Property Tax & Income Tax Relief—A Brief History
As the Legislature contemplates property tax and income tax relief in 2019, it might help to explore the history of tax relief efforts enacted since 2007. In that year, the Legislature passed LB 367 which established the Property Tax Credit Program, broadened income tax brackets, eliminated the marriage penalty and changed the standard deduction for income taxes. At the time, the package was estimated to provide $185 million in property and income tax relief per year–$110 million in property tax relief and $76 million in income tax relief.
Since 2007, the Legislature has passed numerous other measures to supplement property tax and income tax relief. These measures included bills to increase the amount appropriated to the Property Tax Credit Program, index income tax brackets for inflation, broaden tax brackets for corporate income taxes, exempt $10,000 in personal property from taxation, and much more. Each of these measures increased the amount of annual relief provided to property and income tax payers.
The graph below shows estimates of the accumulated annual relief provided to both property tax and income tax payers since 2007. For example, in FY 2015-16, the property tax and income tax relief equaled roughly $200 million, with property tax relief slightly more than income tax relief. The estimates for property tax relief are rather straightforward as the legislature appropriated dollars to the various property tax relief programs each year. The estimates of income tax relief are made using figures from fiscal notes accompanying the bills and applying growth factors to estimate the annual tax relief provided. The growth factors equaled the average grow rates in taxes collected between FY 2005-06 and FY 2015-16, the assumption being the growth in tax savings equates to the growth in taxes collected. The growth rates used for the estimates were 3.9% for individual income taxes and 3.6% for corporate income taxes. The estimates do not account for any legislation passed in 2017 and 2018.
Whether past Legislatures’ intended to or not, they did a remarkable job of equalizing the amounts of income and property tax relief provided since 2007. In some years, annual income tax relief exceeded property tax relief. In other years, the reverse was true. Since 2007, total property taxes collected in Nebraska increased 55 percent—it was 152 percent on agricultural land—while net income taxes collected increased 32 percent. Appreciating the history of tax relief and taxes collected should help this year’s Legislature as it moves forward with its tax discussions and contemplates how to balance the various interests requesting tax reform.
