Prompted by concerns that Nebraska’s tax system could be found unconstitutional, Gov. Ben Nelson last week proposed a constitutional amendment that would allow variable tax rates on personal property.
The measure has already been endorsed by 19 of the 49 members of the state’s unicameral legislature. It needs 40 votes to be put before voters in an August special election.
In March, the state supreme court ruled that exemptions given to some industries violated a constitutional requirement that all personal property, including business inventory and machinery, be taxed “uniformly and proportionately.”
The same constitutional provision also applies to taxes on real property, such as buildings or land. If the real-property tax system is also ruled unconstitutional, as some of the justices involved in the March decision hinted, the result would be to eliminate $1.2 billion in revenues. More than half of all funding for Nebraska schools comes from local property taxes.
In addition to the constitutional amendment, which would not affect taxes on real property, the Governor has advocated exempting all personal property from the property tax for one year to avoid further court action. But Mr. Nelson and the legislature have not been able to agree on ways to make up the resulting $97-million loss in revenue.
Proposals currently being considered for making up the revenue loss include increasing a surcharge on business depreciation or raising other business taxes. Governor Nelson also has called for a committee that would review the state’s entire taxation system and would make recommendations for changes this fall.
