A scaled-down property tax relief proposal stalled in the Legislature May 22 after a failed cloture vote.
As introduced by Albion Sen. Tom Briese, LB183 would reduce the valuation of farm and ranch land for the purpose of school bond issues.
Briese introduced an amendment on select file that would replace the bill. He said the amendment is a simplified version of LB289, introduced by Elkhorn Sen. Lou Ann Linehan. That bill, which stalled on general file, is meant to reduce property taxes by raising the state sales tax rate and directing the additional revenue to Nebraska’s public schools.
Briese said his amendment would provide property tax relief for all Nebraskans and help modernize the state’s sales tax code while avoiding contentious debate about school funding reform.
“Most importantly,” he said, “it will give us an opportunity to show Nebraskans that we care about their plight, that we hear their concerns and that we’re going to do something about the property tax crisis in Nebraska.”
The amendment would include several measures also included in LB289. It would repeal a personal property tax exemption and impose sales tax on bottled water, candy, soft drinks and ice.
It also would impose state sales tax on approximately 20 services, including motor vehicle maintenance and repair; maintenance, painting and repair of single-family homes; commercial lawn care; dry cleaning; beauty and personal care services; wedding planning; personal training; and storage, moving, plumbing, HVAC and certain veterinary services.
The amendment would increase a state refundable income tax credit based on the federal earned income tax credit, which is intended to benefit working people with low to moderate incomes. The state credit would increase from 10 percent to 13 percent of the federal credit.
The proposal would direct the state treasurer to credit sales and use tax revenue generated by the bill’s changes to the state’s Property Tax Credit Cash Fund. It also would set the amount of credits granted by the fund to at least $275 million per year beginning in tax year 2019.
Briese said the changes would generate approximately $100 million in additional revenue each year.
Linehan supported the amendment, saying the major changes in her LB289 proved “too heavy a lift” to accomplish all at once. Briese’s amendment would be a smaller step toward addressing high property taxes and school funding, she said.
“It’s a step in the right direction—not as big a step as I would like—but at least it’s a step,” Linehan said.
Lincoln Sen. Kate Bolz said she was hesitant to support the amendment because the proposed increase in the state credit based on the EITC would not offset the regressive effects of removing sales tax exemptions.
Only working individuals with families qualify for the credit, she said, meaning some low- and moderate-income Nebraskans could end up paying more in taxes under the proposal.
Sen. Mike Groene of North Platte opposed Briese’s amendment, saying the Property Tax Credit Cash Fund is unfair because it distributes credits based on valuations, not taxes paid. He said he supported the proposed tax increases in LB289 because the bill also would more fairly distribute state aid to schools.
“I will vote for a tax increase if it is based on good, sound policy,” Groene said. “As a fiscal conservative, I will not vote [for] anything that throws money at something—this throws money at a problem.”
Bayard Sen. Steve Erdman said he was concerned that passing Briese’s proposal would lead some senators to claim that the Legislature has solved the property tax problem when it has not. He said the amendment lacks spending controls and would provide too little property tax relief.
“This is not a significant amount to anybody, anytime, anyplace,” he said. “We are at the end … of the session, and we’re now grasping at straws trying to figure out how to get property tax relief.”
After three hours of select file debate, Briese filed a motion to invoke cloture, or cease debate and vote on any pending amendments and the bill. The motion failed 23-7. Thirty-three votes were needed.
LB183 is unlikely to be scheduled for further debate this session.