NTF ISSUE PAPER: OUR PROPERTY TAX RELIEF SOLUTION

NTF issue paper: legwatch184.doc. 6-19.
NEBRASKA TAXPAYERS FOR FREEDOM ISSUE PAPER:
OUR PROPERTY TAX RELIEF SOLUTION.

BACKGROUND
. Property tax relief solutions continue to elude our state legislature. The 2019 session ended with no comprehensive property tax relief legislation. Tempers flared, personal attacks spiked, various interests clashed, and the historic rural-urban divide reasserted itself in stark fashion. Business groups conflicted with farm and ranch groups. The 2020 Legislature will have the same state senators present, unless one or more resign or pass away. Therefore, the situation requires a solution that should and will satisfy urban commercial, urban homeowner, rural business, farm, and ranching interests.

THE NTF SOLUTION
. Our Nebraska Taxpayers for Freedom organization presents the following legislation. Beginning in tax year 2020, individuals who own a home, commercial establishment, agricultural, horticultural, or ranch land will receive a refundable credit against their state income tax equal to a progressive percentage. The following percentages will apply to calculate the credit allowed:
TAX YEAR     CREDIT PERCENTAGE
2020                 5%
2021               10%
2022               15%
2023               20%
2024               25%

HOW IT WORKS
. Property taxpayers would no longer use the property tax deduction in payment of income tax. Congress ended real estate itemized deductions on federal tax returns, so this deduction no longer is available as a state income tax deduction. A refundable property tax credit would take its place, a credit that individuals could use to offset their state income tax obligation. These tax credits would apply to every property taxed parcel in Nebraska. The refundable credit subtracts from the amount of income taxes owed after deductions. If the amount of a refundable tax credit is more than the amount of income tax owed, an individual receives the difference as an income tax (or property tax) refund. If already owed a tax refund, the refundable credit adds to increase the amount of a refund. Taxpayers could save or spend the sum as they wish. Property tax credits would go directly and promptly to property owners from the State Dept. of Revenue, not through counties as done currently. The State Property Tax Credit Fund and property tax credit currently in place would end after tax year 2024.

FILLING THE DEFICIT
. State senators must find revenue sources and/or budget cuts to fill the subsequent deficit.
NTF suggestions include cutting fat, waste, and duplication in the state budget, paring the increase in budget spending, restricting non-profit property tax exemptions, restricting use of tax increment financing, and ending most sales and income tax exemptions or staggering the end of these exemptions.

ARGUMENTS IN FAVOR
. Local government subdivisions could continue to levy property taxes through valuations and tax rates. However, state senators would pressure local governments to NOT raise property taxes, as raising them would increase the state deficit. Most local governments would not have reason to actively oppose this plan, because they could continue to generate revenue through property taxes, their most dependable source of revenue. Every NE taxpayer who pays property taxes would benefit immediately. Every taxpayer who pays state income tax would benefit if owning property. An individual easily could calculate a rebate by examining income tax liability and a property tax statement. Retired military personnel and Social Security recipients would benefit if owning property. The formula is easy to understand and popular. Citizens, not the legislature, would control their taxation. All classes of property owners receive equal treatment. It is not a partisan issue. The real estate market will benefit, also real estate investment. NE will become more competitive for business location because of this tax relief. NE would rank lower in state ranking for both property and income taxes paid per capita. Senators who oppose this plan will become targets for taxpayer wrath, especially if up for re-election in 2020.

Research, documentation, and analysis for this issue paper done by Nebraska Taxpayers for Freedom. 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. 6-19. C

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