Editorial, 7/30: Property tax reform needed as ag downturn grows deeper

The Bureau of Economic Analysis released a report in late June that showed Nebraska was the only state to see a decline in personal income between January and March. This week, data from the same federal agency indicated the state’s economic output declined by 4 percent from the last quarter of 2016 to the first quarter of 2017. Both were chalked up largely to a weak farm economy.

With the slowdown that  hurts Nebraska’s largest industry showing no signs of stopping, the state’s farmers and ranchers need relief. The best way to achieve that would be to reconfigure Nebraska’s tax structure in a manner that would ease the property tax burden on the state’s agricultural producers.

And that relief must come in a revenue-neutral fashion, given the continued decline in tax receipts. Earlier this month, Gov. Pete Ricketts reported the fiscal year 2017 tax revenues fell $34 million short of forecasts, two months after state officials reduced the projections. In FY2017, Nebraska took in less tax revenue than it did the previous year – and these shortfalls affect all Nebraskans.

All the while, property taxes levied on Nebraska agricultural land grew by 164 percent – from $455.4 million to $1.2 billion – between 2006 and 2016. This trend is clearly unsustainable for the state’s farmers and ranchers, particularly in light of dim projections ahead.

A University of Nebraska-Lincoln report forecasts the downturn will continue to hamper Nebraska’s economic growth, estimating a 16 percent decrease in 2017 farm income alone – the fourth consecutive year of decline.

To add insult to injury, excessively arid conditions are slowly creeping across the central plains. UNL’s National Drought Mitigation Center reported, as of Tuesday, 86.1 percent of Nebraska’s land area was rated as either abnormally dry or drought conditions.

These struggles are by no means confined to Nebraska, as the ag downturn has disproportionately affected Midwestern states’ economies. Six of the seven states to see a decline in the first quarter of 2017 were in the Great Plains, while all but one state where personal income rose by less than 0.75 percent in that time was in the Midwest.

Nebraska farmers and ranchers cannot afford property taxes increasing this rapidly as their incomes have stagnated or fallen in recent years – and will likely do so in the near future.

With strong reserves and constitutional limits on debt, Nebraska’s economy has weathered such a storm better than most states. In the face of continued declining revenues, however, the Legislature must take action in January to ease the property tax burden on those who have been hurt most by a floundering agriculture industry.