OPENSKY ANALYSIS: HIGHER PROPERTY TAXES FOR MOST NEBRASKANS

Posted 9 months ago

By Ashley Hinker

Higher property taxes for most Nebraskans if agriculural land valuation decreased

For immediate release — Feb. 4, 2013

Higher property taxes for the vast majority of Nebraskans or cuts to schools, roads and law enforcement are likely if agricultural land valuation is decreased to 65 percent of full market value, an analysis by OpenSky Policy Institute shows.

Presently Nebraska values agricultural land at 75 percent of market value. Moving to 65 percent would cause $102.5 million annual shortfalls for localities like K-12 schools, community colleges, roads and law enforcement, the analysis shows.

“Tax increases or cuts to schools and other services that Nebraskans need will be needed to offset this revenue loss,” said Renee Fry, OpenSky’s executive director.

While it would naturally seem intended to help the agricultural community, the largest benefits of decreasing valuations to 65 percent would not go to the most rural parts of Nebraska, but rather to farmers and ranchers near urban areas.

This is because the property tax revenue lost from farmers and ranchers near urban areas can be made up with higher property taxes on business and residential property owners in those areas. Such tax shifts can’t occur to the same extent in more rural areas where there are not as many businesses and residential property owners.

“These communities must make up the lost revenue either by levy increases – which would wipe out much of the tax cut from lowering valuation – or by cuts to education, roads and other local services,” Fry said.

The $102.5 million shortfall that would hit Nebraska’s localities would include $68.2 million for K-12 schools, $21.9 million for counties and $6.2 million for community colleges.

Current law would call for $29.5 million more in state school aid. But that funding is not guaranteed, would not be triggered until the year after valuations were decreased and would not be near enough to offset the losses to schools and other local entities, the analysis shows.

The analysis did show that decreasing valuations for school-aid purposes only may have merit as such a measure would:

  • Increase the number of schools that qualify for state equalization aid;
  • Target aid to areas with relatively high tax levies;
  • Not cause revenue losses to local entities; and
  • Not shift taxes on to homeowners and business property owners. 

The analysis showed that decreasing agricultural land valuation and other options such as increasing state aid to schools and having the state take over programs that it requires at the local level would be better ways to lower property taxes for Nebraskans than decreasing agricultural land values for all purposes.

“It’s important that lawmakers work to lower property taxes as Nebraskans have made it clear that that is their top concern regarding taxes,” Fry said. “But lowering agricultural values will not accomplish this goal as it would likely increase – not lower – property taxes for most Nebraskans.”

Download a printable PDF of the analysis.

Contact Chuck Brown at 402-610-1522 or cbrown@openskypolicy.org for more information.