- Associated Press - Wednesday, April 16, 2014

LINCOLN, Neb. (AP) - Lawmakers made good strides this year in passing millions of dollars in tax cuts, but Nebraska’s next governor and Legislature can still do more when a new session begins next year, Gov. Dave Heineman said Wednesday.

Heineman praised lawmakers for their work in lowering taxes in this year’s session, which ends on Thursday. The new laws will provide an estimated $412 million in income, property and sales tax reductions over the next five years.

But the Republican governor, whose term ends in January, said he believes elected state officials will continue to face pressure to lower Nebraska’s income and property taxes once lawmakers convene next year.

“That issue will be front and center,” Heineman said in an Associated Press interview at the Capitol. “The next governor and the next Legislature, they’re going to be dealing with property and income tax relief again … I just think those issues will continue to be important for the future of our state.”

Heineman pointed to a new state Department of Revenue report that showed an overall 12.45 percent increase in the state’s property valuations this year, fueled largely by a 29.1 percent jump in agricultural land valuations. For land-rich farmers and ranchers, the higher valuations mean bigger tax bills.

In his State of the State speech in January, Heineman called on lawmakers to lower the state’s top income tax rate and to lower the percentage of farm and ranchland that can be taxed by local governments. Both suggestions were rejected, amid concerns that the income tax cut was unaffordable and the ag-land tax change would erode funding for local schools.

“Everybody wants to do a variety of things when it comes to taxes, and at the end of the day, you’ve got to narrow it down to four or five items,” Heineman said. Reducing taxable ag-land values “is one that I think we should have done. I think there was a lot of concern over how it was going to impact local governments. But again, I think most Nebraskans recognize that with these ever-increasing ag-land valuations, you’re shifting more of the local property tax burden onto farmers and ranchers.”

Nebraska farmers and ranchers pay the third-highest property taxes in the U.S., according to Nebraska Farm Bureau President Steve Nelson.

The measures passed this year will require income-tax brackets to keep pace with inflation, provide exemptions for farm equipment parts, expand Nebraska’s homestead exemption program, and place an additional $25 million annually in Nebraska’s property tax credit program.

Sen. Galen Hadley of Kearney, chairman of the Legislature’s Revenue Committee, said he plans to lead a legislative study this summer into the way Nebraska’s agricultural land is taxed.

Hadley, who is returning next year, said he was concerned that ag-land taxes are tied to the land’s value, which rises and falls regardless of how much money farmers and ranchers make each year.

He said the committee also plans to look at Nebraska’s income tax exemptions and deductions, to see if some can be eliminated to reduce the overall tax rates without depriving the state of revenue.

Sen. Health Mello of Omaha said last week that lawmakers led the way on key state priorities this year, including reforms to address prison overcrowding and early-childhood education needs.

Mello, who leads the budget-focused Appropriations Committee, said the tax measures approved by lawmakers struck a balance that will allow the state to keep paying its bills.

Heineman also praised lawmakers for their work this year to address long-term prison overcrowding, and their rejection of a bill that would have expanded Medicaid under the health care law. The Medicaid bill died in a legislative filibuster.

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