LINCOLN — A panel of state lawmakers illustrated Monday night how serious they are about reducing property taxes, discussing favorably the possibility of raising the state sales tax by half a cent to offset property taxes.
The sales tax hike was among several ideas discussed during an executive session of the Legislature’s Revenue Committee, which has pledged to craft a package of bills to reduce property taxes.
Farmers have seen their property taxes skyrocket in recent years because of increases in land values, and they now face declining profits because of low crop prices and the trade conflict with China. Homeowners are also starting to see valuations and taxes rise.
A sales tax increase, if adopted, would most assuredly prompt a veto by Republican Gov. Pete Ricketts, who has opposed raising taxes or shifting taxes to provide property tax relief. And Nebraska voters, in the past, have taken out their wrath on lawmakers who increase taxes.
State Sen. Lou Ann Linehan of Elkhorn, who chairs the Revenue Committee, said a general sales tax hike is the fairest and simplest way to offset property taxes. She emphasized that all new revenue raised would not result in “new spending,” but would be devoted to property tax relief “for all.” The senator said she wants the committee’s package to also control the growth of government spending and resolve “disparities” in state aid to K-12 schools, though no details on how that would be accomplished were discussed Monday.
It was the first time the eight members of the committee had discussed which ideas they supported, and Linehan described the group as “mostly in agreement.”
“Right now, the biggest industry in the state (agriculture) is in trouble,” she said. “We’re not going to grow if they’re in trouble.”
In general, the committee discussed devoting about $500 million in new revenue to property tax relief and directing most of it to increased state aid to K-12 schools.
Right now, the state devotes about $1,000 less in state aid per student than Iowa and about $3,000 less per student than both Kansas and South Dakota, Linehan said. That, in part, allows those states to have lower property taxes, senators said.
Among other tax changes discussed were removing sales tax exemptions on pop, bottled water and candy; costs of storage units and lawn care; and admissions to zoos, including Omaha’s Henry Doorly Zoo and Aquarium.
There was also talk of raising taxes on cigarettes but avoiding an increase that takes the tax above $1 per pack. Right now, Nebraska charges 64 cents per pack, compared with $1.36 in Iowa, $1.29 in Kansas and 17 cents in Missouri.
The state sales tax rate has not been increased since 2002, when it rose from 5 percent to 5.5 percent. If it was raised to 6 percent, it would match Iowa’s state rate and be slightly lower than Kansas’ rate of 6.5 percent. Missouri’s state sales tax rate is 4.2 percent.
The state sales tax rate does not include local sales taxes, which amount to 1.5 percent extra in many Nebraska communities, including Omaha.