Balancing Nebraska's three-legged stool

On Thursday, July 25th, Governor Pillen will bring the Nebraska Legislature back to Lincoln for a special session with the important goal of taking on Nebraska’s out-of-control property taxes. From the farmer to the homeowner alike, property taxes are frequently referred to as a top, if not the top, issue that they are facing. And while we have been able to pass some relief, with each year comes skyrocketing valuations which turn the relief into only a small decrease in the increase of property taxes. For true foundational tax reform, the Legislature will need to examine each leg of Nebraska’s “three-legged stool” or the three primary sources of tax revenue, income, sales, and property taxes. Key to this reform and two important fixes: cutting wasteful spending and broadening the sales tax base.

To identify wasteful spending, Nebraska recently contracted the consulting group Epiphany to identify ways to make government agencies more efficient and spend less. When the group was hired in Utah, the State saw an estimated 35% increase in efficiency across executive agencies. Based on Nebraska’s initial report, Nebraska is looking at over $530 million in potential savings. Cleaning up spending while safeguarding our most important priorities like education and agriculture would be great progress.

But cutting spending is still only a piece of the puzzle. Compared to many of our neighbors, Nebraska offers a rather long laundry list of sales tax-exempt products and services. While everyone may enjoy a tax-free service initially, every time the state makes one item tax-exempt while another remains taxed, the Legislature is ultimately picking favorites or even picking winners and losers. And when the list of sales tax exemptions grows longer and longer, the State must of course make up funds elsewhere and the biggest loser ends up being the Nebraska property owner.

The principles of sound and fair sales tax policy are simple- broaden the base with a low tax rate. Barring a few necessary exemptions including groceries and medical services, the consumer can budget and shop around for the typical product or service. In other words, in many purchases with sales tax, the consumer has a choice in what they pay. But when someone buys a home or even farmland in a once-affordable area and then faces skyrocketing valuations, they face the option to either pay more and more without necessarily making more income or sell the property and move.

To conclude, Nebraskans statewide grapple with property taxes but Governor Pillen has called the special session to take action. By cutting wasteful spending and rebalancing our three-legged stool of taxes Nebraska may finally be able to take on our out-of-control property taxes.