For about fifty years, Nebraskans have been arguing about property tax: Is it fair? Is it too high? What should it fund? Should it be eliminated? I went to the Nebraska Legislature’s page on taxes in Nebraska to find out more.
Property tax is levied only by local governments in Nebraska. It is paid on real estate and depreciable personal property like vehicles. Businesses pay on depreciable property that is used for the production of income, with some exceptions in agriculture. The tax on real estate is based on actual or market value. Most property is assessed at 100% of actual value; agricultural land is assessed at 75% of actual value.
Some real estate is exempt from property tax. Not-for-profit organizations do not pay taxes if the property is used for cemetery, educational, religious, or charitable purposes. Government property is also exempt.
We receive a bill from the county in December and pay our property tax to the county treasurer. Payments are generally made twice the following year, due May 1 and September 1.
Property tax is justified under the “benefits principle.” When we own property, we need the roads and police and fire departments that are provided by county and city government. We want other local amenities like libraries, parks, landfills, and utilities.
Property tax is also a major funder of schools in the belief that this is providing the workforce of the area for the future. Since we have become a much more mobile society, this link is getting weaker.
Property tax receipts are relatively stable and reliable. Property cannot move from place to place to avoid paying local taxes. It is, however, difficult to administer. Determining actual value is subjective and is constantly reviewed. Therefore, there is a time-consuming appeals process. The state may have to intervene to equalize values between counties.
Is property tax progressive, regressive, or proportional – meaning who pays higher rates as compared to their total income? As far as residential property is concerned, it is fairly proportional. Wealthy people live in more expensive homes, and they pay the same % rate on their property as a person who owns a trailer or manufactured home. Low-income elderly and veterans can apply for a homestead exemption through the county assessor’s office.
Compared to other states, Nebraska has a fairly high reliance on property tax to fund our local government and schools. According to Wallet Hub (Feb 21, 2023), Nebraska ranks as ninth highest, with an effective real estate tax rate of 1.67% The average residence in Nebraska is valued at $174,100, and taxes owed are $2,916. Vehicle property taxes are owed in 26 states, and we pay 1.46% of the value of a vehicle.
Since 2000, we have had some years of economic recession. Nebraska’s Constitution requires a balanced budget, so when there are fewer receipts from income and sales tax, the state cuts funding to local entities like schools and counties. The difference is then made up by local property tax. According to Farmer’s Union, Nebraska presently ranks 47th in the percentage of local government support that comes from the state. Nebraska ranks even lower, 49th, in the level of K-12 education support that comes from the state.
Underfunded and unfunded mandates were an issue in our last governor’s race. Local governments are responsible for maintaining roads, jails, space for state services, and providing education. In recent years, the Legislature passed statutes requiring additional school coursework or training including testing requirements, substance abuse teaching, dating violence and suicide prevention training. The Legislature has not funded most of these initiatives, instead relying on school districts to provide the services and training without reimbursement. Paying for these mandates causes an increase in property taxes for schools, counties, and communities.
Is there a problem with property tax in Nebraska? Probably. Can it be solved easily? Nope. The Legislature needs to start by deciding how to fairly fund education. But they are working on that.
Ag land presents an interesting problem for property tax. Farmers and ranchers require a large land base for their production. We all know that there are bad years when there might be no income, only expenses. Weather might destroy crops or a season of calves. Market prices might be low. But the property tax bill doesn’t change.
The Legislature has been working to find ways to grant property tax relief. If you have concerns or suggestions, be sure to contact our state senators.