SCOTTSBLUFF, Neb. — Nebraskans are pretty passionate about their property tax pain.
That was readily apparent Monday during the first public hearing conducted by a special legislative commission looking at how to make state and local taxes fairer and more competitive.
Complaints that property taxes are too high, especially for ranchers and farmers, were made early and often during the nearly three-hour hearing at Western Nebraska Community College. About 200 people attended, including a caravan of 20 people from Chadron who drove 100 miles to gripe about high land taxes.
“Fewer and fewer (agriculture) producers are paying more and more of the tax bill,” said rancher Jeff Metz of Angora.
Ranchers estimated that property taxes consume 10 percent to 30 percent of their income. Another said her property tax bill amounted, in a normal year, to nearly $90 per head of cattle sold on the ranch.
“The financial support needs to come from somewhere else,” said Alice Sibbitt of Hyannis.
The problem with state taxes came through loud and clear, said State Sen. Galen Hadley of Kearney, who is chairman of the Legislature's Tax Modernization Commission.
What wasn't so clear was the solution, said Hadley, who also is chairman of the tax-writing Revenue Committee. The state has plenty of property but few people, it often is said.
“It's a hard problem,” he said. “There aren't easy solutions.”
The Tax Modernization Commission was formed to explore ways to improve the state's tax system. Its stated goal is to shift taxes, not reduce them.
The commission, whose recommendations are due in December, emerged from the ashes of Gov. Dave Heineman's proposal earlier this year to eliminate all state income taxes.
That idea was shot full of holes by business, farm, hospital, church and nonprofit groups that harshly criticized the plan, which included eliminating several sales tax breaks now enjoyed by those groups.
The governor, however, has continued to push for tax changes, saying Nebraska's taxes are too high compared with its neighboring states and must be reformed and reduced to make the state competitive.
On Monday, representatives of farm groups, ethanol plants, hospitals and airports continued their chorus of opposition to Heineman's initial plan.
Farmers and a representative of a chain of implement dealerships also asked for a new exemption on repair parts for farm machinery.
Audience members suggested several ways to replace cuts in property taxes.
One method frequently mentioned was increasing tax funds the state sends to local schools and counties — aid that is funded by state sales and income taxes. To increase state aid, some suggested increasing the state sales-tax rate, now 5.5 percent, or broadening the tax base to include more services.
Taxing food purchased at the grocery store, now exempt, also was suggested by one person. Hadley said he didn't believe that change was politically feasible, but he said he was willing consider taxing additional services.
That, history has demonstrated, is easier said than done.
A decade ago, Nebraska added new taxes on services, including the labor costs billed by remodeling contractors. The uproar over that tax prompted its repeal after only a few years.
Several ranchers asked that ag land be valued to reflect its income-producing potential, not just its market value. In recent years, the value of farm and ranchland has skyrocketed, increasing tax bills as well as making many rural school districts ineligible for any state aid.
One suggestion was to follow Iowa's example and limit how much property taxes can rise in order to avoid steep hikes.
Chadron rancher Chris Garrett said drought devastated his wheat and hay crops in recent years, leaving him with only a fraction of a crop.
“It's a high-risk endeavor. The only thing I can count on is the property tax bill will continue to rise,” he said.
Morrill County Board member Steve Erdman, whose son Phil is a former state senator, said the major problem with the tax modernization study is that it isn't considering reducing state services.
A couple of people advocated cuts in income taxes for retirees.
Nebraska is one of the few states that doesn't offer tax breaks on Social Security income, said Jim McDermott of Scottsbluff.
“Most states are trying to attract more people,” McDermott said. “What we're doing is driving people who are retired from Nebraska.”
The Tax Modernization Commission will hold another public hearing Tuesday at 1:30 p.m. at Mid-Plains Community College in North Platte. It moves to Norfolk on Thursday for a 1:30 p.m. session at Northeast Nebraska Community College. Additional hearings are scheduled Oct. 17 in Omaha and Oct. 18 in Lincoln.