LINCOLN, Neb. – The tax package backed by Gov. Pete Ricketts may have failed this year, but some advocates and senators say they still hope to salvage a plan to lower property taxes in the session’s final days.
Senators say Ricketts’ comprehensive tax proposal faltered because it focused too much on the state income tax and not enough on property taxes. The bill died last week when supporters fell six votes short of the 33 needed to overcome a filibuster.
Lawmakers are meeting privately to try to craft a last-minute plan that focuses primarily on property taxes, said Sen. Curt Friesen of Henderson. Friesen declined to give specifics but said any plan will need support from both rural and urban senators to pass.
“I still think we can do something,” said Friesen, a farmer who supported Ricketts’ tax package. “We’re not done until we’re done. If we could have gotten the focus on property taxes as the primary issue, I think we would have had the votes to get it done.”
But the effort is far from guaranteed. Sen. Jim Smith of Papillion, chairman of the tax-focused Revenue Committee, said lawmakers had the chance to pass major property tax changes through the Ricketts tax bill, which he introduced on the governor’s behalf.
Farm groups said the property tax portion didn’t do enough to help their members whose property tax bills have soared. Property taxes on agricultural land increased nearly 164 percent between 2006 and 2016, according to the Nebraska Department of Revenue.
Smith, a small business owner, said he wouldn’t support any major tax legislation that didn’t include income tax cuts.
“I don’t see the probability of doing anything this session,” he said. “I believe we had an opportunity, but there were certain special interests that fought against that, against giving tax relief to families and businesses.”
At a press conference Friday, Ricketts said he didn’t know how much opportunity lawmakers would have to pass a major tax package this year, but “we will certainly continue to work on it over the summer and into next year.”
The plan lawmakers debated would have lowered Nebraska’s top personal and corporate income tax brackets, adjusted the way agricultural land is valued for tax purposes, capped statewide property tax growth and expanded the earned income tax credit for low-income residents. Income tax cuts would have gone into effect when state revenue grows beyond a preset amount.
Critics noted it would have given a much larger tax benefits to the wealthy and could have led to higher taxes for some middle-income earners if local governments raised their property tax levies to compensate for lost revenue.
Nebraska Farm Bureau President Steve Nelson said the plan didn’t address the imbalance between property taxes, which finance local government, and sales and income taxes, which pay for state government expenses. The Ricketts bill would have provided about $1 in property tax cuts for every $10 in income tax reductions, according to the group’s analysis.
Public K-12 schools receive a combination of local and state money, but a growing number of rural, land-rich districts have lost state aid because of rising property values. Property tax payers have had to pay the difference even though farm incomes have fallen.
“Even though there aren’t a lot of days left in the legislative session, there’s still time to do something that would provide meaningful tax relief for property tax payers,” Nelson said.
Nelson said the Legislature’s vote on the stalled tax plan shows that property taxes should remain a bigger priority for senators than the income tax.
“There was not an appetite to address the income tax in the way that was being proposed,” he said. “I just think it’s very, very clear that more needs to be done for property tax payers.”
Smith said he tried to work with groups including the Nebraska Farm Bureau, which ended up opposing his bill because the group’s leadership concluded that it didn’t do enough to ease the tax burden on agricultural land owners.
“I’m struggling with the sincerity of their desire for tax relief when they were a major participant in killing it,”