David Hahn Keeps His Promise with Property Tax Proposalby Kyle Michaelis
Well, Democratic gubernatorial candidate David Hahn has released a workable plan to accomplish that very goal with six weeks before the election. Voters have that much time to wake-up to the feasibility of Hahn's proposal and to finally realize they can do more than complain about property taxes - with their vote and their support of Hahn, they can affect actual change.
The simple fact of the matter is that Republican politicians such as sitting-Gov. Dave Heineman cannot be counted on to tackle Nebraska's property tax problem. At best, they would offer band-aid pseudo-solutions rather than the the substantive and systemic reforms that are truly necessary. Why? Because property taxes, in their current form, are regressive and most burdensome to rural Nebraskans and those living on fixed incomes, meaning Republicans - focused on the interests of corporations and the wealthy - will not prioritize property tax reform and will offer little but the same lip-service we have heard for years and have heard from Heineman since his campaign began almost 2 years ago.
Hahn, on the other hand, has the vision and the values to make true property tax reform a reality. His entire plan - the Nebraska Tax Fairness Act - can be downloaded from Hahn's website.
Honest, thought-provoking, and impressive in scope, the plan fulfills all of the promise Hahn has shown on the campaign trail, offering bold leadership with creativity and unflinching concern for the future of our state.
Hahn's unprecedented pledge - a true Contract with Nebraska - includes the following highlights (though I'd advise everyone in the state to read the full text for themselves):
[O]ur governor and the political elite in our state decry high taxes as though they are addressing middle class concerns, and then proceed to prioritize the repeal of the estate tax, which would result in the vast majority of Nebraskans paying higher taxes to compensate for a reduction in taxes for the wealthiest.
Our current leadership, noisily tinkers around the margins of our tax programs, offering "tax relief" and doing so in a way that is calculated to maintain public outrage at an unfair tax structure while obscuring what is indeed unfair about it.
Tax reform, which is what I offer today, should identify and tackle the core issues involving funding and spending mismatches, with careful attention to who pay, and how.....
Nebraska’s founders so valued public education that they placed a free public education guarantee for all citizens in the State Constitution and the Bill of Rights. They understood that the economic and social prosperity of their state is dependent upon an educated citizenry. They intended that all Nebraska children receive an education suitable to the times in which they live, no matter where they live or what their socio-economic status.
To this end the founders created a system of public schools supported by tax revenues. Since land was the principal measure of wealth in their time, they devised a funding system for education based on property taxes. Over time, as government funding was broadened to include a variety of other taxes — the most important being taxes on income and sales — funding of public schools continued to rely predominantly on property taxes....
Because of over-reliance on property taxes by Nebraska school districts, it should be no surprise that property taxes in Nebraska are largely dedicated to funding education. Over three-fifths of all property taxes in Nebraska are collected by local school districts....
Nebraska is not alone among states in over-reliance on property taxes for public school finance. However, many states contribute more to public education than their local funding sources. And most other states contribute proportionately more to school funding than does Nebraska, which gets very poor marks in this regard.
A 2003 U.S. Census Bureau survey ranked Nebraska near the top (5th) among states in terms of local sources for K-12 public school system finance, while ranking it near the bottom (44th) in terms of state sources....
[F]or two years Governor Heineman has taken a dive on the issue of education finance reform linked to property tax reform, preferring to play dodge ball with the issues while offering voters the illusion of tax cuts. LB 968, the Governor’s tax bill passed by the Legislature in 2006, trimmed state income tax rates while at the same time removing the reduction in the school levy lid from $1.05 per $100 of value to $1.00 scheduled for 2008....
By replacing scheduled property tax rollbacks with continued higher property taxes, LB 968 easily offsets any income tax cuts for the majority of homeowners, farmers and ranchers. Heineman’s LB 968 income ‘tax cut’ is in reality a total tax increase for most Nebraskans. In the final analysis, LB 968 represents a setback for efforts to unwind the state’s over-reliance on property tax to fund public education.....
Nebraska lawmakers, like those of many other states, can be dragged by the courts into taking responsibility for the needed reforms of public school finance. A better course, however, is for our state’s leaders to tackle the problem with true resolve that springs from an unflinching understanding of the issues and the commitment to strengthening our state institutions to the benefit of all Nebraskans....
Nebraska’s ongoing reliance on property taxes to fund public education is a ticking time bomb politically, economically and legally. Nebraska needs a leader in the Statehouse with the courage to reverse this regressive tax shift and make the state shoulder its responsibility to provide a constitutionally adequate education for all Nebraska children. Continued failure to address this tax equity problem stands to put all Nebraskans at economic risk.
As for Hahn's actual proposals, they were listed in a Hahn campaign press release as follows:
*Create an exemption so that the first $50,000 of value on a primary residence will not be taxed. That exemption will eventually grow to a $100,000 exemption. This means Nebraskans pay less in property taxes now.
*Freeze taxable values of agriculture land at current valuations for family farms and ranches. Land value will not be revaluated until ownership of that land changes hands. Permit intergenerational and like-use without step up to maintain family farms and ranches.
*Double the Tax Equity and Educational Opportunities Support Act aid (TEEOSA), the mechanism that disperses state funds to local school districts. This will double funding for Nebraska's public schools and make school funding less dependant on property taxes.
*Establish a lid on property tax levies to guarantee property tax rates cannot be raised by a property tax levy.
*Determine land value of undeveloped land in key areas based on raw square footage of that land, as opposed to the current system which is based on land use potential. This will encourage economic development in the places that need it most.
Hahn finally explained:
"The benefits of this proposal include tax fairness, stable and fair education funding, increased home sales and construction, and focus on economic growth to enhance state revenue rather than continuing over reliance on the unfair property tax.
"I propose the Nebraska Tax Fairness Act and, as Governor, will work for this necessary tax reform."
Challenged for more details as to where the increased state funding would come from, Hahn told the Lincoln Journal-Star:
The state budget can be cut by $200 million to $250 million by “attacking overspending and inefficiencies,” Hahn said.
He’d raise additional revenue by proposing elimination of some tax shelters and loopholes, including those now accorded to corporate jets.
Under his governorship, Hahn said “the day of corporate largesse and giveaways would be over.”
Hahn said he’d apply the state sales tax to sales on the Internet and broaden the sales tax on services, including the addition of attorney fees, before determining an increase in tax rates.
Meanwhile, the Omaha World-Herald reported:
Hahn said his plan would reduce property taxes by 57 percent from 2004-05 levels....
Hahn said hundreds of millions of dollars can be trimmed from the state budget.
He said Nebraska could cut its $400 million annual cost for prescription drugs by driving harder bargains with pharmaceutical companies, for example.
The state spends more than $20 million on outside consultants for information technology, he added, a cost that could be reduced by going in-house or working with the University of Nebraska.
And, Hahn said, he would trim business tax incentives by $100 million to $150 million a year - the bulk of the program....
[H]e said, Heineman's tax changes earlier this year amounted to a tax shift, not a tax cut. The Legislature, with Heineman's agreement, offset the tax cut by repealing a law that would have forced schools to reduce property taxes.
Most of the measure's income tax reductions, Hahn said, benefited high-income Nebraskans by allowing them to claim more tax deductions.
"The brutal reality is that Governor Heineman . . . has shifted the tax burden from those best able to pay onto the shoulders of farmers, ranchers, homeowners, small business owners, the elderly and the retired."
I'm not going to label the plan outlined above as the ultimate, final solution for Nebraska's property tax woes, but there's no doubt Hahn has put forward an impressive set of ideas that offer a true alternative for those who have so long called for action on this issue.
With one stroke, Hahn has converted years of taxpayer frustration into a plan both bold and constructive. With the support of Nebraska's voters and the energy of a newly-engaged legislature, challenged by the example Hahn has set by his leadership, there is no doubt this could be the dawn of a new day for our state.
Now is the time to believe. Now is the time to demand change - to fight for it and to make reform a reality. Hahn has shown us the way, but he can't do it alone. We must take his message to the people that they might - at long last - make an informed choice between continuing the status quo or taking the long overdue first step towards a Nebraska of the 21st Century.