Gov. Dave Heineman says the legislature needs to take a balanced approach on taxes.
Heineman says Nebraskans want tax relief, though what form that takes varies.
“If you go to rural Nebraska, the issue is property taxes,” Heineman says. “But, again, I want to emphasize property taxes are locally assessed, locally collected and locally spent.”
Heineman emphasizes that the legislature and the governor do not set property taxes. School boards, city councils and county boards set the property tax rates in Nebraska. The governor says the state can have a marginal impact by providing more money for the Property Tax Credit Fund.
The Tax Modernization Committee has completed its public hearings. It will provide a report to the Unicameral by mid-December.
The committee’s study of the tax system grew from failure to advance Heineman’s plan to scrap the state income tax, both individual and corporate, in exchange for the elimination of certain sales tax exemptions. The legislature balked at enacting such sweeping reform and created the committee to study the state tax system instead.
Heineman wants the legislature next session to consider lowering the state income tax as well as providing income tax exemptions for Social Security and military retirement payments.
Many proposals have been floated during the Tax Modernization Committee meetings.
The American Cancer Society has proposed raising the cigarette tax a dollar a pack to bring in $72 million dollars annually. It projects that higher cigarette costs would drive down smoking and that the extra income could be used for smoking cessation programs or for property tax relief.
Heineman says that’s not the type of tax proposal he is looking for.
“This is what I get a big kick out of, everybody associated with cigarette taxes, who gets money from it, is trying to figure another way to raise the tax to get more money for their favorite program,” Heineman says. “And, that’s not the answer. Higher taxes are not the answer to our challenge.”
An ambitious plan has been proposed by the Nebraska Farm Bureau. The Farm Bureau proposes a multi-year plan to reduce property taxes by $405 million annually.
The plan would funnel $160 million more into the Property Tax Credit Program. The assessed valuation of farmland would drop from 75% of its value to 65%.
A number of farmers have testified before the Tax Modernization Committee that their property tax bills have become a real burden. According to the Farm Bureau, farmers and ranchers make up three percent of the Nebraska population, but pay 24% of the total property taxes statewide.
The Farm Bureau plan relies on budget cuts and a broadening of the sales tax base to provide additional property tax relief.
Heineman is cautious in his assessment of the plan, though he says it has merit.
“I think the Farm Bureau is on the right track. I want to continue to work with them and the Nebraska Cattleman.,” Heineman states. “Maybe the lowering of ag land valuation might be part of a compromise. I’m not sure yet. But, again, we have to recognize when we do that that is a tax shift. That’s my main concern.”