Two-tier property valuation system proposed

The Revenue Committee heard testimony Feb. 12 on a proposal to change Nebraska’s property valuation system and limit annual property tax increases.

LR292CA, introduced by Omaha Sen. Bob Andersen, would allow voters to amend the state constitution to require two valuations for each parcel of real property in Nebraska. If approved by the Legislature, the measure would be placed on the November 2026 general election ballot.

Under the proposal, real property would be valued for property tax purposes at its taxable market value, which would be set at its 2026 assessed value. Except in certain circumstances, the taxable market value could not increase from year to year by more than an allowable growth percentage, equal to the Consumer Price Index for All Urban Consumers.

A property’s taxable market value would be adjusted to its fair market value when it is purchased, when it is newly constructed, when parcels are combined or when a change of ownership occurs after the 2026 assessment.

Andersen said LR292CA would lead to more predictable property tax bills for Nebraskans at a time when tax increases by local governments have made home ownership unaffordable.

“It is paramount that we stop taxing people out of their homes and provide them a fair path forward,” he said.

As introduced, Andersen’s proposal would allow for an election to authorize a bond levy during an officially declared emergency. The authorization would require at least half of registered voters of the applicable taxing entity to vote in the election and at least two-thirds of votes to be cast in favor.

Andersen brought an amendment to the hearing that would remove the election provision from the proposal.

Jack Baum of Americans for Tax Reform testified in support of the measure, saying property valuations in Nebraska continue to increase faster than inflation and wage growth.

“Meaningful reform will require multiple policy changes,” he said, “but tying assessed value increases to the Consumer Price Index is a strong step in the right direction, one that brings predictability back into the system, restores a measure of fairness for taxpayers and ensures property taxes grow in line with what families can actually afford.”

Also in support was Doug Kagan of Nebraska Taxpayers for Freedom. He said the measure would protect Nebraskans from unexpected increases in their property tax bills and force local governments to cut spending.

Testifying in opposition to LR292CA was Meg Harris on behalf of an association of cities in Sarpy County. She said local governments currently at or near the maximum levy limit would not be able to make up for lost property tax revenue under the new valuation system, requiring them to cut spending on public safety, infrastructure and services.

Colby Coash testified in opposition to the measure on behalf of the Nebraska Association of School Boards. He said LR292CA would “engrain” the new valuation system in the constitution, making it difficult for the Legislature to address any unintended negative effects on Nebraska’s public schools, which are heavily reliant on property taxes.

Nicole Fox of the Tax Foundation gave neutral testimony on LR292CA. Although assessment limits benefit existing property owners, she said, they shift the tax burden to new homebuyers, resulting in houses with similar fair market values having substantially different tax bills based only on when they were purchased.

Fox said the proposal also could exacerbate Nebraska’s affordable housing shortage by disincentivizing new housing construction and discouraging current homeowners from moving or downsizing.

The committee took no immediate action on the measure.