51¶ÌÊÓƵ

Omaha Sen. John Cavanaugh's proposal would exempt the first $100,000 of a homeowner's property value from being taxed through a universal homestead exemption that would be available to any homeowner in the state who lives full-time in the property they own.

If made law, the exemption floated in Cavanaugh's bill (LB22) would join —not replace — to veterans, people with disabilities and homeowners who are 65 or older.

Cavanaugh's bill would cut the average Lincoln homeowner's tax bill by around $1,780 a year, a 35% cut from the average 2023 property tax bill. In Omaha, the average homeowner would see a $2,200 reduction — reductions that Cavanaugh said would be "significant for the average Nebraskan."

"I wanted an option that did not give large, seven-figure tax breaks to extremely wealthy landowners who don't even live here, like Ted Turner and Bill Gates," Cavanaugh told the Revenue Committee at a public hearing Wednesday, which marked Day 5 of the special legislative session Gov. Jim Pillen called to take up property tax reform.

Cavanaugh's plan stands in contrast to Pillen's tax proposal and others like it, which seek dramatic, across-the-board property tax cuts that would provide the biggest windfall to the state's largest landowners, a group that includes Pillen himself.

The governor, who is also the state's largest pork producer, stands to cut his own tax bill by nearly $1 million under his plan, which relies in part on the elimination of more than 100 sales tax exemptions to replace property tax revenue, taxing previously untaxed goods and services like home and car repairs and maintenance.

"The way I understand the governor's plan, the more property value you own, the larger your tax relief will be," Cavanaugh said. "This obviously would be beneficial to those who own a significant amount of land, but less to homeowners who will see basic homeowner expenses like home repair and auto maintenance increase (under Pillen's plan)."

Income, property and sales taxes make up the "three-legged stool" that defines state revenues, which have grown increasingly reliant on property taxes over the last decade as property tax receipts have ballooned by more than $2 billion since 2013.

In the fiscal year that ended June 30, the state's total net tax revenues included $3.6 billion in sales taxes, $4.2 billion in income taxes and $5.1 billion in property taxes.

The governor's proposal seeks to cut property taxes by $2.6 billion by shifting the operating costs of public schools from the backs of property taxpayers onto the state.

"If we're going to provide over $1 billion in tax relief, we should at least target it to homeowners ... (who) we are saying this session is supposed to be helping," Cavanaugh said.

Under the Omaha lawmaker's plan, the state would cover the revenue dip the loss of property tax revenue would bring to local political subdivisions, which he estimated would amount to $880 million annually.

Cavanaugh told the committee he hoped the Legislature would look to legalized recreational cannabis or the rollback of previously enacted income and corporate tax cuts to fund his plan.

Pillen opposes both potential revenue streams, though other lawmakers have introduced legislation to legalize marijuana and freeze income tax cuts this session anyway.

Cavanaugh also said he intends for LB22 "to be part of a combination" of bills to deliver tax relief to Nebraskans, naming of Lincoln of Omaha that would provide income tax credits to renters, who make up about one-third of state residents.

Jon Cannon, the executive director of the Nebraska Association of County Officials, testified in support of Cavanaugh's bill Wednesday, though he suggested the universal homestead exemption apply to a percentage of a homeowner's property value rather than a dollar amount.

He noted the average value of a homestead in Boyd County is $200,000 less than the average home in Douglas County.

"To the extent that we're trying to provide property tax relief targeted to a percentage of someone's homestead, it seems like that route might be a little bit better," Cannon said.

The OpenSky Policy Institute, a Lincoln-based fiscal policy think tank, penned a letter to the Revenue Committee in opposition to LB22 "out of concern for the overall cost."

"We appreciate that this approach is more narrowly tailored than the Property Tax Credit Program, which goes to all landowners regardless of residency, but would like to see it narrowed even further in order to benefit those Nebraskans least able to afford staying in their homes," the group wrote.

The Revenue Committee took no action on the bill Wednesday.