COLUMBUS, Neb. — State Sen. Paul Schumacher wanted people to notice when he introduced three bills last month that would impose a tax on irrigation water, eliminate the sales tax exemption for agricultural expenses and get rid of business tax incentives aimed at spurring economic development.
The Columbus lawmaker knew his bills (LBs 1021, 1022 and 1023) would get people fired up.
He also doesn’t expect any of them to make it out of their respective committees.
They’re more of an “attention-getter,” he said.
“This is a little bit of a signal of what could happen if you get what you wish for,” Schumacher said.
That wish for many Nebraskans is more property tax relief, including a proposal introduced by Sen. Steve Erdman that would provide an estimated $1.1 billion in tax relief starting next year.
Erdman’s bill (LB829) calls for property tax relief distributed through a state income tax credit or refund equal to 50 percent of local school property taxes paid by Nebraskans.
If his bill fails to gain legislative support, a petition drive is planned to gather signatures to place the property tax issue on the November ballot for voter consideration.
With Nebraska facing a roughly $200 million projected revenue shortfall over the current two-year budget cycle and expenses tied to an overcrowded prison system and aging baby boomer population sure to rise, Schumacher argues the state can’t afford to cut property taxes right now.
“The state has no place to get that money from,” he said.
Unless, of course, someone introduced a package of bills identifying ways to make up that lost revenue.
So that’s what he did, just to give Nebraskans something to think about before they sign a property tax relief petition.
“I think people deserve to be warned about what could happen if the Legislature were forced to get a billion and a quarter dollars out of nowhere,” he said.
LB1022, dubbed the Irrigation Tax Act, would impose a one-cent tax for every 10 gallons of water used to irrigate agricultural and horticultural land. The tax, charged to the owner of the land, would apply to irrigation wells capable of producing at least 5,000 gallons per day.
The measure would also value all agricultural land as dryland for taxing purposes.
Schumacher’s argument is the state owns the water and provides a “substantial subsidy” to school districts and other local taxing entities by allowing irrigated farmland to be valued higher.
Revenue from the irrigation tax would be dispersed among school districts that don’t receive equalization aid from the state.
Schumacher said the actual tax rate would likely be “substantially less” to make up for the lost property tax revenue.
Eliminating the sales tax exemption for agricultural expenses such as equipment, chemicals, livestock, electricity and irrigation water, which LB1021 would do, is another way to recover that revenue.
“That probably wouldn’t go over big either,” said Schumacher.
The third bill, LB1023, would get rid of state tax incentives for businesses after this year.
Those incentives totaled $295 million during 2016, according to a Nebraska Department of Revenue report released in August.
Schumacher said he introduced that bill “just to be fair and get everybody mad at me.”
The local lawmaker, who is serving his final year in the Legislature because of term limits, is just sending a message at this point, but he believes state senators may soon have to get serious about these types of proposals.
“Next year if the state’s pushed up against the wall to come up with $1.2 billion, who knows what’s going to happen?” he said. “Maybe something even worse than those things.”