Property taxes are on the ballot in multiple states, but not Nebraska

Property taxes are on the ballot in multiple states, but not Nebraska

Most of the focus for the election this year has been on the presidential race, but did you know many states have property tax initiatives on their ballot this year?

  • California Proposition 15 would undo the protections of California’s historic Proposition 13 property tax limitations and introduce “split roll” property taxation—commercial properties would be assessed on their market value, while residential properties would continue being assessed on purchase price.
  • Colorado Amendment B would repeal the Gallagher Amendment, a longstanding but nonneutral provision within the Colorado constitution that limits residential property to 45 percent of the statewide property tax base. If passed, this measure will freeze assessment rates at current levels.
  • Louisiana Amendment 5 would give local governments the authority to allow new or expanding manufacturers to submit payments in lieu of property taxes.
  • Louisiana Amendment 6 would raise the threshold to qualify for the special property assessment level for seniors, military, and disabled persons from $50,000 to $100,000 beginning in 2026.
  • St. Louis’ (Missouri) Proposition R would levy an additional property tax of $60 per $100,000 of assessed value to fund early childhood services.
  • Portland (Oregon) Measure 26-213 would levy a property tax of $80 per $100,000 for five years starting in 2021 to provide parks and recreation funding.

Nebraska almost joined this list of states when many interested citizens started a petition drive for the Nebraska Income Tax Credit for Paid Property Taxes Initiative. Although this measure did not garner the necessary signatures to make it on the statewide ballot this year, the Legislature did enact something very similar with LB1107.

Nebraska’s ballot initiative proposed a change to the state’s constitution that specifically stated,

“For taxable years beginning or deemed to begin on or after January 1, 2021, under the Internal Revenue Code of 1986, as amended, there shall be allowed to each taxpayer a refundable credit against the income tax imposed by the State of Nebraska in the amount of 35% of taxes levied on the taxpayer’s real property in this state and paid by the taxpayer during the taxable year.”

LB1107 also created a refundable income tax credit for property taxes paid. However, it is only for school district taxes, not all property taxes, and is significantly less than 35% (which had a $1 billion price tag).

According to the legislation, for tax year 2020, $125 million in credits will be distributed to property tax owners. For tax years thereafter, the amount depends on the actual net revenue the state collects during the fiscal year. It must be 3.5% higher than projected and 3.5% higher than actual prior-year collections. If this situation exists, then the excess collections would be added to the $125 million base allocation for property tax credits.

By year 2024, the Legislature has committed the credit amount to be $375 million. While this is still considerably short of the 35% goal the ballot initiative had, where the cost would have been around $1 billion, it still shows that the pressure of the ballot initiative instigated something in a Legislature that has been unable to compromise on property taxes for many years.

Overall, proposals by the Nebraska Legislature and the petition drive did not aim to create structural reform to the state’s property tax situation, just temporary relief. When we look at other states, particularly Colorado and California, they are enacting structural changes to their property tax system. This is a good time to see how the voters react to Colorado and California’s ballot questions and what direct impact these changes have on the property taxes levied.

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