Nebraska Governor Jim Pillen testified before the Legislature’s Revenue Committee Friday on his plan to change how the state values ag land for tax purposes from market price to its production, but even supporters of the idea had concerns with the bill.
LB 820 creates a 5-member state committee to calculate a land’s income producing potential for tax purposes and limits ag land valuation increases to 3.5% per year. It’s estimated to decrease valuations by about $7.5 billion dollars or about 8%.
In his third straight day of testifying at hearings on the bills making up his tax reform plan, Pillen said it’s not right that land is valued on “artificially” inflated purchases of nearby land, purchases unrelated to its productivity.
A hog producer and the first farm-related Nebraska governor in decades, Pillen said using market value for assessing taxes can produce distorted results, especially if a producer wants to keep farming or ranching land that can be developed.
Ag groups have been pushing for a production-based valuation system for decades, but the representatives of several told the committee that in its current form, Pillen’s plan might cause more harm that good.
Central City farmer Mark McHargue is president of the Nebraska Farm Bureau, the state’s largest ag group. Speaking for it and several others, McHargue said there’s a sense that the plan “isn’t ready for prime time.”
Figures from state property tax administrator Ruth Sorensen showed one problem. The change would increase ag land valuations in 64 of the state’s 93 counties, with 12 rural counties seeing rises of more than 10%,
More and more of the property tax burden has fallen on ag land in recent years, especially in rural counties. Ag valuations jumped 264% between 2006 and 2016 while commercial/industrial land rose 43% and residential valuations 33%.