Governor expects ‘historic’ property tax relief for Nebraskans
OMAHA, Neb. (WOWT) - Gov. Pete Ricketts announced Tuesday that this budget cycle will provide significant amounts of property tax relief for Nebraskans.
Ricketts says addressing property tax relief has always been a number one priority.
Nebraska’s governor worked with Legislature from 2015 to 2019 to nearly double the Property Tax Credit Relief Fund per year. In 2020, they worked again to pass LB 1107, a landmark property tax relief bill that created a refundable property tax credit able to be claimed for the first time. Additionally, Ricketts said, the 2021 session mainline budget bill further increased the Property Tax Credit Relief Fund to $313 million annually.
During the Legislature’s 2021 regular session, Senators and Ricketts limited spending growth to 2.4% for the current two-year budget. The four biennial budgets Ricketts and others have developed have an average annual growth rate of less than 2.5%.
Nebraska has also continued to see rapid growth while keeping spending in check. State revenues grew 19.2% beyond projections in the past fiscal year and they’re exceeding expectations again this year.
Ricketts says this is important because the Refundable Income Tax Credit created in LB 1107 is set to grow as tax revenues exceed expectations. Last year’s credit was worth $125 million, offsetting 6% of local school property taxes. This year’s credit will jump to $548 million, offsetting 25.3% of local school property taxes. Ricketts says taxpayers will receive this credit when they file their state income taxes in 2022.
By controlling spending and growing Nebraska, Ricketts says, Nebraskans will see over $1.9 billion of direct property tax relief and over $2 billion of estimated total tax relief over the next two years. Because of this, tax relief is expected to represent nearly 20% of the State’s overall general fund budget for the current two-year budget.
In addition to property tax relief, Ricketts and other lawmakers agreed upon various other important tax measures in 2021:
- Veterans Tax Relief, an exemption for 100% of military retirement benefits from state income taxation.
- Social Security Tax Relief, an exemption for 50% of Social Security income that will be phased in over time.
- Ag Land Valuations Reduction, reducing Ag land valuations from 75% of market value to 50% of market value for the purposes of property taxes for bond issues - reducing the tax burden on farmers and ranchers.
- Water Tax Exemption, an exemption for residential water service from tax sales.
- Truth in Taxation, legislation passed “Truth in Taxation” legislation requiring local governments to notify taxpayers whenever their property taxes are scheduled to increase by more than 2%.
- Job Creator Tax Relief, began the process to align taxes on job creator income with that of taxes on individual income.
While these are encouraging signs, Ricketts says there’s still more work to do in making sure state growth benefits go to Nebraska families instead of local governments. Local government property taxes have increased 4.3% per year over the past decade in Nebraska, that’s a 51.8% increase over 10 years while income grew 48% and inflation just 18.7% during the past decade.
Ricketts is also wary of local governments lowering their levy rates to adjust for property valuation increases. Ricketts says that a year-over-year jump in property valuation means taxpayers see their property tax bills go up substantially, even if levy rates remain unchanged.
Earlier this year, Senator Tom Briese proposed LB 408 to cap the annual growth of local government property taxes at 3%. A limit like this would protect Nebraskans from seeing their tax bills go up faster than their family budgets can afford. Under LB 408, local governments would retain authority to override the 3% limit with voter approval. The override process provides flexibility but may also empower voters to block tax hikes.
Lawmakers were four votes short of advancing LB 408 last spring. Ricketts says Nebraskans need to engage in the legislative process in order to win support for additional tax relief.
“We have historically low unemployment and strong growth in Nebraska, and the State is delivering record amounts of tax relief. But there’s still more to do. We must control spending at the local level to keep taxes low. We need to develop our workforce to fill the great-paying jobs we’re creating. And we have to promote Nebraska globally to open new markets and attract international investment,” wrote Ricketts in Tuesday’s press release.
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