‘Historic’ tax relief and school funding reforms headline 2023 legislative wins

The 2023 state legislative session will be remembered for yielding many wins for Nebraska’s farm and ranch families, but none larger than the actions taken to deliver both tax relief and school funding reforms long sought by Nebraska Farm Bureau and its members.

“The Nebraska Farm Bureau has consistently led the charge for property tax relief. This legislative session marks a major victory for every taxpaying Nebraskan. The Legislature’s passage and Gov. Pillen’s signing of LB 243, LB 583 and LB 754 are transformational for the entire state, especially for our farmers and ranchers. We thank the senators for their tireless efforts to get this package across the finish line in this unique year, and we thank Gov. Jim Pillen for his visionary and aggressive approach in tackling the state’s most pressing issue,” said Mark McHargue, Nebraska Farm Bureau president.

When fully enacted, the trio of bills will lower both property and income tax burdens for Nebraskans while also making fundamental reforms to the way K-12 schools and community college education are funded. Nebraska Farm Bureau estimates the combined measures will effectively reduce what Nebraskans would have paid in property and income tax burdens by roughly 30% each year moving forward through 2030.

“These measures are critical to slowing growth of property and income taxes, providing much needed and unprecedented tax relief. While these measures provided tax relief, we are not done. We know valuations are going up across that state and we will be working to tackle that issue in the next session,” said McHargue.

LB 243, introduced by Sen. Tom Briese of Albion, made four major changes to help provide property tax relief. The changes include enacting a 3% annual cap on the amount K-12 school districts can annually increase their revenues (with limited exceptions). The bill also significantly increased state dollars allocated to the Property Tax Credit Fund (PTCF). Most Nebraskans will recognize the PTCF tax credit as the one automatically appearing on their property tax statement each year where the amount of the credit is based on the value of an individual’s property and total dollars in the fund. The third change eliminated a cap on growth in state dollars available for property tax relief through the refundable income tax credit Nebraskans can claim for property taxes paid to K-12 schools. The credit had been capped at 5% per year. The fourth change curtails community college levying authority and in turn provides state aid to community colleges to offset the loss of access to property taxes. Effective in 2024, community colleges will only be able to use general levy authority if the state fails to meet state aid obligations.

LB 754, sponsored by Omaha Sen. Lou Ann Linehan, phases in reductions in both individual and corporate income tax rates in Nebraska. Under the legislation, Nebraska’s individual and corporate income tax rates will drop to 3.99% by Jan. 1, of 2027.

LB 583, sponsored by Sen. Rita Sanders of Bellevue, fundamentally changed K-12 education by obligating the state to annually provide $1,500 per student in foundation aid. The measure also obligates the state to help cover 80% of a K-12 school’s special education costs. The bill represents Nebraska’s largest state investment in K-12 education since state aid to education was created in 1990.

“Only 10 years ago, there were elected leaders who were unaware that high property taxes in Nebraska were an issue. To see the size and scope of relief delivered during this legislative session shows the progress that’s been made in the body of the need to provide tax relief to hard-working Nebraskans. We thank the senators that supported these measures and Gov. Pillen for his leadership to get these bills signed into law,” said McHargue.

According to McHargue, getting the right people elected to office played a major role in delivering these critical tax relief measures.

“To say that electing the first governor rooted in agriculture in nearly a century was key to this success is an understatement. It only reinforces the importance of our Nebraska Farm Bureau Political Action Committee getting involved in elections to support the right candidates,” McHargue said.

In addition to historic tax relief, the 2023 legislative session produced several other important wins backed by Nebraska Farm Bureau, including, but not limited to:

• Allocation of $1 million in tax credits per year for blenders of biodiesel
• Incentives to boost retails sales of E-15 ethanol
• Increased tax credits for growing employment at livestock operations
• Lowering of investment thresholds to boost participation in the livestock modernization program
• Exemption of baling wire and twine used in commercial ag from sales and use tax
• Preservation of special valuation of agricultural land annexed into a municipality or sanitary improvement district
• Expanding opportunities and thresholds for participation in the Beginning Farmer Tax Credit Act program
• Establishment of a Nebraska Broadband Office to coordinate and boost broadband expansion
• Measures to support energy development, including nuclear and hydrogen
• Allocation of funds to develop the Perkins County Canal Project to protect Nebraska’s full entitlement to flows under the South Platte River Compact
• Allocation of funds for water quality
• Allocation of funds to assist counties with bridge construction and repair

“Clearly this was an unprecedented and historic legislative session in terms of what was accomplished in the areas of tax relief and school funding reform, as well as implementing numerous other Farm Bureau policy objectives. We thank the members of the Legislature and Gov. Pillen for their work this session and for their efforts to help grow our state by supporting agriculture and putting dollars back in the pockets of Nebraska taxpayers,” McHargue said.