LINCOLN, Neb. (AP) — Nebraska Gov. Pete Ricketts is considering a proposal that would change the way agricultural land is taxed to provide relief to farmers who are struggling amid low crop prices.
The governor floated the idea last week as a way to prevent property taxes from sharply increasing even as the state’s agricultural economy is having troubles. A similar bill stalled in the Legislature in 2017, but Ricketts said he doesn’t think it was fully debated or understood.
“I still think it’s a good idea,” Ricketts said in an Associated Press interview. “People have had a chance to think about it and look at it, and I think that gives us more of an opportunity to get that passed.”
Nebraska now relies on a market-based system when valuing agricultural land, unlike most Midwestern states that levy based on the potential income a property can generate. Iowa, Illinois, Indiana, Kansas, Ohio, Wisconsin and the Dakotas all use the latter and typically charge less in agricultural property taxes than Nebraska.
Under Nebraska’s system, farmland is assessed based on the market price of nearby land parcels that have recently been sold. Investors in recent years have bought such land at a premium, raising property values for the surrounding area even when commodity prices have fallen. The soaring land values result in higher taxes.
Fresh off his win in Tuesday’s election, Ricketts said cutting taxes and promoting business growth will remain his top priorities for his next four years in office. He said the Legislature “has been the obstacle” to reducing property taxes because lawmakers have rejected his proposals, but he pledged to continue working with lawmakers.
Some senators have blamed Ricketts for not accepting their ideas.
Sen. Steve Erdman, a retired farmer from Bayard, criticized the governor’s tax package in April as “too little, too late” for property taxpayers and called it “one of the most ridiculous pieces of legislation I have seen in my life.”
Now, Erdman said he’s working with the governor’s staff on a bill that would tax agricultural land based on its potential income instead of its market value.
“A lot of people are buying for purposes other than farming it,” Erdman said. “It seems very unfair to value 99 percent of ag land based on what happens to 1 percent of it.”
Ricketts said he was also interested in the work done by a group of senators who were looking for ways to change Nebraska’s aid formula for K-12 public schools, a major driver of property taxes.
“There’s not going to be one silver-bullet answer to solve this,” he said. “Part of my job is to try to bring together (urban and rural senators) on property taxes and find something we can agree on.”
One prominent agriculture group, the Nebraska Farm Bureau, stopped short of endorsing the proposal but left open the possibility. Spokesman Craig Head said the group’s members haven’t yet approved a policy agenda for next year’s session, “but property tax reform is still a high priority for us.”
Other rural senators said they support the concept but didn’t think it addressed the immediate problem facing rural landowners.
“It doesn’t really fix anything,” said Sen. Mike Groene, of North Platte. “Twenty years ago it would have been the answer, because it would have prevented these huge valuation increases we’ve seen. Over the long range it works, but we don’t have time for the long range.”
Groene said the proposal would shift the tax burden to other property owners within a county or school district. Local governments that can’t collect additional revenue because of the policy could compensate by raising their levies — putting farmers back in the same predicament.
Groene, a blunt-spoken fiscal conservative who owns farmland, said he was fine-tuning a different proposal to address the taxes levied by public schools.
“We have to do something, or else I’m going to leave this damn state,” Groene said. “I’m sick of this.”