LINCOLN — A state legislative committee balked Wednesday at advancing measures that would lower property tax valuations on agricultural land, a change that is backed by farm groups and Gov. Dave Heineman.
But lawmakers are seeking another way of delivering property tax relief to all landowners by urging an increase in the state's property tax credit program.
The Legislature's Revenue Committee met Wednesday to begin crafting tax legislation for the 2014 session. The discussion comes on the heels of a special study by state lawmakers last year of tax “modernization” ideas.
One idea that grew out of the study was to lower the valuation of farm and ranch land for tax purposes in response to the explosive growth in values of rural properties. The Nebraska Farm Bureau, as well as Gov. Dave Heineman, have supported such a reduction to counter a shift of the overall property tax burden to ag land.
But several senators on the Revenue Committee said two bills that would lower the valuation from the current 75 percent of market value to 65 percent would not deliver tax relief to all owners of ag land.
Counties that are primarily rural, senators said, would probably not see lower property tax bills because schools and counties would be forced to raise their tax rates to make up for the loss of valuation and revenue.
After taking no action on the two bills, the committee opted to write a letter urging a $47 million increase in the state's current property tax credit program. Currently, the state puts $115 million a year into the credit program, which delivers about a $99 rebate to the owner of a $150,000 home or property.
State Sen. Galen Hadley of Kearney, chairman of the Revenue Committee, said the property tax credit program was the surest and swiftest way to deliver a property tax break to Nebraskans. He said that $47 million would bring the credits up to the level that was offered in 2008, the high point of the credit program.
Hadley, during an executive session, told committee members that he intends to conduct a study this summer of property tax relief options. There are several, he said, including increasing state aid to local government and factoring in the income-producing potential of a property into its valuation.
“We're trying to get it, but we want to get it right when we do it,” Hadley said.
The Legislature's Appropriations Committee is currently considering a trio of bills that would increase the credit program, including one that would double the allocation.
The chairman of that committee, Omaha Sen. Heath Mello, recently predicted that the committee would increase funding for the credit program, but the size of the increase is yet to be determined.
Jay Rempe of the Farm Bureau said he was pleased that senators recognize the need for property tax relief but his organization still thinks ag land valuations should be lowered.
The Revenue Committee did advance three minor tax reduction proposals Wednesday.
They include Legislative Bill 986, which would expand the homestead tax exemption program to more elderly and disabled Nebraskans and disabled veterans. It would provide about $4.6 million in tax reductions.
Also advanced was LB 850, which would provide a homestead tax exemption for developmentally disabled homeowners, and LB 1087, which would expand an exemption to 100 percent service-related disabled veterans who don't qualify for it now. Those two bills would provide about $1 million in tax reductions.