Midlands Voices: Nebraska special session helped property owners in significant ways

The 2024 special session concluded with a modest impact on the property tax crisis in Nebraska. While we had hoped to accomplish more, and despite recent claims by naysayers, Legislative Bill 34 achieves significant goals and will positively impact Nebraska property owners.

LB 34 does three significant things. It applies spending restrictions on local taxing authorities, it front loads the property tax credit and it increases the total dollars that flow into the property tax relief fund.

First, and most impactful, LB 34 places spending restrictions on local jurisdictions and local property taxing authorities. It is widely agreed that spending, or tax-taking, is truly the root of the problem.

While some cities, counties and other taxing authorities have made sound fiscal budgeting decisions, the statewide year-over-year rate of increase averaged nearly 20% higher than consumer inflation over the past 20 years. Rising property valuations created a windfall that allowed budgets to expand while maintaining, or even cutting, levies. This bill says that those taxing authorities may adjust their budgets based on a rate of inflation that is comparable with other government spending, rather than simply growing spending along with valuation increases. It places a floor in that policy that protects budgets at a flatline if in years of no inflation or even deflation.

These caps are a first step towards disconnecting rising valuations from rising tax-taking. This language does not completely negate the valuation problem, but it does slow the impact of runaway increases. Further, the spending caps may be overridden by a simple majority vote of the people held during a regularly scheduled election, giving an even greater voice to citizens in how their tax dollars are spent.

Secondly, LB 34 front loads the 1107 property tax credit. Slightly over 50% of Nebraska property owners took this tax credit on their state income taxes in previous years. With LB 34, that cumbersome and expensive process is eliminated. Going forward, the credit will simply appear on your property tax statement as a discount. For those with a mortgage and who escrow these funds, a reduction in their monthly house payments is likely in the years to come. Approximately 45% of Nebraska property owners have not claimed this credit on their income taxes in past years. This benefit will finally accrue to those modest earners who need it most.

Thirdly, LB 34 provides an additional $185 million into the newly created School District Property Tax Credit fund. For those who claim that LB 34 is a tax increase, not a tax cut, it is noteworthy that $565 million will be paid out in FY 2024 and $750 million will be paid out in FY2025, an increase of nearly 33%.

Of additional note is that proceeds from casino gambling increased the property tax credit fund by $21 million over twenty months from December of 2022 through July of this year. It is anticipated that this contribution will continue to grow in the coming years, offering additional relief to Nebraska property owners.

We anticipate that January will bring new ideas to the floor for additional tax relief and we look forward to moving those forward that bring the greatest level of relief to taxpayers while maintaining a strong and fiscally responsible budget.

Sen. Lou Ann Linehan was first elected to the Nebraska Legislature in 2016. She currently serves as the Chair of the Revenue Committee and is also a member of the Education Committee.

Sen. Brad von Gillern was a part of the Omaha business community for many years before being elected to the Legislature in 2022. He currently serves on the Banking, Insurance and Commerce Committee, and is Vice-Chair of the Revenue Committee.