Effective tax rates allow comparisons of property tax burdens across state borders. For property taxes, effective tax rates equal actual taxes paid in a state as a share of total property market value. Using effective tax rates, one can compare tax burdens without getting bogged down in policy differences between states. The methodology was used by researchers for the Legislature’s Revenue Committee in a 2014 interim study report (LR 566) examining methods used by states to set the taxable value of agricultural land. Here, the methodology is resurrected using data from the USDA Economic Research Service and National Agricultural Statistics Service to calculate effective tax rates on agricultural property in Nebraska and bordering states. The results are shown in Figure 1.
Figure 1 plainly shows the effective tax rate on agricultural property in Nebraska in 2017, 1.04 percent, far exceeds those of bordering states. Kansas’s rate, 0.78 percent, is nearest to Nebraska, but Nebraska’s rate is still 1.33 times greater. Nebraska exceeds Wyoming by more than 3.0 times, and Iowa by 2.89 times. The results are like those found in a University of Illinois study of effective tax rates using 2015 data (Figure 2). Not surprisingly, Nebraska compared unfavorably in this study as well. States in red top the nation with effective tax rates exceeding 1.0 percent. States in orange, including Nebraska, had effective rates between .75-1.0 percent. Only states in the Northeast, much smaller in terms of their agricultural sectors, had effective tax rates exceeding Nebraska’s. The bottom line of both these comparisons—Nebraska agricultural producers pay high property taxes and are clearly at a competitive disadvantage to producers in other states.