Tax relief measure passed over, special session suggested

Lawmakers passed over Gov. Jim Pillen’s property tax relief proposal on final reading April 18 without voting on it, ending consideration of the bill this session.

LB388, introduced by Elkhorn Sen. Lou Ann Linehan, would impose state sales and use tax on the purchase of certain items and services and eliminate exemptions for others. The additional revenue would be used to provide property tax relief.

The bill would end the refundable income tax credit against school taxes paid that was created under LB1107 in 2020. It instead would “frontload” the funds allocated to the program by disbursing them to counties, which then would credit each parcel based on the school district taxes levied. The credit would appear on the parcel’s property tax statement.

LB388 also would limit the annual increase in a political subdivison’s property tax request to no more than 3% or the percentage change in the consumer price index, whichever is greater. Several exceptions to the limit would apply.

The Legislative Fiscal Analyst estimates that the bill would reduce state general fund revenue by $160.5 million in fiscal year 2024-25. It would increase general fund revenue by approximately $35.8 million in FY2025-26 and $40.8 million in FY2026-27.

Sen. Julie Slama of Dunbar opposed LB388 and offered a motion to return the bill to select file and strike the enacting clause. She said the only Nebraskans who would pay less in taxes under the measure are the minority of property owners who currently do not claim the LB1107 credit.

Slama and others said the Legislature could create a better proposal to reduce property taxes in a dedicated special session.

“I would rather handle this specific issue, our tax code, in a longer process over [a] special session when it’s the one thing we’re focused on,” she said.

Linehan said LB388 would result in a tax shift, not an increase, and that the proposal would do what many stakeholders have suggested by broadening the state’s sales tax base. Linehan added that she was “willing” to return for a special session on tax policy.

“But I hope we have a lot of conversations between now and then about all your perfect answers to this problem,” she told opponents, “because it’s easy to say ‘no, no, no.’”

At Linehan’s request, Speaker John Arch of La Vista passed over LB388. The Legislature moved to the next item on the agenda without voting on the bill, ending debate on it this session.