty-five percent of respondents do not want to pay more taxes as a result of property tax reform, while 45 percent would be willing to do so if they had a guarantee that they would pay less property tax going forward.
10. Regardless of your response to the previous question, how much lower would your property tax bill need to be for you to feel the Legislature addressed your concerns?
On the whole, these taxpayers want significant property tax reductions that it would be fair to say require fundamental changes to state tax and spending policy.
Thirty-two percent said that a 20 percent cut in property tax would address their concerns. Another 30 percent said they wanted a bigger, 30 percent reduction.
A combined 21 percent of taxpayers said a 5 or 10 percent cut would satisfy them.
Another 17 percent of respondents had their own ideas. Many demanded larger amounts of tax relief, or the complete repeal of property taxes, while a few said they would be satisfied with any reduction or limitation that kept property taxes from rising further. Some respondents noted that they did not have a problem with property taxes or property tax increases, or felt it was a local issue that the state does not need to be involved with.
11. Which of these changes would you prefer most?
Respondents showed stronger support for property tax limitations instead of indirect subsidies of property taxes.
Thirty-three percent say property tax levies should be reduced. Limits of property tax valuations were chosen by 24 percent. Income tax credits to offset a portion of property tax paid garnered 17 percent support, while an increase to the current property tax credit that appears on property tax bills earned 8 percent support.
This survey shows that a strong majority of Nebraskans may want to see something significant done about property taxes, and could be willing to do so by tapping into the state’s sales tax base. However, many taxpayers may also be hoping someone else will pay for their desired tax relief, and could have difficulty accepting that "someone else" could end up being them.
Learn more about these issues and how property taxes have been a problem throughout Nebraska’s history in our new report, “Get Real About Property Taxes.”