Bill to lower taxes on Nebraska farmland stalls in legislative committee

LINCOLN, Neb. (AP) – A proposal to lower the taxable value of Nebraska ranch and farmland stalled March 6 in a legislative committee amid concerns it would erode the property tax base used by rural K-12 public schools.

The Legislature’s Revenue Committee voted 4-4 on a bill that would phase in a reduction of taxable agricultural land values, from the current 75 percent to 65 percent. The plan was endorsed by Gov. Dave Heineman and the Nebraska Farm Bureau as a way to offset the taxes that farmers and ranchers pay due to land prices that have soared.

The bill’s sponsor, Sen. Beau McCoy of Omaha, said he will attempt to secure additional support to pass it before the Legislature’s 60-day session ends. Despite a proposed $25 million increase to the state’s property-tax credit fund, McCoy – a Republican candidate for governor – said he doesn’t believe lawmakers have done enough this year to reduce taxes.

“It’s not acceptable to me, and I don’t think it will be acceptable to the people of Nebraska,” McCoy said after the vote. “We can certainly do more this session than what we’ve done, in my mind.”

Opponents said they worry the bill would place additional financial pressure on rural K-12 public schools that use the land as a major part of their tax base.

Without that revenue source, some schools could be forced to raise their property-tax levies or cut services, said Sen. Kate Sullivan, chairwoman of the Legislature’s Education Committee. Raising local property taxes could wipe out any savings from the state reduction, she said, and the school boards would likely get blamed.

Reductions in the revenue that schools can generate locally could also trigger millions of dollars in state-equalization aid from Nebraska’s tax coffers. Sullivan said the crux of the problem lies in the way that Nebraska values its farmland. Farmers and ranchers pay taxes based on their land’s value, even in years when the land doesn’t produce and cuts into their income.

Sen. Tom Hansen, a rancher from North Platte, said the current property tax climate is threatening to squeeze out small operations that can’t absorb the costs as easily as megafarms and ranches.

“Farms are going to get bigger, ranches are going to get bigger, ag is going to get bigger, and you know what’s going to happen to the family farms? They’re going to be gone,” he said. “I’m one of them. Next downturn we have in cattle prices, I may not be able to pay the property taxes.”

In a statement, Farm Bureau president Steve Nelson said he was “extremely disappointed” with the vote.

“The decision made today is a blow to the hundreds of Nebraska farm and ranch families that took the time and effort to attend public hearings across the state this past fall to share their concerns about the ever-growing property tax burden,” he said.