Links to and reflections about interim studies on income, property taxes
It’s been a busy couple weeks in Lincoln as lawmakers wrapped up interim studies in advance of the 2015 Legislative session. Among the studies completed and reported on were Revenue Committee studies on income taxes and property taxes.
Credits, deductions, exemptions a main focus of income tax report
The income tax report by Mary Jane Egr Edson – legal counsel for the Revenue Committee — focused solely on Nebraska’s personal income taxes. Among the ideas Egr Edson discussed was reform of deductions, exemptions and credits as a possible way to change the income tax.
Sen. Galen Hadley, chairman of the Revenue Committee, suggested that exemptions, deductions and credits be a focus of an interim study next year. Hadley also repeatedly reiterated the need for lawmakers to be very cautious when making changes to the tax system to avoid some of the revenue problems experienced in other states where taxes were cut recently.
Property tax report notes lowering ag value, income based valuations not silver bullets
While presenting about property taxes in Nebraska, revenue analyst Bill Lock noted that reducing agricultural land values from 75 percent to 65 percent – an idea pushed by some as a way to lower property taxes — would not treat all Nebraskans the same.
OpenSky research shows that if agricultural land valuations were reduced, farmers and ranchers near urban areas would see significant property tax reductions as taxes could be shifted onto nearby residential and commercial property. Such shifts would not be possible, however, in more rural parts of the state meaning property tax levies would have to increase or schools and other services would need to be cut.
Lock also discussed some potential problems regarding a switch to using an income-based valuation system rather than Nebraska’s current practice of valuing property at market value. For example, Lock said income-based valuations use multi-year averages with one year delays. This means changes in crop prices take a while to show up as changes in assessed values and can cause agricultural producers to pay property taxes that don’t reflect their current income levels.
Options for property tax assistance include circuit breakers, tax credits
Lock mentioned tax credits or “circuit breakers,” which provide property tax assistance based on one’s income-to-property tax ratio, as possible methods of lowering property taxes. Lock also noted that Nebraska would fall more in line with other states if it exempted agricultural personal property.
OpenSky glad to see studies looked at valuation, called for caution
In a statement to media after the hearings, OpenSky’s executive director Renee Fry said she was glad the committee took a look at agricultural land valuation, as data show Nebraskans in highly agricultural counties pay more in combined property and income taxes than those in more urban areas.
Hadley’s calls for caution regarding tax changes were reason for optimism as well, Fry said.
“We also feel the reports made an important point – that it is vital that the state thoroughly examine any proposed tax changes to see who would be affected and how,” she said. “Some other states didn’t do thorough examinations before they made changes and now face significant revenue shortfalls and other negative consequences.”