105 Measures Introduced as Special Session Begins

By Gordon Hopkins Last week, Governor Jim Pillen issued a proclamation calling for a special session of the 108th Nebraska Legislature. The session will convene Thursday, July 25 at 10:00 a.m. Per a statement from the governor, “the scope will be limited to enacting legislation related to reducing state property taxes.” The Nebraska Legislature formally convened the special session on Thursday, July 25, 2024. The first three days of the session were for bill introductions. A total of 105 measures were introduced.The very first legislative bill, LB 1, “Adopt the Property Tax Growth Limitation Act, the School District Property Tax Relief Act, and the Advertising Services Tax Act and change revenue and taxation provisions,” was introduced by Senator Lou Ann Linehan (R-District 39. The 139-page bill, introduced at the governor's request, was originally meant to go to the Revenue Committee, which Linehan chairs. But on Friday, July 26, the Referencing Committee voted five to four to send the measure to the Government, Military and Veteran Affairs Committee instead. Later that day, two lawmakers changed their votes and it was returned to the Revenue Committee. After bill introduction was completed, testimony was heard. Is the Plan a Tax Decrease or a Tax Shift?Many critics have described Pillen's plan to reduce property taxes as shifting the burden elsewhere, most notably sales taxes. Governor Pillen testified before the Revenue Committee the morning of Tuesday, July 30, “This plan is not a tax increase. This is a tax decrease. LB 1 will reduce the total number of taxes collected by just under a billion dollars. This will be the largest property tax reduction in state history.” Senator George Dungan (D-District 26), who serves on the Revenue Committee, said, “I received a letter from a manufacturing company here in Lincoln saying that, based on their calculations, they would anticipate that under this plan, they're looking at about a 515 percent increase in taxes, in sales.” Dungan asked the governor, “How is this not a sales tax increase? If we're talking about broadening the sales and use tax base, that does inherently mean that we're going to be paying sales tax on more items as a state.” The governor disputed the accuracy of the calculations Dungan cited, “Maybe they've listened to whoever that's trying to derail fixing the property tax problems so they can stay relevant. I don't know what the issue is.” Is There a Benefit to Renters?Dungan said, “The individuals who don't own property are now, if this plan were to go forward, going to be increasing their sales tax they're spending, their sales and use tax they're spending, without receiving any direct benefit. Now I understand there is at least an argument that the rent is not going to go up as much if the property tax relief is achieved but what do I say to my friends and my constituents who are reaching out to me and saying ‘I'm going to be paying more in taxes and I'm not getting any benefit.’ Why would I support this plan?” “Number one, I think we'd all agree that if we don't do anything,” said Pillen. “That property taxes are going to keep going up, they'll be going up a million dollars a day, and rent will continue to go up.”“Number two is really, really simple. The first step would be when we get property tax under control, I think we all agree our goal is to help people have a better jobs and be able to help people be able to live the American dream and own their homes,” said the governor. “And then, number three, I'm a believer in free market. It's not going to change immediately the first day.” Erin Feichtinger, policy director of the Women’s Fund of Omaha, disputed the suggestion that lower property taxes would lead to lower rents: “The assertion that property tax relief for landlords will translate into lower rents for tenants is not possible in our current rental market without an intentional effort by our Legislature to pay attention to renters and to include them in that relief.”With renters in mind, Senator Eliot Bostar (D-District 29) introduced LB14, that would create a refundable income tax credit for individuals who rent a house, apartment or other residential unit for use as their primary residence. The credit would equal five percent of the total amount of rent paid during the previous taxable year. Would the Plan Impact the Ag Industry?While lowering property taxes would be beneficial to farmers, there are other elements of Pillen's plan that concern members of the ag industry. As a result, Mark McHargue President of the Nebraska Farm Bureau, testified in opposition to LB 1, “I'm here on behalf of the groups in opposition of LB 1, largely because this bill contains provisions that violate a widely accepted principle of good taxing policy and economic growth, that being the taxation of inputs into production. LB 1 would establish a two percent tax on machinery. It seems like that's up for debate. Possibly four percent.” “It is commonly known that taxing inputs into production makes products more expensive for both producer and the end consumer due to the compounding of taxes, commonly referred to as tax pyramid. This approach to taxation is widely criticized by tax experts across the country as detrimental to economic growth. Moreover, the new form of taxation will make Nebraska farmers less competitive compared to those in the neighboring states,” said McHargue. “Our members are competing with farmers in Iowa and Kansas, which are also in the top agriculture production states, neither states tax inputs on agriculture machinery and equipment.” What Other Measures Have Been Introduced?Just a few of the other measures introduced include: LR2CA, a proposed constitutional amendment, was introduced by Senator Tom Brandt (R-District 32) that would authorize the Legislature to provide a different method of taxing owner-occupied housing. LB11, introduced by Senator Machaela Cavanaugh (D-District 6) would raise the tax on a pack of 20 cigarettes from 64 cents to $2.14, effective October 1, 2024. The increased revenue would be split between the Property Tax Credit Cash Fund to be used for property tax credits and the Medicaid Waiver Cash Fund. LB11 creates the Medicaid Waiver Cash Fund, to be administered by the Department of Health and Human Services, to be used for Medicaid waiver services. LB 27, sponsored by Senator Carol Blood (D-District 3), would provide refundable income tax credits to offset the cost of property taxes for homeowners or renters with an adjusted gross income under $100,000 for married couples and under $50,000 for single filers. The bill would also offer credits to farm and ranch land owners whose farming operations bring in less than $350,000 a year. LB34, sponsored by Senator Tom Brewer (R-District 3), would establish a four-year moratorium on property valuation increases.

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