Taxpayers Beware: 3 Issues You Should Be Concerned About in Nebraska
Do you think Nebraska taxpayers would like to pay $1 billion more in taxes each year?
Unfortunately, some groups and policymakers in our state have pushed for this without many people even knowing about it. That’s why experts at the Platte Institute go down to the Capitol to testify against expensive policies threatening economic opportunity in Nebraska.
Today, I’m going to share with you three issues taxpayers should be concerned about in Nebraska. Stay tuned until the end where I’ll share with you how policymakers even tried to raise taxes on businesses during the COVID-19 pandemic.
In so many ways, the status quo holds Nebraskans back from achieving their full potential in our state. At the Platte Institute, we remove barriers to growth and opportunity to promote economic growth in Nebraska. One approach we use is advancing solutions to create a simple and sustainable tax structure.
We want Nebraskans to keep more of what they earn, and for the state to attract and retain a talented workforce. This way, Nebraska will create innovative businesses and good paying jobs that improve our quality of life.
Certainly, taxes also help pay for many things that improve our quality of life. That’s why it’s even more important to design a tax system that’s easy to comply with and encourages more people to want to be taxpayers in Nebraska.
To get there, policymakers need a better understanding of how taxes really work and the public needs to have a voice in how tax policies are decided.
Not all tax policies have the same economic effects. Governments must keep an eye on how their tax rates and tax structures impact their competitiveness and economic opportunities.
Right now, we don’t have a simple and sustainable tax structure in Nebraska that promotes economic growth. We’re not competitive with states that are growing faster than us.
It’s not simply that taxes are too high. Nebraska’s tax system was designed for a completely different economy. It’s weighted against providing the opportunities and amenities that Nebraskans want to see.
A lot of people know we have the eighth highest property taxes on homeowners, and one of the highest property tax burdens on agriculture. That’s just the start of it. If you throw a dart at the U.S. map, 70% of the time, you’re going to land on a state that has lower income taxes than us.
Our business taxes are also too high. Policymakers feel they must use generous tax incentives to attract large employers, while most businesses don’t receive them.
On top of that, Nebraska has a bunch of miscellaneous taxes that create additional red tape. However, Nebraskans want to live in a state where the tax system works for them and their communities so they can reach their dreams and goals. In order to remove obstacles standing in the way, here are three major issues Nebraska taxpayers need to pay attention towards.
#1. Nebraska policymakers rarely hear from taxpayers when it really matters.
There’s plenty of good data about tax policy, and the Platte Institute works to equip policymakers with that information. But generally, politicians only use economic facts to justify their positions after they’ve scoped out the political landscape.
Most policies don’t exist because of economists or researchers. They exist because enough people in the community got involved and pressed elected officials to adopt that policy.
Ask yourself, when was the last time you called your Nebraska state senator about a tax issue that mattered to you? When did you attend a local government meeting or state legislative committee hearing?
If you’re not doing any of these things, I promise you someone else is doing it, and they’re probably not on the same page as you.
I’ve seen the polls. I know Nebraskans are all upset about taxes, especially property taxes. However, if elected officials mostly hear from other officials and advocacy groups who like Nebraska’s current tax policies…
Nothing will change.
This disconnect between taxpayers and policymakers is not all the public’s fault. Historically, the process for deciding tax policy has kept taxpayers in the dark.
For decades in Nebraska, local governments could raise your property taxes automatically by adopting a windfall from rising property values (all while claiming property tax rates had not increased).
All local governments had to do was adopt a new budget. If nobody came to the public budget hearing, then officials could assume nobody was really concerned. Yet, most taxpayers didn’t know about these hearings, even though they are legally supposed to be notified about them in the newspaper.
Starting in 2019, the state required a separate hearing and board vote had to be scheduled. Still, taxpayers weren’t showing up. A Platte Institute poll in early 2021 showed why. Most Nebraskans didn’t know or weren’t sure that local governments had to hold a hearing before raising their property taxes.
That’s one reason why the Platte Institute has advocated for direct notification of property taxpayers before a hearing. A priority bill in the 2021 Legislature would require postcards to be sent to all taxpayers in advance of the hearing, giving them a chance to speak on the matter before a property tax increase could be adopted.
This policy has been the law in Utah for decades, and the result was a surge of taxpayer engagement at the local level. Even with all the growth Utah has seen in recent years, it’s maintained the 14th lowest property taxes in the country.
#2. Having high real estate taxes is far from Nebraska’s only tax problem.
Nebraskans who care about economic opportunity need to be aware of all the red tape that our tax policies create for the very people and businesses we should want in our state.
Nebraska imposes a lot of different taxes that the average person might not know about. The cost is not just in dollars, but in headaches.
For example, in the early 20th century, property taxes were assessed every year on personal property that you owned. This includes the furniture in your home, a TV, radio or anything not attached to your residence that you can pick up and move around.
This kind of tax was created before states had sales taxes. Today, most Nebraskans only experience a tax like this when they renew their motor vehicle registration.
However, if you run a business in Nebraska, this antiquated tax on personal property is still in effect for most of the equipment you use to do your work. We even pay personal property tax at the Platte Institute.
The tax might be levied on something high-tech and sophisticated, like agricultural machinery and computers, or even something mundane like a chair or a desk. All of it must be reported on an annual tax filing along with the calculation of the property taxes due, which is based on a depreciation schedule.
This means businesses in Nebraska often need outside help to pay their local taxes. It also means a business that invests in newer equipment will have to pay higher property taxes.
This is not a simple, sustainable tax policy for Nebraska.
Most Midwestern states don’t do this to business taxpayers. Some states impose very little personal property tax. States, like Iowa and South Dakota, don’t tax personal property at all. Even Colorado is looking to eliminate their personal property tax. Many states that still have personal property taxes on businesses have very generous exemptions that prevent smaller businesses from having to file for them.
Currently, Nebraska has no exemption. Even if you are starting a business in the garage with a computer and a desk, you’d potentially be responsible for paying this tax.
Now, do some businesses not pay this tax like they should? You bet. That’s part of the reason the government stopped collecting it on people like you and me. It was more trouble than it was worth.
Another good example of a tax that’s far more trouble than it’s worth is Nebraska’s inheritance tax. This is only collected by county governments.
At the time of this recording, only six states have inheritance taxes. These are another holdover from the 19th and early 20th century. Again, before states had sales taxes and income taxes.
Since the beginning of the 21st century, states have increasingly done away with this tax. As we speak, lawmakers in Iowa are working to repeal their inheritance tax. A lot of Nebraskans disagree with the idea of putting an extra tax on property, just because the person who owned it died and gave it to their family or friends.
Beyond that, the inheritance tax is counterproductive. It’s one of the only taxes that an average person needs to hire an attorney to handle. Even if you pay a relatively low inheritance tax rate, you may have to double that number or more because of your legal fees.
Here’s another reason we have these red tape taxes. Oftentimes in Lincoln, opponents to tax reform will say: “We shouldn’t remove these barriers, whether it’s with the income tax, personal property, or inheritance tax because some amount of the benefit will accrue to businesses, owners or investors who aren’t based in Nebraska.” Politicians love the idea of being able to tax people who don’t live in Nebraska because they don’t vote here.
Some taxpayer groups also think hosing out-of-state taxpayers will keep their own taxes lower. Both of these groups are kidding themselves. While people who don’t live here might not be able to vote at the Nebraska ballot box, they can vote with their feet and their wallets. They can decide Nebraska is not as good of a place to put their money as Colorado, South Dakota, Texas, Utah, Florida or wherever.
It’s completely against Nebraska’s true economic interests. It’s costing the state population, investments, job opportunities, and even tax revenue that all contributes to making Nebraska a better place to live.
We should want people from other states and countries to be investing as much time, talent, and treasure into our state. Taxpayers need to stop letting their elected officials play on this false hope that someone else is going to pay your taxes for you.
Outdated taxes and high tax rates add red tape to the process of owning a property or business here. It’s holding us back and we’re falling behind other states.
#3. As bad as Nebraska’s tax system might be, it could always be worse.
I’m not saying we should just be happy for what we have, although it doesn’t hurt to recognize when we get things right. However, I don’t think most Nebraskans know that millions of dollars are spent in Lincoln every year attempting to raise the tax burden even more.
Currently, besides the Platte Institute, there’s not a lot to safeguard Nebraskans against a future where taxes are even higher than they are now. For reference, during the Nebraska legislative session held between 2019 and 2020, legislative bills were introduced to raise state taxes and fees by more than $1 billion. This is in addition to hikes on local property taxes.
Even during the COVID-19 pandemic, lawmakers seriously considered raising income taxes on small businesses that received loans under the federal emergency relief program. Fortunately, the Platte Institute helped lawmakers avoid this outcome, and the state was rewarded with one of the most resilient economic recoveries in the country.
In the Unicameral, we have an amazing process that allows every bill to get a public hearing, where you can express your concerns about legislation. However, since the Legislature typically considers hundreds of bills a year, it’s not always easy for regular people to get to the Capitol for every public hearing.
Most typical Revenue Committee hearings start at 1:30 p.m. on a weekday, and the bill you’re interested in might not come up for hours. When the Platte Institute was a smaller organization, I used to be the one who had to attend the hearings to share our message. Sometimes it was a long night.
I’m grateful now that we have a growing team of experts who can attend and testify on several topics, including tax policy. Long story short: Nebraskans who might be concerned about these many tax increase proposals are often outnumbered at hearings.
Without the Platte Institute in attendance, lawmakers might not hear any other perspectives about the impact of these policies, except for those lobbying for more taxes and more red tape. Strangely, Nebraska taxpayers have been fortunate that things are not worse. It would only take a few unlucky breaks for Nebraska to go down the path of ultra-high tax states like New York, California, or Illinois.
If you’re planning on sticking around in Nebraska like I am, wouldn’t you like to make sure we don’t get there? That’s why the Platte Institute is working to stop this status quo.
If you want more economic freedom in Nebraska, please visit www.PlatteInstitute.org to make a donation to help fund our research and advocacy. Or you can subscribe to our newsletter and learn about today’s most important issues facing Nebraskans.
❌ It’s time to stop the status quo. Let’s remove economic barriers and make Nebraskans proud.