Paul Hammel
LINCOLN — A state legislative committee moved closer Monday to finalizing a much-anticipated property tax relief bill, with a key senator saying it might not reach the goal of $1 billion in relief sought by Gov. Jim Pillen.
The Legislature’s Revenue Committee also got a bit of homework Monday evening: a list outlining possible sales tax exemptions to eliminate, and what size increase to prefer in state sales taxes.
“Go through them. Tell me ‘yes,’ ‘no’ or ‘maybe,’ ” said State Sen. Lou Ann Linehan, who chairs the powerful committee that crafts state tax policy.
Later, she gave this assessment of where things stand on the top priority of the 2024 session: “I think we’re making some progress.”
The homework came after a flurry of activities Monday — Day 45 of the 60-day session — concerning the long-anticipated, and as-yet-unfinalized, tax relief proposal. Developments included an unusual, closed-door briefing Monday morning by the Governor’s Office with the eight-member Revenue Committee that excluded news media.
Pillen has “guaranteed” that lawmakers will deliver a $2 billion reduction in local property taxes — actually $1 billion this year on top of $1 billion passed in recent years — even if it takes meeting “every day until Christmas.”
Sales tax hike decried as ‘shift’
But many of his ideas, and in particular a 1-cent increase in state sales taxes, have faced a rocky reception in the Legislature.
Business and retail groups howled that eliminating tax exemptions on soda pop and candy, legal and accounting services, and farm repair parts would hurt Nebraska outlets and force transactions across the border.
Lobbying groups mobilized to oppose a proposed $2-a-pack increase in cigarette taxes and higher taxes on vaping products.
Usually reliable allies of the governor, including the Platte Institute, the Nebraska Chamber of Commerce and Americans for Prosperty, have decried the idea of raising sales taxes to lower property taxes, as a “tax shift” that really isn’t tax relief.
But Linehan, without revealing exact details of the tax plan, said she thinks Nebraskans will be OK with a hike in the state sales tax rate if they see a reduction in their property taxes this fall.
The increase envisioned has been from 5.5 cents to 6.5 cents, which would rank Nebraska at No. 9 highest in the country, matching adjacent Kansas.
Linehan added, however, that it will be up to the Revenue Committee to decide how much to raise the sales tax rate in the final draft of the tax bill. The increase, she said, might be less than 1-cent, depending on the strength of state tax receipts.
‘Don’t know if we’ll get $1 billion’
Pillen has sought, through an increase in sales taxes and new taxes on previously exempt items, to raise $1 billion a year in new revenue, to allow a $1 billion reduction in local property taxes. Coupled with past tax relief bills, that would add up to a 40% overall drop in property taxes, the governor’s much-stated goal.
But Linehan added this: “I don’t know if we’re going to get to $1 billion in one year.”
A key portion of the tax proposal, the senator said, will be a “front loading” of current state tax credits against property taxes, along with the new cuts. Pillen has said that currently, all eligible Nebraskans have not been taking the tax credit available when filing state income taxes, and they need to pay an accountant to get it.
But front loading the tax credits has proved to be complicated, which has delayed a final draft of the tax-relief package.
Linehan said the tax relief will be delivered via a revised state aid formula to K-12 schools, with a goal of providing tax relief to every property owner, but providing more funds to districts with the highest tax levies.
That would be good news to places like Lincoln, Millard and Omaha, which have high tax levies, and to rural districts that generally don’t have high-dollar farm land.
Linehan said the Revenue Committee would meet again Tuesday to work further on the property tax relief bill.