Nebraska Gov. Jim Pillen offered the most detailed outline yet Thursday of his plan to cut the state's collective property tax bill in half — but left crucial questions over how the state might fund his plan for lawmakers to answer.
Addressing reporters Thursday morning at the Capitol, Pillen repeatedly called for a "hard cap" on local governments' yearly spending increases and for the state to take over the majority of funding for Nebraska's public schools.
A state takeover of school operating expenses would cut property taxes by about 49% but put the state on the hook for $2.61 billion in funding annually.Ìý
Pillen on Thursday pointed to $1.6 billion in savings the state could achieve by phasing out local school districts' general levy property taxes, "retooling" existing property tax cut relief programs and hiking "sin taxes."
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But the governor has been slow to outline a viable plan to replace the remaining $1 billion the state would have to come up with to deliver on his promise to cut Nebraskans' property tax bill in half.
Pillen declined to do so again at Thursday's news conference, where he promised to cut state spending by $350 million but indicated he would leave it up to lawmakers to identify replacement revenue through the elimination of sales tax exemptions — an unpopular policy proposal that lawmakers have already rejected once this year.
"When the unicameral comes together, that's their job: to put together what the plan will be to come up with the extra funding," Pillen said.
During the press conference, the governor said his office did not have a list of those exemptions, which represent the most controversial portion of Pillen's plan and the likeliest to sink it in the Legislature. But later in the day his office sent a list to the media.
The governor's news conference came a week before he is set to recall the Legislature to Lincoln for a special session focused on property tax reform. For weeks, lawmakers from both parties have publicly aired concerns that Pillen's plan does not have enough support to become law. AÂ special session will cost the state upward of $16,000 per day.
A draft of Pillen's proposal obtained by the Journal Star earlier this week indicated the governor plans to ask lawmakers to eliminate up to 130 sales tax exemptions, including on the purchases of manufacturing and agricultural equipment and the energy used in industrial and agricultural operations.
Pillen walked back some of those proposed exemptions Thursday — "I think today ... the (agricultural and manufacturing) inputs are off the table," he said — but at other times maintained that "all of them" could be eliminated.
"In the last 60 years, there's been 120 exemptions (added). Where'd that money go? That went away and went onto the backs of the property taxpayers," Pillen said. "So (eliminating exemptions) is not a tax increase. That's putting sales taxes back in play that needed to be a long time ago."
The governor's staff handed out a booklet Thursday titled The booklet indicates Pillen's plan would eliminate 114 sales tax exemptions to generate $950 million in replacement revenue. He also highlighted a that Nebraskans can use to see how much the proposal could reduce their property tax bill.
The glossy brochure — which one lawmaker, Sen. Danielle Conrad of Lincoln, said was reminiscent of political campaign materials — indicates taxpayers would save $500 million annually by 2026 by curbing school districts' taxing authority, and another $898 million by front-loading income tax credits already offered to property tax owners.
The booklet also floats hiking "sin taxes" on items including "cigarettes, candy, pop, vaping, spirits, keno gambling, games of skill and consumable hemp." Those tax hikes would generate $200 million in revenue, according to the booklet, which Pillen said his campaign paid to have printed.
A policy adviser for the governor said after the news conference that Pillen's office — funded by taxpayers — had paid for the booklet's production. In an email later, a spokeswoman for Pillen said the governor had paid for the booklet out of his own pocket. It's unclear which of the three claims are true.
Pillen also, perhaps for the first time, signaled support for the legalization of online sports gambling, though he indicated he would back a plan to legalize online gambling in January, not at this month's special session. Conservatives have long opposed the expansion of legalized gambling in Nebraska, where casino gambling has been legal for less than five years.
The governor's still-evolving plan to reduce property taxes emerged as his administration's top priority in January after Nebraskans paid about $5.3 billion in property taxes in 2023 — an increase of about $1 billion from 2019 and $2 billion since 2013. Virtually every lawmaker agrees the state needs to curb rising property taxes.
'Reverse Robin Hood scheme'
But the crux of Pillen's plan — to replace up to $1 billion in property tax revenue with sales tax revenue — has been blasted as a "reverse Robin Hood scheme" by some liberal lawmakers and a "tax shift" by conservatives who also oppose the proposal.
Fierce opposition to Pillen's plan among lawmakers from both parties in Nebraska's formally nonpartisan Legislature did not cease following Thursday's news conference.
"Pillen’s press conference was full of empty promises with no substance," Sen. Julie Slama of Dunbar, a conservative who has advocated for reduced spending as "the only route to real tax relief," said in a message Thursday. "Of the few numbers of his plan that have leaked, simple third grade math shows working Nebraskans will be paying more in taxes."
Few lawmakers attended Pillen's news conference, where he appeared alongside Sen. Lou Ann Linehan of Elkhorn, the chair of the Legislature's Revenue Committee, and Sen. Rob Clements of Elmwood, the body's Appropriations Committee's chairman.
Linehan said the Legislature "must put a halt of local governments collecting a windfall of cash every time (property) valuations go up," signaling support for the "hard cap" on local spending championed by Pillen.
The booklet and Pillen's draft plan both indicate that school districts could levy property taxes to generate revenue beyond state funding only with the support of 60% of district voters.
"The ultimate benefit of this plan, once fully implemented: Nebraska will collect $1 billion less in taxes," said Linehan, rates last year. "While some may try to convince you that this a tax increase, this plan is a tax decrease. This is a fair plan."
Not everyone agrees.
John Gage, Pillen's former communications director who is now the state director for the conservative policy group Americans For Prosperity, said Thursday that Pillen's "scheme to shift more taxes onto working and middle class Nebraska families" will again be defeated in the Legislature.
"While other Republican governors are working to make life more affordable for their constituents facing sky-high living costs under the Biden economy, Gov. Pillen is pushing a plan that would be the largest tax increase in state history," Gage said in a statement, adding that his organization would "make sure the lawmakers who support it are held accountable."
Pillen has already watched his initial tax plan — which relied on hiking "sin taxes" and new taxes on soda and candy, veterinary care and other services for pets, dry cleaning and lottery tickets, among other things — stall in the Legislature once this year.
The governor in early January , prompting immediate skepticism from some lawmakers and drawing fire from groups with different political ideologies.
During the regular legislative session that ran from January to mid-April, lawmakers amended the bill that carried Pillen's plan repeatedly, ultimately axing the across-the-board sales tax hike altogether while proposing new or increased taxes on consumable hemp products, cigarettes, soda and candy, veterinary care and other services for pets, dry cleaning and lottery tickets, among other things.
But even the final version of that bill (LB388) — which included a 7.5% excise tax on ads that run on some state broadcasting outlets and social media websites — faced a last-minute advertising blitz on state radio and TV stations and in newspapers across Nebraska, warning that the tax would “destroy many small businesses."
The Legislature adjourned for the year April 18 without taking a final vote on LB388, sinking the governor's plan. In a speech to lawmakers hours later, Pillen repeatedly derided the Legislature's “failure to act†and promised to recall them for a special session on property taxes.
The first-term governor barnstormed the state to rally the public's support for his tax plan, which still relies on the repeal of sales tax exemptions that proved too unpopular among lobbyists and lawmakers in April — a reality Pillen seemed to acknowledged Thursday as he implored Nebraskans to call their senators, as he has repeatedly said this summer.Ìý
"It's really important that the people of Nebraska's voice is heard on this," he said. "As we talk about broadening the sales tax, there'll be a lot of squealing going on."
As elements of the governor's latest tax plan have emerged through news reports from his town hall series this summer, some lawmakers and lobbyists have remained skeptical that Pillen's proposal will garner enough support in the Legislature to become law this year.
That remained true after he outlined more of his plan Thursday.
"I think after this most recent bewildering chapter out of the Pillen playbook, the senators that I've been in contact with today, who were all watching ... remain rightly skeptical if not flatly opposed," said Conrad, who previously said Pillen's plan would be "dead on arrival" in the Legislature. "If he truly had 33 votes behind him, let's see his vote card."
But Pillen — who has repeatedly pushed back against criticism of his tax plan and maintained his proposal will "get the votes" — remained both defiant and confident Thursday, predicting again that enough lawmakers will support his plan to form a filibuster-proof majority.
"Don't listen to what people say. Let's watch what they do," he said, later adding: "We'll have bipartisan support. We won't be scratching for 33 votes."