- Associated Press - Wednesday, February 22, 2017

LINCOLN, Neb. (AP) - Lawmakers are questioning a proposal that would raise Nebraska’s state sales tax and steer the extra revenue into tax credits for low-income residents and property owners.

The bill drew support from farmers on Wednesday during a Revenue Committee hearing but criticism from some senators who say it won’t address the underlying problem.

Sen. Tom Briese of Albion said he introduced the measure in response to continued pressure from farm and ranch land owners whose property values have soared while commodity prices have slumped. Briese said spending cuts alone won’t contain the rapid growth.

“Realistically, we aren’t going to be able to slash and burn our way to deliver the property tax relief Nebraskans are demanding,” he said.

The bill would increase Nebraska’s state sales tax rate from 5.5 percent to 6.5 percent. The extra revenue would first be used to raise the state’s earned income tax credit from 10 percent of the current federal credit to 17 percent. Once that threshold is reached, the rest would go into a tax credit for all property owners.



Briese said increasing the earned income tax credit would address concerns that the poor spend a larger share of their income on sales taxes than the wealthy.

Committee members acknowledged that farm and ranch land owners are facing hardship but argued that the bill could shift the tax burden onto middle-income residents.

“It’s that working class guy, that blue collar guy, picking up the tab for this,” said Sen. Burke Harr of Omaha.

Sen. Lydia Brasch of Bancroft took issue with the idea of raising one tax to ease pressure on another, instead of focusing on local government spending.

“To increase the sales tax, it seems like we’re moving backward,” she said.

Some leading farm groups have endorsed the proposal as a way to lower their tax bills without disrupting state aid for local K-12 public schools. Farm and educational groups have formed a new coalition, Nebraskans United for Property Tax Reform and Education, to urge lawmakers to act this year.

Jerrine Racek Harris, a fifth-generation family farmer, said property valuations have more tripled between 2007 and 2016 on three land parcels she owns in Saunders County. Racek Harris said her property tax bills have risen from $6,000 to $17,500 during that period.

“Farmers are drowning in property taxes,” she said.

Nebraska Farm Bureau President Steve Nelson said public schools have come to rely too heavily on property taxes to finance their operations. Roughly two-thirds of Nebraska’s public school districts don’t qualify for state equalization aid because their surrounding property values have risen too high, even though farm incomes have declined.

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