I have heard from a few people who were concerned about something I brought up in my previous article. I want to be very clear I am not advocating for the taxation of intangibles. The purpose of my last article was to point out yet one more way there are disparities between the taxation of farmland and intangibles as assets.
An update from this year’s legislative session is that my priority bill to raise speed limits has started to take effect in the district and across Nebraska. As you may have noticed some speed limits have been raised on certain highways and roadways, not all of the speed limits were changed immediately. The Nebraska Department of Transportation will continue to evaluate which roads should have their speed limit increased by 5 mph.
This is the time of year where committees will start having interim hearings. On August 31st the committee that I am chairman of, the Natural Resources Committee, will have their first interim hearing of the year. It will be a study to examine issues relating to the spread of Eastern Red Cedar trees. This is really getting to be a problem in pasture land in some areas of the state. Our study is going to explore this issue and look at what practices are working best for control. I have been out in the district this summer meeting and talking to many residents, as always please feel free to come and say hello if you see me at an event you are attending. I have also been meeting with the elected officials and staff from the ten counties that make up the 44th District. It has been good to learn what is happening locally around the district, as well as, their opinions on the legislature.
Our local budgets are currently being drafted and discussed at public meetings. I encourage all of you to attend these meetings to educate yourselves about the proposed budgets and make suggestions on how to best spend our taxpayer dollars. The budgets of these entities will have an impact on our property taxes since that is where the bulk of the revenue comes from that is used to fund our local government. The only number you really need to focus on is the difference between last year’s total budget and next year’s proposed budget total. If the new budget is higher, ask why, and make sure it is justified. You need to make your voice heard.
I always enjoy hearing from the Nebraskans I represent. Please feel free to contact my office with any questions or concerns that you might have. My email address is email@example.com and my phone number is (402) 471-2805. You can read more about bills and other work of the Legislature at www.nebraskalegislature.gov, and you can click on the Live Video Streaming NET logo to watch sessions, hearings, and other Capitol events.
I have been attending several county fairs and community celebrations throughout the district recently and during those trips, I have had the opportunity to visit with a wide range of individuals. Almost universally, property tax is the topic of discussion. I have spent many hours thinking about this problem and have yet to come up with a viable solution. I have a solution, but it is the viable part that is the challenge. This week I would like to discuss that solution, as well as, touch on a recent supreme court decision.
Many people not within agriculture look at farmers as being rich because they own land. In Nebraska, about half of the land is owned by those working the land and the other half is owned by people not engaged in farming and ranching. To everyone who owns land, it is an asset regardless of whether or not you bought it, or whether it was given to you. It is part of your net worth and part of the nest egg that is your retirement. If you purchased stocks, bonds, or have CD’s in a bank, or if you inherited some stocks, bonds, or CD’s in a bank, they are your assets as well. The real question is why we double tax one set of assets and not the other. Both produce income and we pay income tax on the amount of income earned in that year. Both can increase in value and we pay capital gains tax on that increase when we sell the asset. So why must agricultural real estate owners pay an additional tax every year on that income-producing asset and other income producing assets do not? I am fully aware the argument over taxing intangibles (stocks and bonds), that has been debated before but is it time to take another look at it? I am sure several of my colleagues in the legislature have never heard this argument. I think it is worth having again since the disparity of taxation is so great at this time, and I do not see that changing any time soon.
Lastly, I wish to address the issue of requiring NRDs to sell land it owns but keeping the ability to pump the underlying water for the streamflow augmentation projects. The opinion of the Nebraska Supreme Court is, the matter is settled. The high court has ruled the Rock Creek Project, which was developed and is being operated by the Upper Republican NRD, serves a public purpose. According to the high court, “The right to use the groundwater does not float in a vacuum of abstraction but exists only in reference to and results from ownership of the overlying land”. This statement from the court covers both the Rock Creek and NCORPE Projects. The fact is neither Rock Creek nor NCORPE has pumped any water since May 2017 and it is possible neither will have to operate this coming fall and winter. This shows the NRD’s have had the vision and determination to solve the state of Nebraska’s problem locally while keeping the local economies intact and our communities thriving.
This week I would like to discuss a couple of things that have been in the news and give you a break from property taxes. I would like to touch on the recent U.S. Supreme Court ruling that deals with sales taxes on items purchased on the internet, as well as, talk about industrial hemp and medical marijuana.
The U.S. Supreme Court recently ruled that states may collect sales tax on purchases made on the internet. I have always supported this and have voted accordingly in the Legislature. I always felt it is a matter of fairness with our local retailers who have always had to collect and remit sales taxes. A 5 percent to 10 percent difference in price may be enough to change consumers buying patterns. As for immediately implementing this, it is not so easy. There are still a few questions left by the Supreme Court ruling that we must answer before we proceed with changing our statutes. We will have an exemption for a small retailer who must meet a minimum number of transactions before being required to collect and remit. That number has not been established in Nebraska yet. As for directing the additional revenue, we really have no way to track this revenue coming in. We are hoping it will be upwards of $30 million for the state but there is no way to know for sure what would have been remitted anyway and how much is “new” revenue. So making statements like it should be directed solely toward property taxes is a bit misleading at best. Not that I disagree with that use of the additional revenue.
Industrial hemp and marijuana are two completely different plants. Industrial hemp would be a good alternative crop for the farmers in Nebraska. It can be used to make many different products and would certainly be a way to diversify a farming operation. Industrial hemp contains very little of the chemical THC that can make you high. Anyone trying to smoke it will soon just have a headache. Marijuana, on the other hand, can be very potent and is a different looking plant being both shorter and bushier. The proponents of marijuana will say it will be good for farmers in Nebraska. But if you look at other states who have legalized, medical or recreational marijuana, the “farmers” are large companies who grow indoors under strict guard and growing
conditions. Marijuana is not a crop that Nebraska farmers will grow. You cannot hide marijuana plants in a field of industrial hemp because it will cross-pollinate and make the marijuana plants useless. I believe there still hasn’t been significant research done on the effectiveness of medical marijuana, I don’t believe it is the miracle plant that some people would try to make you believe. It is possible the federal government will reclassify CBD so drug manufacturers can produce and sell products that have gone through FDA testing. All of us would like to get medications into the hands of those who suffer from seizures but we must make sure that these products are safe.
I always enjoy hearing from the Nebraskans I represent. Please feel free to contact my office with any questions or concerns that you might have. My email address is firstname.lastname@example.org and my phone number is (402) 471-2805.You can read more about bills and other work of the Legislature at www.nebraskalegislature.gov, and you can click on the Live Video Streaming NET logo to watch sessions, hearings, and other Capitol events.
This week I want to explore further the property tax problem we have in Nebraska. One of the main problems is how we value property. Some have been talking about going to an income producing method of valuing real estate for taxation purposes. Some of our surrounding states are using that method currently and Nebraska has used it in the past. During my visits with county assessors, I usually ask them about making that change. Most of them have asked me “please do not go back to that method”. It is much too cumbersome and there are way too many subjective decisions that can be made on any property.
Sales is not a perfect way to determine value but it is simpler and less subjective. Besides, whatever method you use to determine value, there is still an arbitrary number plugged into the equation to come up with the amount of taxes needed to fund our government. Currently, Nebraska taxes agricultural land around 75%, of recent sales determined values, and residential and commercial properties at not less than 95%, of recent sales determined values. With the income-producing method, there is a capitalization rate which is an arbitrary number plugged into the formula to give the values necessary to raise the amount of taxes needed to fund our government. One of the biggest complaints I receive is when someone’s neighbor sells their property, causing their property value to escalate and causing taxes to go up. On average only two to three percent of agricultural land sells in any given year, and based on a three-year rolling average, we are allowing over 90 percent of our values to be determined by less than 10 percent of sales. The same thing happens with residential and commercial properties but using a different time frame. Why should you have to pay more in taxes just because someone else chose to pay an inflated price for a piece of property in your vicinity? That inflated valuation does you no good unless you are willing to sell. Most of the time that is not an option.
I would like to see our valuations frozen at today’s levels, then if someone wants to pay an inflated price for a piece of property, they can without it causing all of the neighboring properties valuations and ultimately taxes to go up. The price paid for the selling property would be the new value for it, but all surrounding properties values would not change for taxation purposes. We will also need to decrease the percentage that agricultural land is taxed at, to bring balance back to our revenue streams. If we did freeze valuations we would still need to make some adjustments annually in valuations to keep them uniform and proportional and to ensure our schools and counties could still have a modest increase in revenue if needed. Our property tax issue is very complicated in Nebraska. There are cause and effect issues with everything the Legislature tries to do to solve the problem.