This week, the Legislature will debate the largest tax increase in Nebraska history. LB 289 raises the state sales tax rate by 9%, cuts property tax relief from the state in half, imposes new taxes on a variety of services (including car and home repair), raises the cigarette tax, and increases the tax on buying a house.
If you’ve read one of my recent columns, you may be surprised to hear that LB 289 is still under consideration. Nebraskans, from farmers to home builders, voiced overwhelming opposition to the bill when it was heard in front of the Revenue Committee less than two weeks ago. After the hearing, Senators tinkered around with the bill—and made it even worse!
In addition to the taxes mentioned above, the revised bill also now proposes new sales taxes on 20 services including: pet-related services, moving services, storage, hair care and hair removal services, nail care, skin care, tattoos, home services and repair (including plumbing, HVAC, and electrical), interior design, taxi, limo, rideshare, lawn care, parking, swimming pool cleaning, dating, Teleflora, wedding planning, weight loss, personal training, clothing alteration, candy, pop, bottled water, car repair (including brakes, scheduled maintenance, and body repair), and ice.
When debate on LB 289 starts, Nebraskans will feel a bit of déjà vu: The bill is premised on the notion that Nebraska can finally get property tax relief if we raise a bunch of other taxes to lower property taxes. The truth is that this method has been tried and failed.
In 1990, the Legislature passed LB 1059 which created the school aid formula known as the Tax Equity and Educational Opportunities Support Act (TEEOSA). With this bill, the Legislature raised the sales and income tax over the veto of Governor Kay Orr. School property taxes went down for two years and by the third year we were back at the same level as 1990 with more than double the spending on state aid to schools and no tax relief.
Subsequent attempts to achieve property tax relief have continued to involve the TEEOSA formula. For example, in 1999, the Legislature increased state aid to schools by about $134 million, or a 21% increase. By 2001, just two years later, school property taxes set a new record high. Between 2007 and 2009, the Legislature boosted state aid another $183 million, or 19% over two years. School property taxes went up $153 million over the same period of time, setting new record highs.
Every time the Legislature tries to do tax relief this way, we ended up with record high property taxes. It’s why we’re here again trying to fix our property tax system. If Senators raise taxes yet again, we can expect the same results. We are going to end up with both higher sales taxes and higher property taxes at the end of the day.
If Senators actually want to fix the problem, they need to break the seemingly endless tax-and-spend cycle. The old idea of “raising revenues” (increasing taxes) to provide property tax relief has failed in the past, and it will fail again. Instead, Nebraskans need the Legislature to take a fresh approach that actually controls spending within the state budget, so the state can provide direct relief, and puts limits on growth in local property taxes as well.
In contrast to the Legislature’s scheme to shift taxes and accelerate spending, I support property tax relief that controls spending. Each of the past five years, I’ve made property tax relief my top priority. We’ve increased the Property Tax Credit Relief Fund by 60%, which is good progress, but there is much more that needs to happen.
This year, I’ve outlined three proposals for additional relief:
• Increase the Property Tax Credit Relief Fund by 23%, which is $51 million each year.
• Create a statutory floor of $275 million in the Property Tax Credit Relief Fund.
• Give the people of Nebraska an opportunity to vote on a constitutional amendment to limit annual increases in local property taxes.
I’m also open to working with Senators on additional tax relief by controlling spending. I strongly oppose, however, squandering taxpayer money on repairs that won’t actually fix our broken system.
The Legislature cannot just endlessly raise state sales and income taxes every time property taxes get out of hand. That’s why this new approach of controlling spending is so critical. If they do end up raising taxes, our state will be in an even worse position in just a few years. To tell your Senator to scrap LB 289 and to start working on real and sustainable tax relief, you can find their information at www.NebraskaLegislature.gov. To contact me, you can email firstname.lastname@example.org or call 402-471-2244.
Pete Ricketts is the governor of Nebraska.