Senators advance property tax credits, consider bigger changes

The Nebraska Legislature gave second-round approval Friday to increasing an existing property tax credit, while signaling that voters could be asked about making a bigger change in the future.

As the Legislature’s special session entered its third week, lawmakers were considering legislation that would convert an existing income tax credit to a property tax credit. That would lower taxes for Nebraskans who don’t claim the existing credit, but would not affect those who do.

As they debated the proposal, senators demonstrated the splits that have blocked Gov. Jim Pillen’s original, much larger plan, to lower property taxes up to 50% by expanding sales taxes. Sen. Julie Slama expressed her opposition.

“I do not buy into the policy that we should be increasing the state's tax base on one hand, to take more money from Nebraskans from your left pocket, to put that same money into your right pocket, maybe a little bit less, to give you a pat on the head and say, ‘Look at what the government did for you,'" she said. "I would much rather just have my own money."

Sen. Lou Ann Linehan, who’s been leading the charge for Pillen’s plan, said the current system needs to be changed.

“We have a screwed up, messed up exemptions on sales taxes," she said. "And I don't like tax increases. I fought for tax cuts the whole time I've been here. But just to say we're not for sales taxes on the things that I put amendments up on last night? Are you kidding me?”

Those amendments included applying sales taxes to a variety of services, ranging from nail care to tattooing and lawn care.

Sen. Machaela Cavanaugh opposed that approach, using lawn care as an example.

“We have to think about the people who this is going to really impact, like low income, elderly people who have somebody come in and take care of their lawn, and they probably are already doing it, probably for like $20 a month or something, but just you know, you're on a fixed income, you're elderly, you're unable to take care of your lawn, or you're disabled,” Cavanaugh said.

Sen. Jen Day also expressed her opposition.

“Fundamentally, the amendments that we are talking about getting to today are tax raises, and that's why there's quite a few of us that are not in favor of getting to those amendments, because we're not here to raise taxes on people,” Day said.

Sen. Justin Wayne disputed that characterization.

“Removing a tax exemption is not the same as a tax increase,” Wayne said.

Before the Legislature reached a vote on her amendments, Linehan withdrew them. She later explained she did that in order to get to a vote on the underlying bill.

Sen. Rob Clements supported the proposal, LB34.

“LB34 is not a tax increase, it's actually an overall decrease," he said. "LB34 has $185 million of property tax relief, funded by affordable reductions in government spending."

More from the Legislature's special session:

Lawmakers divided over doing a little or trying something more

Legislature moves toward budget cuts

Legislature advances vastly scaled-back property tax bill

Legislature tees up key property tax vote for Tuesday

Senators continue thrashing around on taxes

Special session debate: Should there even be a special session?

Sen. Terrell McKinney maintained his opposition, criticizing the special session.

“What are we doing here?" McKinney asked. "We come into a mess every day. (There’s) supposed to be a plan. We left, I think in April. We didn't get a bill until the day before, and we still have no idea how this special session is going to end."

After four hours, senators voted to cut off debate, then voted 39-8 to give the bill second-round approval. It still requires one more round of voting before being sent to the governor.

Also Friday, senators gave first-round approval to a proposed state constitutional amendment that would allow owner-occupied housing to be assessed at a lower rate than other property for tax purposes. Currently, the Nebraska constitution requires that residential and commercial property be assessed the same, at or near market value. Sen. Tom Brandt said the Legislature should have the option of doing things differently.

“Currently, we are forced to treat all residential property uniformly, whether it is owned by a long-term Nebraskan or multinational corporations,” Brandt said. "We've seen a significant increase in out-of-state investors buying residential properties in Nebraska. Enacting this law will help homeowners that call Nebraska home."

Sen. Brad von Gillern questioned the proposal contained in LR2CA. Von Gillern said lowering taxes for owner-occupied housing could raise taxes on businesses and renters.

“If somebody pays less, somebody is going to pay more,” von Gillern said. "And with LR2CA, again, I like the idea. I think we should move forward with researching the idea, but until we know who's going to pay more, I don't know that we should get too excited about who's going to pay less."

Senators voted 32-14 for first-round approval of the amendment. But it would take 40 votes to put it on this November’s ballot. Short of that, it would take 30 votes to put it on the ballot in 2026. The measure would still require two more rounds of voting to be approved for submission for voter approval.

Debate continued Friday on proposed budget adjustments to pay for the expanded property tax credits, with senators giving them second-round approval as well. Speaker John Arch said there would be further debate on the constitutional amendment Saturday. Then, after the required “layover” day on Monday, final votes are expected Tuesday.