NTF Issue Paper: valuation25.doc. 9-17.

Most states have revised and reformed their archaic systems and criteria for local governments setting real property tax rates. Unfortunately, Nebraska has not updated its property tax system for a long time. The result is that taxes on both urban and rural properties have skyrocketed, causing property owners to pay increasingly higher property taxes. Conservative state senators have proposed several reform ideas, but none have gathered sufficient support in the Unicameral to pass into law. Various senators have advocated either property valuation or property tax relief, with senators each favoring one process over the other. Meanwhile, utilizing the NE petition process to gain relief remains severely hampered by the inability to launch an initiative petition drive having more than one subject. NTF believes that coordination by conservative state senators successfully can implement both property valuation and property tax revision and reform that would satisfy both urban and rural property taxpayers.

Nebraska currently has the 6th highest property taxes in the nation. The dramatic upward property tax spiral has produced several disastrous consequences. It is driving away new businesses, persuading small businesses to not expand, and forcing businesses to close, putting people out of work. High property taxes are forcing homeowners, particularly retirees, but also productive working people, to move to lower tax states. This sad situation delays first time buyers from buying a house and perhaps forcing them into a perpetual cycle of renting. Agricultural communities across our state destroyed as farms and ranches go under. Colorado homeowners pay a mere 1/3 of what NE homeowners pay in property tax. All 6 adjacent states enjoy significantly lower property tax rates than Nebraska.

This 1% Plan, initiated by the NE Conservative Coalition Network, would place a constitutional limit on the annual amount of property taxes that local taxing authorities could impose on an individual parcel of property without voter approval. A constitutional limit imposed by the Unicameral would limit the annual combined rate of property taxes levied on an individual parcel of property to 1% of its true and fair market value regardless of how much property values increase or decrease. Because tax rates set in terms of dollars per $1,000 of value, the 1% limit is the same as $10 per $1,000. Taxes imposed under this limit are termed regular tax levies, those outside the limit labeled special levies. Each annual levy may increase by no more than 1%, unless registered voters vote for a greater increase. Voters can approve special levies for schools, capital projects and bonds. The amount of property tax due on similar properties may differ throughout a county. There are 3 reasons for a difference:
1. The various combination of taxing districts in different areas of the county.
2. The passage of voter-approved special levies and bonds.
3. The amount of the budget for each taxing district.

If a NE town accrued $1 million in property taxes, it could levy and receive $1.01million the next year, plus revenue from new construction. Because the levy limit does not include new construction, annexations, and voter- approved override levies, a taxing district actual revenue increase may be greater than 1%. Individual tax bills base on several factors, including how much a property changes in value relative to other property in a taxing district, and if voters approve tax increases over the levy limit. The 1% limit applies to the maximum increase in tax revenue levied by an individual taxing district. It does not apply to individual homes, which tend to increase in assessed valuations at varying rates depending on location and other factors. Taxes on individual homes could increase by more or less than 1%, depending on how they change in value relative to other properties in a district.
• Home A increases from $200,000 to $220,000 in assessed value within a city (a 10% increase)
• Home B increases from $200,000 to $240,000 in assessed value (a 20% increase)
• Home C increases from $200,000 to $230,000 in assessed value (a 15% increase)
If a NE city collected $1 million in property taxes in 2017 at a rate of $1.00 per $1,000 assessed value, on a total valuation of $1 billion, the city can increase its 2018 levy by 1% to $1,010,000 in 2018 (not counting additional tax revenue from new construction added to the tax rolls in the past year). The total taxable value of properties in the district increased 15%, from $1 billion to $1.15 billion (not counting new construction, improvements to property, higher valuations). In order to stop collecting more than 1% additional tax on existing properties, the city tax rate drops to $0.878261 from $1.00 per $1,000 assessed value. In 2017, each of these 3 homes paid $200 in taxes on $200,000 of assessed value at the $1.00 rate. In 2018, the tax depends on how their assessed values change compared to other properties in the city.
• Home A – value increased by 10%. Taxes drop to $193.22 on $220,000 of assessed value at $0.878261 rate (3.39% decrease);
• Home B – value increased by 20%. Taxes rise to $210.78 on $240,000 of assessed value at $0.878261 rate. (5.39% increase);
• Home C – value increased by 15%. Taxes rise to $202.00 on $230,000 of assessed value at $0.878261 rate (1% increase).
Property owners may see increases in their assessed valuations, but this rise does not mean a rapid hike in property tax bills. The levy rises only 1% annually, so the effect of rapidly growing assessed values leads to a reduction in the property tax levy rate. Thus, if a parcel of property increased by 10%, the actual tax rate for this parcel would still only increase by 1%. A house that does not increase in value as much as a neighboring home may receive a tax reduction. However, a house that increases in value at a greater rate than other properties in a taxing district will shoulder a greater tax burden. How values grow in relation to other properties in the same district determines if a property tax increases or decreases. In a district where valuations average 5% growth, a home with 2% value growth would receive a tax reduction.

A taxing authority must hold a public hearing and adopt a resolution authorizing a ballot issue to increase its regular property tax higher than the actual levy. Voter-approved tax overrides like bond issues not subject to the 1% limit. Taxing districts can propose that voters bust the 1% levy limit on annual levy increases, so the district can collect a higher levy amount, up to the maximum rate limit amount for that jurisdiction (if state lid in place).


(document on progress)
The math is simple. One can compute the formula on the back of a postage stamp. Property taxes on a $100,000 home are no higher than $1,000; property taxes on a $200,000 home no higher than $2,000. Same formula for commercial and industrial property. The Legislature must pass a simple resolution to alleviate our property tax burden:
The Resolution:

Property Tax levy rates shall not exceed 1% on any commercial or residential property, and shall not exceed x% (this will likely come in around 0.5%) on Agriculture land in the State of Nebraska.

Research, documentation, and analysis for this issue paper done by Nebraska Taxpayers for Freedom and Lee Todd. This material copyrighted by Nebraska Taxpayers for Freedom, with express prior permission granted for its use by other groups in the NE Conservative Coalition Network. 3-17 C.

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