It has often been said that it is helpful to understand history to avoid repeating the mistakes of the past. This year, state senators have proposed initiatives aimed at achieving property tax relief. Many of these ideas have been tried before in Nebraska’s decades-long pursuit of property tax relief. As the Legislature works to address the state’s high property taxes, it is important to keep in mind the history behind attempts to relieve property taxes, and what has worked and what has not. As the Legislature works this session, I am sharing with you a short guide to past attempts to tackle high property taxes.
Many trace Nebraska’s modern tax code to the election of 1966 when the voters of Nebraska repealed the state’s authority to levy property taxes. This led to the creation of the state’s income and sales taxes by Governor Norbert Tiemann and the Legislature. The vote by the people, however, left in place the ability of local governments to levy property taxes. While repealing the state’s authority to levy property taxes was dramatic, it did not stop property taxes from going up. Property taxes went down for two years before jumping 10 percent in 1969.
In 1985, the Nebraska Legislature passed and Governor Bob Kerrey signed LB 662, which made a new attempt at property tax relief by raising the state’s sales tax one percent to increase education funding. While the Legislature narrowly passed this bill, the people of Nebraska repealed the tax increase in the 1986 election.
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. This did not reduce property taxes, which continued to increase in the following years.
Subsequent attempts to achieve property tax relief have continued to involve the TEEOSA formula. For example in 1998, the Legislature increased state aid through TEEOSA by about $125 million, or a 27 percent increase. In 1999, property taxes still went up about $48 million. In 2005, the Legislature boosted state aid another $70 million, or 10 percent in one year. In 2006, property taxes went up $161 million statewide.
These are just a few of the examples of how previous Governors, Legislatures, and the people of Nebraska have tried to address our high property taxes. These approaches, which are well-intentioned, have not ultimately delivered long-term relief. From 1980 to 2018, the amount of property taxes levied by local governments has increased from about $700 million to over $4 billion, or about 5 percent annually on average.
These are important lessons as we approach this subject again in the 2019 legislative session. Some senators want to increase several kinds of taxes to achieve property tax relief. These include tax hikes on food, home remodeling, vehicle repairs, and haircuts among many other kinds of tax hikes. These approaches have not delivered long-term relief in the past, and they will not deliver it in the future.
To achieve structural reform going forward, we must control spending. That is why Revenue Committee Chairwoman Lou Ann Linehan and I have proposed a cap on the growth of property taxes levied by local governments. Our proposal is a constitutional amendment, which would require a vote of the people after the Legislature approves it. Without a limit on the growth of property taxes, taxpayers will continue to see steep property tax increases.
This week and in the coming weeks, the Revenue Committee will be holding hearings on proposals to achieve property tax relief. As they listen to proposals, Senators are also listening to you. Please consider contacting your Senator to let them know that you would like to see property tax relief that controls spending and that does not repeat the failures of the past. If you have questions on this or on any other matter, I hope that you will contact me at firstname.lastname@example.org or 402-471-2244. Together, we can finally accomplish property tax relief.
Pete Ricketts is the governor of Nebraska.