From my viewpoint, the two biggest issues facing the Legislature this year are property tax relief and a new economic development incentive program. Both are important, but in terms of economic development in rural Nebraska, property tax relief takes priority.
Farm income in Nebraska was $4 billion in 2017, down from the peak level of $7.5 billion in 2013. This decrease has had a major effect on our rural economy. In McCook, we had just over $142 million in net taxable non-motor vehicle sales in 2018. This is down from more than $164 million in 2014. This has affected employment, salaries and services throughout our region in southwest Nebraska.
Even though income and sales have gone down, property values have gone up dramatically. In 2019, Red Willow County’s property valuation was $1.267 billion. A decade ago, it was $672 million.
Funding for state and local government in Nebraska is based on a three-legged stool. When it works well, income tax, sales tax, and property tax each cover about a third of local and state government spending. The increase in property values the last decade has distorted this. In 2016, we relied on property tax to cover 37.5% of local and state government, with sales tax covering 29.3%, and income tax covering 26.3%.
This reliance on local property taxes to fund K-12 education and other local services falls heavily on the most important part of our rural economy, the ag sector. It will continue to be difficult for our ag producers as commodity prices stay low, but if we can cut property taxes for them, that gives them more money to spend at the local implement or car dealer, grocery store or hardware store.
I am an economic development professional, and I understand Nebraska needs to enact a new tax incentive program to compete with other states. But property tax relief should be addressed before passing an incentive package, and lawmakers also should work to ensure the fiscal impact of the incentive package doesn’t force us to rely even more on property taxes.
Furthermore, the program should give the Department of Economic Development discretion about what projects receive incentives. Under our current program, the Nebraska Advantage Act, if a project meets certain criteria, it receives incentives even if it isn’t the best economic development investment.
A good example of what can happen under such a system occurred late last year when it was announced that NioCorp, which mines the rare mineral niobium, would receive $200 million in state tax incentives for its Nebraska operation. The catch is that Nebraska is one of the only places on earth where niobium is found, so NioCorp must mine here whether it receives incentives or not.
Giving the state more discretion about what projects receive incentives and effectively capping the program could help ensure the state doesn’t just give away money that could be used for more fruitful endeavors like property tax relief.
Other steps the state could take to help bolster economic development in rural Nebraska include increasing investment in the Business Innovation Act, which provides grant and loan support to innovative starts ups and works to increase broadband internet in rural Nebraska.
We have a lot going for us in Nebraska. Our people have a great work ethic. Our outstanding schools prepare our children to succeed. Our unicameral Legislature allows for more cooperation and collaboration than more partisan bodies can offer.
With so much going in our favor, I know our legislators can forge economic development solutions this year that meet the needs of our entire state.
Andy Long is executive director of teh McCook Economic Development Corporation.
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