How Nebraska’s special legislative session on taxes came about and what to expect

Nebraska lawmakers have introduced more than 100 proposals aimed at easing residents’ soaring property tax bills — from a vast expansion of goods and services subject to the state’s sales tax base to legalizing marijuana to reap new tax revenue.

The Associated Press takes a look at how the special session came about, what to expect from it and which proposals to watch.

Why is the Nebraska Legislature in a special session?

Gov. Jim Pillen recalled state lawmakers to the State Capitol on July 25 after the Legislature failed to pass a property tax relief bill before the regular session that ended April 18.

Soaring housing and land prices in recent years have led to ballooning property tax bills for homeowners and farmers, but some have been hit especially hard, as state law requires residential property to be assessed at nearly 100% of fair market value. That compares with 75% for agricultural land.

Property taxes aren’t collected by the state, but by local governments to pay for services such as public education, police and fire protection and maintenance of infrastructure. As such, state leaders used to avoid any attempts at property tax relief, saying it was a local issue.

But Pillen and others note that ever-increasing tax bills are keeping a new generation from being able to afford homeownership and forcing some elderly residents on fixed incomes out of homes they’ve already paid off — and that action must be taken to staunch increase property taxes now.

What will be addressed in the special session?

More than 80 bills and 24 constitutional amendments were proposed in the first three days of the special session before bill introductions were closed. Public hearings, which began Monday, will be held for each one.

Pillen, a Republican, issued a carefully crafted, lengthy proclamation convening the special session that was intended to keep lawmakers tightly corralled in what bills they could propose. State law requires lawmakers to stick to the subject of the governor’s proclamation in introducing special session bills.

But Sen. Danielle Conrad — a Democrat in the country’s only officially nonpartisan Legislature — said the proclamation is so long and complex that “there’s really almost no area of state government that’s untouched.”

“So actually, I think that the governor’s plan backfired,” she said. “I think that it’s going to provide ample opportunity for the Nebraska Legislature to bring forward any and all ideas to achieve property tax relief.”

Which proposals are being most closely watched?

The bill getting the lion’s share of attention is the first one introduced at Pillen’s request — but not for reasons the governor had hoped. The public hearing Monday on LB1 lasted more than 10 hours as scores of people testified for or against it. The vast majority — including city, school and business leaders — opposed it.

During the regular session, Pillen had called for a 40% reduction in property taxes, initially backing a proposal that sought to raise the state’s sales tax by 1 cent and expand the sales tax base to goods and services currently exempt.

But liberals complained Pillen’s proposal would put too much of the tax burden on those least able to afford it, while conservatives called for more reductions in spending over new taxes.

In the special session, Pillen has called for an even more ambitious plan to cut property taxes by half. His new plan would apply the state’s 5.5% sales tax to more than 100 goods and services currently exempt and include so-called sin taxes on candy, soda, cigarettes, vaping, liquor, CBD products and some forms of gambling. Most groceries and medicine would remain exempt.

The money generated would be used to issue tax credits to public schools to replace property taxes. His plan would set a hard cap on what local governments can collect in property taxes.

Are other bills getting traction?

A bill by Sen. John Cavanaugh, a Democrat from Omaha, would offer a universal homestead exemption that would keep the first $100,000 of value of all homes from being subject to property tax, which he estimates would cut $1 billion from property tax rolls.

Other proposals range from ones intended to send a message to finding new revenue sources that could ease the property tax burden. None are likely to advance in the conservative Nebraska Legislature despite gaining notice.

Omaha Sen. Terrell McKinney, a Democrat, has proposed a bill to legalize marijuana in the state and use tax revenue generated from it to cut property taxes, fund public education and have enough left over to fund business and community development initiatives. A proposal by Sen. Tom Brandt, a Republican from southeastern Nebraska, would collect additional revenue by expanding sports betting in the state to allow bets on college teams.

A bill by Sen. Jen Day, a Democrat from Omaha, would force the sale of a state-owned plane used by the governor’s office.

Margery A. Beck, The Associated Press