Governor’s office, OpenSky figures differ • Nebraska Examiner
Governor’s office, OpenSky figures differ • Nebraska Examiner

LINCOLN — Nebraskans are presented with two starkly different predictions about whether taxpayers will pay less or more under Gov. Jim Pilon’s proposed property tax relief plan.

The plans call for up to a 1-cent increase in state sales taxes and new and higher sales taxes on some purchases to offset reductions in local property taxes — a “tax change” that Pillen argued was needed and which according to some conservative groups, it is not a tax cut.

But on Wednesday morning, the tax plan’s lead sponsor, along with Peelen administration officials, held a briefing for state lawmakers. They provided estimates that, overall, three “exemplary” households would save between $1,036 and $2,137 in net taxes because their property tax reductions would more than offset the higher sales taxes they are expected to pay.

‘Good deal’

“This is a big deal,” state Sen. Lou Ann Linehan told the assembled lawmakers, officials and media.

But those forecasts differed significantly from others released Tuesday evening by the watchdog group OpenSky Policy Institute.

OpenSky predicts that the top 5% of taxpayers, those with household incomes above $252,600, will pay slightly less in total taxes, while low- and middle-income families will end up paying slightly more.

“more regressive”

Overall, this tax change makes Nebraska’s tax system more regressive,” said Rebecca Firestone, CEO of OpenSky.

“Anyone who is a renter is not likely to get a tax break from this,” Firestone added, noting that OpenSky has analyzed the impact on a wider range of income groups.

The governor’s forecast looks at three sample households with incomes of $45,000, $80,000 and $144,000, respectively, who own homes in Beatrice, Hickman and Elkhorn.

Linehan, at the Wednesday morning briefing, called the forecasts by OpenSky — a group with which she often disagrees — “not even close.”

The different projections, which look at different ranges of household incomes, will be aired in full Wednesday afternoon when debate begins on Pillen’s plan, House Bill 388.

30% reduction in property taxes

The governor’s office says the plan would cut local property taxes by about 30 percent by shifting an additional $1.2 billion in new state aid to K-12 schools.

The amount of so-called “foundation aid” per student would rise from $1,500 to $3,000 per student under the plan, which, if passed, would put Nebraska in eighth-highest state aid for local education, up from 28th now .

An existing cap on school district revenue increases, Pillen officials said, would ensure that additional state aid would translate into property tax reductions.

They projected that the owner of a $225,000 home in Beatrice with a household income of $45,000 would see a net tax savings of $1,036, due to a $1,237 drop in property taxes and a $201 increase in annual taxes on sales. That household, according to the Pillen administration, would also save $1,800 in utility sales taxes, a new tax break that is part of LB 388.

The owner of a $300,000 townhouse in Hickman with a household income of $80,000 would see a net tax savings of $1,041, according to Pillen’s administration projections.

New taxes on “discretionary” spending

The administration pointed out that many household expenses — such as groceries, gasoline and health insurance — are not taxed, and that the new, higher taxes would be on “discretionary” items that families may choose not to buy.

State Sen. Terrell McKinney of Omaha. (Zach Wendling/Nebraska Examiner)

During the briefing, Omaha Sen. Terrell McKinney asked if renters in his North Omaha district would see net tax savings.

Linehan said she has yet to see an analysis of that, but said she expects that if landlords don’t see property tax increases, it will lead to fewer rent increases.

But OpenSky’s analysis took into account lower-income groups, which include renters. It shows that households in the bottom 40% of incomes will see a 0.16% increase in total tax payments. For a household with an income of $30,000, that would mean a $48 increase in taxes.

Firestone blamed the governor’s projections for not analyzing the full range of income groups, adding that the plan would make it more expensive to buy cars and homes.

“Having said that everyone would get a tax break, it’s hard to see how that math is possible,” she said.

OpenSky criticized the plan as a whole because it would increase taxes on items more commonly purchased by communities of color, such as cigarettes and lottery tickets, and impose spending caps on local governments, making it harder for them to provide needed services.

Some conservative groups, such as Americans for Prosperity and the Nebraska Chamber of Commerce, oppose the plan as a “tax change” rather than a real tax break.

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