Nebraska’s creeping property tax rate has been the subject of much discussion lately. High property taxes and rising inflation have spurred conversation about the best way to reduce property tax bills in the state.
Last year, Gov. Jim Pillen made a plan for reducing state income tax rates. His eyes are now set on the next tax burden: property taxes. However, there is still much debate on how to enact a plan that will benefit Nebraska and provide much-needed relief for homeowners.
Here's more of what you need to know.
Property tax relief plan in Nebraska
Pillen’s Legislative Bill 1 sought to reduce property tax bills for Nebraska residents by an average of 50%.
“In a few short years Nebraskans will be paying $1 million a day in property taxes,” Gov. Pillen stated in a press release. “That’s $6 billion a year. Property taxes are hurting young people, our seniors, homeowners, renters, farmers, business owners.”
His first proposal would have capped local government spending while phasing out most K-12 property taxes within three years. But Pillen’s bill came with a couple of caveats:
- Property tax revenue heavily funding K-12 schools would shift $2.6 billion in expenses to the state
- Revenue lost from property taxes would largely come out of expanded sales tax on citizens
If the proposed plan had gone through, it would have been the largest state tax reform since 1967. Although this original plan was not approved, talks continue in the special session. And the story is a bumpy ride.
Pushback on Nebraska property tax reform
Critics of Gov. Pillen’s plan claimed the property tax cut benefitted richer residents while levying more sales taxes on the average Nebraskan renter. Nebraska’s 5.5% sales tax would've added new taxes on about 100 goods and services previously tax-exempt. This was in addition to local county and city taxes.
While some claimed tax-exempt goods or services should have been taxed all along, state Sen. Danielle Conrad called the proposal a “reverse Robin Hood.”
Conrad’s remark highlighted the regressive nature of sales taxes, meaning household incomes that make less would see a higher percentage of their budgets going to taxes.
Other critics were concerned about the new “sin tax” on candy or soft drinks in the proposed legislation. Would this bill open the door to a future grocery tax in the state? Previously, these items were considered tax-exempt, as were services like pet grooming, handyman services, haircuts, and zoo tickets. But under the bill, those and other services could've been taxed in Nebraska.
Also, the bill proposed higher sales tax rates on alcohol and tobacco. This included cigarettes, spirits (not beer or wine), as well as games of skill, lottery tickets, and consumable hemp. Nebraska heard an outcry from many about the new tax proposal.
On the wings of all this pushback, Gov. Pillen called a special session in late July. (The session began on July 25 and will run through August 15.) So far, state lawmakers have weighed in on where additional funds could be found and many bills have come out of this session.
One proposal would've legalized and taxed marijuana in the state.
Is Nebraska legalizing marijuana?
Earlier this month, Democratic Sens Justin Wayne and Terrell McKinney proposed Legislative Bills 52 and 71 to legalize marijuana. While consumable hemp is already legal in Nebraska, these bills would've provided the legal framework to grow, produce, and sell marijuana. Anyone 21 years or older would be able to purchase it.
While the bills were new, the idea wasn’t. Nebraskan lawmakers have tried two other times in recent history to legalize marijuana. These bills were different from previous proposals in a couple of ways:
- They would legalize all marijuana instead of only medical marijuana
- One bill would tax retailers and growers at 25%, the other at 16%
Proponents estimated the new bills would bring in significant revenue, at $90 million.
But there were many opponents. Chief among them were law enforcement officials. For example, the Deputy solicitor general in the Nebraska Attorney General’s Office, Zachary Viglianco, cited potential health risks from legalizing marijuana, like increased risks of heart attack and cancer, and opposed the bill.
Other law enforcement officials pointed to purported increases in homicide rates, violent crime, and impaired driving in states where marijuana is legal.
But marijuana wasn’t the only suggested tax for homeowner tax relief in Nebraska. Lawmakers also proposed an ammo excise tax. If passed, the ammo bill would have made history.
What is the ammo tax bill in Nebraska?
Legislative Bill 65, proposed by Sen. Lou Ann Linehan, created a 5% excise tax on all ammunition sales in Nebraska.
The bill was somewhat modeled on the federal Pittman-Robertson Act tax bill. Pittman-Robertson imposes an 11% tax on firearms, ammunition, and archery equipment to fund wildlife conservation projects. The Nebraskan version would have used half its funds for wildlife projects and those suffering from PTSD, while the other half would have been used for property tax relief. Only recently, California’s gun and ammo tax became law. If this new bill was passed, Nebraska would have been the second state in history to enact a gun and ammo excise tax.
Opponents of the bill included the National Rifle Association (NRA), some proponents of the Second Amendment, and others who merely didn't want to see higher sales taxes. The ammo excise tax proposal and marijuana bill were just three of over 80 that have come out of the special property tax session.
Gov. Pillen has not directly remarked on the ammo tax bill but advocated against the legalization of marijuana.
Amended property tax reform in Nebraska
After receiving a plethora of suggestions via special session bills, Gov. Pillen amended his bill. The amended plan shifted $1.8 billion of K-12 expenses to the state and would have been more lenient on vital local spending, like police, firefighters, and prosecutor offices.
Another big change was in the number and quality of sales tax items. If the bill is approved, Instead of over 100 goods and services now becoming taxable, more than 70 would become taxable.
Lawmakers of the special session pushed back again. And so, a newly amended bill was born. After days of cycling through various tax packages, Legislative Bill 34 (LB34) was approved. Here are the highlights:
- The increase in sales taxes was not approved
- Spending caps on local government stayed (public safety and emergencies excluded)
- Investment in property tax credits was approved
The revised plan suggests a $750 million investment into the School District Property Relief Credit Fund to kickstart property tax relief. Homeowners can expect property tax credits to be automatically applied to their tax bill, with the idea being it will be easier for those already claiming the credit to claim it; but the relief will not be as much as Gov. Pillen's original bill had hoped.
Additional funding for LB34 is still under debate at the special session.
Bills from the session could go to the ballot box in November — in some form or other.
The marijuana bill is a good example. While it wasn't approved in the special session, Nebraskans for Medical Marijuana, a registered ballot committee, has garnered signatures for their spot on the ballot. Other items — like the ammo excise tax and the legalization of online gambling — have had no immediate action during the special session, but that doesn't mean they're down and out.
So, all Nebraskans are encouraged to vote. There may be much to think about this year at the ballot box.
