LINCOLN — Nebraska Farm Bureau says a legislative proposal to change the way agricultural land is valued in Nebraska could be helpful, but the measure won’t deliver the property tax reform being sought by rural and urban Nebraskans who’ve seen their property taxes skyrocket over the last decade.
“LB 338 introduced by Sen. Lydia Brasch on behalf of Governor Ricketts is a step in the right direction to fixing a long-term issue we’ve had with the state using a market approach to valuing agricultural land for tax purposes, but the impact of the bill on property taxes will be minimal and it doesn’t provide tax reform that benefits all property taxpayers in Nebraska; a principle we believe must be considered as we work to correct an imbalance in our tax system,” said Steve Nelson, Nebraska Farm Bureau president.
LB 338 would change the way agricultural land is valued for tax purposes by moving away from the current market based approach to an approach where land is more closely tied to its ability to generate income. Farm Bureau supports the concept as a way to bring agricultural land values closer to true production capability while minimizing outside influences that can drive market values beyond production capability.
Nebraska Farm Bureau Senior Economist Jay Rempe conducted an analysis of LB 338 to evaluate the potential impacts of the bill.
“The bill does achieve part of the goal of trying to link agricultural land values closer to income conditions and it would bring Nebraska in line with other states in terms of how they value agricultural land. It might also provide some stability year to year in changes in agricultural land values, so there’s some good there in terms of trying to better value ag land, but in terms of trying to achieve overall property tax reductions, I don’t see much coming out of it in that regard,” said Rempe.
The Governor’s office estimates that had the income approach included in LB 338 been in place in 2017, taxable values for agricultural land would have been $2.2 billion lower statewide. According to Rempe, a $2.2 billion reduction in statewide agricultural land values using 2016 data equates to roughly a two percent reduction in agriculture land values.
“A two percent reduction in land values for most farmers and ranchers isn’t likely to translate into much property tax savings when you consider agricultural land values statewide increased more than six percent alone from 2015 to 2016 and more than 263 percent over the last ten years. When we talk about LB 338 and property tax reductions, we’re looking at a statewide reduction of $20 million out of $3.8 billion in property taxes levied statewide. The bill could be helpful in how we value agriculture land, but it’s not a big property tax savings bill,” said Rempe.
Rempe noted that if LB 338 passed, farmers and ranchers would see their valuations change in 2019, but wouldn’t see any potential property tax savings until 2020.
According to Nelson, property taxes account for roughly 48 percent of the total combined collections of property, state sales, and state income taxes in Nebraska.
“We’re looking for revenue neutral solutions that balance the tax burden and reduce the overreliance on property taxes to fund government services, including education,” said Nelson.
“Several bills have been introduced this legislative session that chart a path forward in providing meaningful property tax reform for all Nebraska property taxpayers and move us toward our goal of $600 million in property tax reductions statewide,” said Nelson.
Bills identified by Nebraska Farm Bureau as key measures to achieve property tax reform to this point include:
LB 545, Sen. Watermeier
Directs an additional $200 million per year over the next three years, to the state’s Property Tax Credit Fund to bring the annual appropriation to the fund to $824 million.
LB 569, Sen. Friesen
The bill creates a Community College Task Force related to evaluating duplication and funding sources for the Nebraska Community College System, and sunsets community college property tax levying authority on January 1, 2019.
LB 44, Sen. Watermeier
This bill would tax sales by online retailers without a physical presence in Nebraska. The measure could generate as much as $100 million in new revenue that could be used to reduce property taxes.
LB 312, Sen. Briese
Expands the sales tax base by eliminating certain sales tax exemptions, including those on many services. The bill could generate around $225-250 million that would be directed to reduce property taxes.
LB 313, Sen. Briese
Raises the state sales tax rate 1 percent, to 6.5 percent. The bill could generate an estimated $275 million to be used to reduce property taxes.
LB 570, Sen. Friesen
Provides a property tax exemption for all tangible personal property, including vehicles, trailers, business and agricultural inventory, and tangible personal property which is not depreciable.
LB 576, Sen. Brewer
Provides a landowner’s property tax bills in 2017 and 2018 shall not exceed their property tax bill in 2016. Places a ceiling on property taxes but allows them to go down if valuations decline.
LB 601, Sen. Erdman
Directs revenue generated from the internet sales tax to the Property Tax Credit Fund.
The Nebraska Farm Bureau is a grassroots, state-wide organization dedicated to supporting farm and ranch families and working for the benefit of all Nebraskans through a wide variety of educational, service and advocacy efforts. More than 61,000 families across Nebraska are Farm Bureau members, working together to achieve rural and urban prosperity as agriculture is a key fuel to Nebraska’s economy. For more information about Nebraska Farm Bureau and agriculture, visit www.nefb.org.
— Nebraska Farm Bureau
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