The Legislature on Wednesday and Thursday will consider property tax breaks and corresponding income tax cuts that together would restrict the revenue that’s available to fund important programs that all Nebraskans rely on for years to come.

First up is debate on LB 243, a framework for property tax breaks that, as amended, would commit nearly $1.9 billion over the next two years to directly lower property taxes as well as bolster income tax credits for a portion of property taxes paid. That commitment would continue to grow annually through 2029.

The bill would also place a cap on what school districts can request in property taxes each year, restricting their ability to increase spending at a time when districts are struggling to meet the increasingly complicated needs of students.

Here’s a look at some of the provisions of the property tax bill:

  • Money the state commits to direct credits to property taxpayers would grow from $275 million annually to $475 million by 2028, with later increases linked to the annual growth of assessed valuations.

    The benefits would flow primarily to wealthy Nebraskans. Based on an analysis by the Institute on Taxation and Economic Policy, more than half of the annual credits show up on statements going to the top 20% of Nebraska wage earners. Other beneficiaries are individuals who live outside Nebraska but own property in the state.

  • The state would remove a cap on growth within a program that allows property owners to claim income tax credits for taxes paid to K-12 schools and community colleges. The credits, estimated at $560 million next year and now capped at 5% annual growth, could expand rapidly as assessed valuations continue to grow. Ag land values across Nebraska alone grew 14% last year, the Omaha World-Herald reported.

  • Revenue caps proposed for Nebraska’s public schools would essentially tie any new funding a district receives through changes in state aid with restrictions on what they can request through property taxes to educate our students.

The bill caps what a school district can receive in property tax revenues at 3% over a prior year, with some flexibility based on student growth and other factors. Districts can exceed that cap only through an override vote.

Marrying spending priorities and proposed tax cuts

The Legislature spent much of its time Tuesday and Wednesday addressing the budget, a blueprint of $5.3 billion in annual spending from the state’s General Fund.

The original proposal from the Appropriations Committee called for setting aside $1.026 billion in the state’s rainy day fund, but amendments would reduce the cushion for years when senators are faced with economic challenges to $815 million at the end of the next fiscal year.

One reason for the drawdown could be to hold back General Fund dollars for other priorities not included in the budget, including the proposed property tax breaks and income tax cuts that largely benefit the wealthy and out-of-state corporations.

These proposed cuts, combined with a reduced cushion in the Cash Reserve, could threaten what’s available to fund important programs, including education, workforce development, affordable housing and health care for aging populations.