According to a national report, Nebraska residents pay $1,855 in taxes per $100,000 of assessed home value, whereas Colorado residents only pay an average of $607 in taxes per $100,000 of assessed home value.
Nebraska needs to take the property tax burden off taxpayers’ backs and onto the state, Sen. Lou Ann Linehan of Elkhorn, Revenue Committee chairwoman said during a Platte Institute webinar this month when she cited a recent report from the Tax Foundation.
“If you’re a retired person living in Nebraska you could just as easily live in Colorado, which also provides a significant income tax deduction for retirees,” Linehan said.
This year she is focused on her property tax relief bill, LB1106, which would increase state funding by $520 million for public schools while simultaneously lowering property taxes. Senators reconvened for a 17-day legislative session on July 20, with property relief expected to be debated.
While Linehan’s property tax relief bill is the tax reform measure expected to dominate debate, at least one state senator believes the state’s tax collection system could be replaced with a consumption tax.
LR300CA, a constitutional amendment, was proposed by Sen. Steve Erdman of Bayard and would change the way taxes are collected. The proposed consumption tax would be collected one time with about a 10.5% tax on everything, including new services and food with a few exceptions.
During a Feb. 12 Revenue Committee hearing, Erdman said the consumption tax would be paid by the initial purchaser of any new item or service, then businesses could collect and remit the tax to the state.
If LR300CA passes, the resolution would be placed on the November general election ballot.
Erdman’s bill hasn’t been voted out of the Revenue Committee, and it isn’t expected to be debated this session.
Laura Ebke, a senior fellow for job licensing reform at the Platte Institute and former Nebraska senator, said a consumption tax could provide property tax relief but may be difficult to implement and gain support.
“It’s appealing on the surface,” Ebke said. “It’s a movement that’s been around for 10 years, but it hasn’t generated a lot of enthusiasm because we don’t know what would happen if the revenue didn’t come in that we expected.”
But, Linehan’s plan also faces hurdles. Those opposed to her property tax relief bill LB1106 are skeptical there will be funds available to pay for it. Linehan is confident that LB1106 can be passed.
“If property tax relief was important before the pandemic, it’s critically important now,” Linehan said.
Linehan said Nebraska’s revenue will come close to certified forecasts for the fiscal year, even though $275 million has disappeared from the rainy day fund because of COVID-19.
At a virtual Platte Institute western Nebraska property tax town hall on July 13, 62% of 90 participants said in a straw poll that they believed Nebraska voters would do a better job adopting changes to Nebraska’s property tax laws than the Legislature. The Platte Institute recorded all the poll results from the town hall. Residents across the Panhandle and west of North Platte were encouraged to attend the town hall.
William Knapper of Scottsbluff, who attended the virtual town hall, suggested that individuals interested in property tax issues meet with their elected officials to voice concerns and come to a solution that benefits all Nebraskans.
“To take on this property tax issue, we need leadership,” Knapper said.
During the town hall, participants shared views on property taxes and suggested solutions to provide property tax relief, including a consumption tax.
Melissa Evans of Lemoyne favored replacing taxes such as income and sales taxes with a consumption tax.
“The property valuation system is flawed, and it’s time to replace it with a new revenue producing system such as the consumption tax,” Evans said.