Bill to cut property taxes limps ahead without sales tax hike

April 2, 2024, 6 p.m. ·

Senator Lou Ann Linehan talks to Senator Steve Erdman after he kept her tax bill alive (Photo by Fred Knapp, Nebraska Public Media News)
Senator Lou Ann Linehan talks to Senator Steve Erdman after he kept her tax bill alive (Photo by Fred Knapp, Nebraska Public Media News)

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The Nebraska Legislature gave first-round approval Tuesday to a bill originally intended to increase sales taxes in order to lower property taxes. But its chief sponsor indicated that the sales tax increase is probably off the table, and if senators can’t agree on an alternative, the bill won’t come up again this year.

Just before senators voted on LB388, Sen. Lou Ann Linehan admitted the bill could not pass as originally intended. But she promised to keep trying.

“We will work very hard over the next few days with everybody. Anybody that’s got ideas I’m open. Anybody on the Revenue Committee’s open to any ideas that you might have. And if we don’t, I will make this commitment: if we can’t get to an agreement, I will ask the speaker not to bring it back,” Linehan said.

Linehan needed 33 votes to cut off debate and vote on the bill. When the roll call was finished, she had 32. Then, Sen. Steve Erdman switched from not voting to voting in favor of cloture, to audible groans from lobbyists outside the chamber. (To see the vote, click here).

Senators then voted 28-12 to advance the bill. Erdman, a fierce critic of the bill and a ‘no’ vote on advancing it, offered a tactical explanation for his cloture vote.

“We’ve got to figure out a solution. This is not the solution. You seen the second vote? She had 28. That’s the vote that counts. She don’t have 33. She knows that. And so those offers and opportunities I gave her to negotiate, they’re real. And if that didn’t get a chance to go forward, I wouldn’t have an opportunity to negotiate,” Erdman said.

It would once again take 33 votes to overcome a filibuster against any proposed revision of the bill.

Just before the vote, Sen. Eliot Bostar offered an amendment to remove the sales tax increase from the bill. Senators didn’t get to a vote on that. But Sen. Julie Slama, another opponent of the bill, said a proposed increase in state aid to schools in order to lower property taxes wouldn’t have enough money behind it without the sales tax increase.

In: Now what's being pitched is taking out the sales tax increase, going forward with exemptions, but we don't have the numbers that show this as sustainable. We don't have the numbers to show that this wouldn't compromise the property tax relief. And moreover, the property tax relief that we're supposedly getting with this bill isn't for the long term without hard caps. For the majority of your property tax bill for schools, you're not going to get long term property tax relief out of this. You're just not,” Slama said.

In an interview after the vote, Linehan said a sales tax increase is probably off the table. She admitted she doesn’t know what comes next, but said if something doesn’t pass, property taxes will continue to rise.

Leading off Tuesday’s debate, Linehan, chief advocate of Gov. Jim Pillen’s tax plan, acknowledged the political difficulties it posed.

“No matter how you vote on this, it’s going to be a bad vote. That’s just the political reality of it. Because what has happened in suburban and urban Nebraska in the last two years, your valuations have skyrocketed. Lancaster County, 23 percent up. What happens if we do nothing, is your school aid’s going down 23 percent. So you can vote for this and adjust it so property taxpayers across the state in cities and suburban Nebraska don’t have a 20 percent tax increase. Or you can not,” she said.

Sponsoring a motion to kill the bill, Sen. Machaela Cavanaugh begged to differ.

“I disagree. I think there is a good vote on this. Voting red (no) on LB388 is something I am 100 percent comfortable doing, because I don’t want to bankrupt the state,” Cavanaugh said.

Under the version proposed by the Revenue Committee, the bill would have increased the state sales tax rate from the current 5.5 percent by up to one cent, imposed sales tax on currently exempt goods and services like candy, pop, and veterinary serves for pets, and raised cigarette taxes from 64 cents a pack to a dollar. A separate bill would funnel that money to schools, thereby lowering their need for property taxes.

Sen. Mike Moser, who runs a store that sells musical instruments in Columbus, said raising the sales tax, which cities can add to, is distasteful. But he supported the bill.

“I'm not a flag waving supporter of raising sales tax, I have to collect it every day. Every day I sell some little thing and then I add 7% to the total for the tax and I get some negative feedback on that. And if it goes to 8%, it's going to be more of a negative feedback. So I don't like that. But what's the alternative?” Moser asked.

Sen. Jane Raybould opposed the bill:

“This is a tax increase and also a sleight of hand of cost shifting,” she said.

Raybould suggested the state could raise money for more school aid by delaying corporate and personal income tax cuts that senators approved last year.

Linehan said that could lose the bill more votes than it would gain.

LB1331, a bill to increase state aid to schools by more than $1 billion was scheduled to come up Wednesday. Now, with the sales tax increase to support that increase apparently dead, the fate of that measure is also uncertain.