Assessment cap creates shortfalls, tax shifts and disparate impact (Soundbites included)
An analysis from OpenSky Policy Institute shows the assessment growth cap proposed in LB 958 would lead to shortfalls for schools and other localities, tax shifts and would treat taxpayers disparately depending on where they live.
Such unintended consequences are why LB 958’s proposed cap on the assessed value agricultural land is not a good approach to lowering property taxes in Nebraska, said Renee Fry, OpenSky’s executive director.
“Our analysis falls in line with other research, which shows assessment caps are not an effective, efficient or equitable way to lower property taxes,” Fry said.
The OpenSky analysis shows the cap would:
- Create shortfalls for schools and other localities;
- Provide the largest tax reductions for farmers and ranchers near urban areas where property taxes can be more readily shifted and shared with nearby business and residential property owners; and
- Lead to levy increases or service cuts in more rural areas where there aren’t as many business and residential property owners with whom to shift and share the responsibility of paying for local services.
The cap would have a similar impact to proposals to reduce the taxable value of agricultural land from 75 percent to 65 percent of market value, but unlike those proposals, the assessment cap compounds and continually separates the taxable value of agricultural land from market value, the OpenSky analysis shows.
For example, had the cap been in effect beginning in 2005, agricultural land this year would be taxed at 30.7 percent of market value as opposed to the current level of 75 percent. Had the cap been in place for the current year, it would have created a $212 million shortfall for local governments including a $144 million for K-12 schools; $42 million for counties; $12 million for community colleges; and $11 million for other local entities.
“Nebraska agricultural landowners have seen their property taxes increase dramatically in recent years but our research shows using an assessment cap to address this scenario is likely to create more problems than it solves,” Fry said.
Download a printable PDF of this analysis.
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