Nebraska’s high property taxes are devastating for young farmers and ranchers
August 17, 2018
When the stakeholders gather around the table as Nebraskans United for Property Tax Reform and Education, the future of the state's agricultural industry and the future of the state's children are looming large.
The coalition, made up of the major players in both agriculture and education, is working toward a balance between property tax relief for agricultural producers and still adequately and reliably funding education.
Nebraska farmers and ranchers pay the highest property taxes in the nation, according to Nebraska Farmers Union president John Hansen. Second on the list of agriculture property taxes is California, where he said taxes are, on average, about $9,000 less. Residential property taxes fall in the top 10 nationally, but Nebraska is 49th lowest in the amount of sales and income taxes used to fund schools.
As sales and income tax are often indicative of one's ability to pay, property taxes do not reflect years of low commodity prices or operations at or below the cost of production. Hansen said slightly more than half of Nebraska farmers and ranchers reported losses last year.
“You have the state’s biggest industry, agriculture, and the state’s greatest opportunity, educating our students to be productive members of society, two of the biggest priorities in the state, riding on this.”
Recommended Stories For You
"You have these folks producing these products economically in a very environmentally responsible way and a socially beneficial way and yet, we're not getting paid enough to feed our own families," Hansen said.
While some agriculture producers are better equipped to ride out times of low commodity prices and high taxation, Hansen said most are not and many of those are dependent upon off farm income.
"Even the best and strongest operations have lost a lot of equity in the past five years and a lot of operations have lost a lot of cash," Hansen said. "What we fear is that there will be a lot of difficult decisions that are going to get made this fall and winter. Folks have been bleeding red ink and equity for too long."
This over taxation translates to an unhealthy dependence upon property taxes to fund government services, predominantly education, which utilizes about 60 percent of property taxes collected in the state. Income tax, sales tax, and property tax are the three areas in which Bruce Rieker, vice president, government relations for the Nebraska Farm Bureau, is hoping to find some balance while still adequately funding education.
As legislators have made cuts to balance the budget, local political subdivisions have been left to find ways to fund things required by the state. More often than not, Rieker said property owners — residential, commercial and agricultural — have been left "holding the bag." Rieker said the coalition is calling upon legislators to find the political courage to shift the balance of income sources back to a more equitable position, though the majority of the legislators and the governor are not willing to do so.
In Nebraska, state aid is paid to schools to the tune of just over $1 billion. However, the lion's share goes to about 75 districts of the state's 246 school districts. Rieker said this leaves about 70 percent of Nebraska's schools receiving no equalization aid from the state.
"Those who say it's properly distributed will also point out that more than 60 percent of the students in the state of about 330,000 students K through 12, go to school in those districts that receive equalization aid," he said.
While he admits this can be a valid argument, the fact remains that Nebraska uses property taxes as the only indicator of wealth and ability to fund schools. For districts with a great deal of agricultural land, often in sparsely populated areas, the funding for schools falls squarely on the shoulders of those paying the greatest amounts of property taxes.
Other sources of wealth are available in the state, he said, whether through eliminating antiquated sales tax exemptions, expanding the tax base in some areas, increased sales taxes on tobacco products or other items.
"Most people agree that we're out of balance but when it comes to paying for it, that's where it really gets bogged down," he said.
PRESSURE ON PRODUCERS
In an economy of complicated trade issues, high taxes, and lower commodity and livestock prices, young farmers and ranchers are among those Rieker said that are devastated by the current costs of making a living in agriculture in Nebraska. Many beginning producers depend upon cash rent situations, but with property taxes often higher than cash rent income, Rieker said the costs are passed on to the renter, creating what he calls an incredible burden. For young producers who entered production when prices were higher in recent years, they are now facing high property valuations on top of high health insurance costs and low commodity prices.
"If you take property taxes, add the low commodity prices and the cost of health insurance, it's the perfect storm that is putting pressure on producers," he said.
Rieker said he has been exceptionally pleased with the work of the Nebraskans United for Property Tax Reform and Education coalition. While some of the conversations have been tense, he said, accomplishing the goals of the coalition are only possible through cooperation. Due to the state's filibuster rule, the group needs the support and votes of 33 of the state's 49 legislators, a super majority.
"That means ag can't get it done by itself, education can't get it done by itself, the business community can't get it done by itself," he said.
The coalition includes Nebraska Farmers Union, Nebraska Farm Bureau, Nebraska Corn Growers, Independent Cattlemen of Nebraska, Nebraska Soybean Growers Association, Nebraska Pork Producers Association, Nebraska Wheat Growers Association. Nebraska Women involved in Farm Economics, the Nebraska Grange, the Center for Rural Affairs, the Nebraska State Education Association, the Nebraska Council of School Administrators, the Greater Nebraska Schools Association, which represents the state's largest schools, Schools Taking Action for Nebraska Children's Education (STANCE), and the Nebraska Rural Community Schools Association, representing the smaller districts.
"I truly believe we can get this done," Rieker said. "You have the state's biggest industry, agriculture, and the state's greatest opportunity, educating our students to be productive members of society, two of the biggest priorities in the state, riding on this." ❖
— Gabel is an assistant editor and reporter for The Fence Post. She can be reached at firstname.lastname@example.org or (970) 392-4410.