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Property tax reform bill slams into wall of opposition in joint committee hearing
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Property tax reform bill slams into wall of opposition in joint committee hearing

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The tax reform package constructed by the Legislature's Revenue Committee over the last two months ran into a storm of opposition Wednesday and emerged from its public hearing wounded.

It was the wide spectrum of opposition -- from cities, urban schools, chambers of commerce, the Nebraska State Education Association, policy think tanks, retailers, real estate agents and contractors -- that may have done the most damage.

Even the Nebraska Farm Bureau and allied ag organizations found fault, approving of the proposal to increase the state sales tax rate and broaden the sales tax base as a means of reducing local property taxes that are particularly burdening Nebraska agriculture, but arguing for maintenance of the state's current property tax credit fund.

Revenue Committee Chairwoman Lou Ann Linehan of Elkhorn said the revised proposal (LB289) would assure meaningful property tax relief by funding a significant increase in state aid to schools.

In the process, she said, Nebraska would rise from 47th to 20th among states in terms of state funding support for schools.

But representatives of Nebraska's largest and growing urban school districts said they would be adversely impacted by the change.

Lincoln Public Schools would lose $2.3 million in support if it levies at a maximum allowable property tax rate, Associate Superintendent Liz Standish told members of the Revenue, Education and Retirement committees at a rare joint hearing.

"It is very likely revenue per student would be shrinking while the city is growing," Standish said.

Growing cities with schools that contain "a majority of the most vulnerable children" in the state would lose vital school funding support, the committee was told by other school representatives. 

The torrent of opposition became apparent hours before the committee launched its lengthy hearing when 38 people, most of whom spoke for organizations impacted by the proposal, already had signed up to provide opposition testimony.

Only four proponents testified in support of the bill, including a representative of the Nebraska Rural Community Schools Association.

A representative of the Tax Foundation, headquartered in Washington, took no position on the bill, but told the committee that Nebraska has high income and business taxes now and would also have high sales taxes if the proposal is approved.

The bill would raise the state sales tax rate from 5.5% to 6.25% while also eliminating a number of sales tax exemptions on products like candy, pop and bottled water and hiking the state cigarette tax from 64 cents to $1 a pack.

Linehan said any new revenue raised by those provisions would go to property tax relief. The average taxpayer would experience a 20% reduction in property taxes paid to public schools, she said.

Sen. Patty Pansing Brooks of Lincoln said she is concerned about the regressive nature of the sales tax as the source for funding.

The revenue stream should include some income tax revenue "to avoid being so regressive," Renee Fry, executive director of Open Sky Policy Institute, told the committee members.

Fry also suggested that the proposed three-fourths cent increase in the state sales tax rate is too high. 

The funding source for increased school aid should be elimination of sales tax exemptions, not any increase in tax rates, the Platte Institute told the committee.

Wednesday's hearing overflowed the assigned hearing room and ran into the night. 

The bill moves on now to an uncertain fate within a divided Revenue Committee that has not yet taken a single vote on the proposal. A number of committee members have privately stated that they cannot support the measure in its current form.  

Rallying opposition to the tax reform plan prior to the hearing, Gov. Pete Ricketts suggested that "there's still time to come up with a plan to make progress on property tax relief" without increasing other taxes.

Ricketts spoke at a news conference surrounded by representatives of businesses and industries that would be impacted by proposed increases in state sales taxes.

"We want to encourage the Legislature to stop the path they're headed down," the governor said.  

The current proposal mirrors previous efforts to secure property tax relief that have failed, Ricketts said.

"This will not work," he declared. "We need to focus on budget control.

"Property taxes may go down for a couple of years, maybe three," he said, "then go right up," leaving taxpayers with an accompanying increase in state sales taxes.

Ricketts was joined at the Capitol by spokespersons for real estate agents, grocers, homebuilders, ranchers and people engaged in pet care.

"Action should not be confused with progress," rancher Trent Loos of Litchfield said.

"We spend too much," he declared, and the losers if the proposed legislation is approved would be "anybody who calls Nebraska home."

Ricketts has proposed a $51 million increase in the state's property tax credit fund during each year of the upcoming fiscal biennium, along with a constitutional amendment that would limit property tax increases to 3% a year.  

Reach the writer at 402-473-7248 or dwalton@journalstar.com.

On Twitter @LJSDon.

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