What is the cost of government, and what should it be? • Nebraska Examiner

Tax policy is not an exciting topic at a barbecue, but the taxes we pay are a perennial topic of conversation in Nebraska. As property tax recipients, we (counties, municipalities and schools) are as sensitive to this issue as anyone else.

In a special session called specifically on property taxes, we offer our perspective on how to approach them. We’re not saying that doing anything specific will “fix” property taxes, but we can offer general guidelines to inform policy discussions. Determining the right tax structure comes down to how we collectively answer four basic questions:

• What does the government have to pay for?
• How much do you need?
• Who do we want to pay for this?
• How do you want them to pay?

Years ago, these questions were answered in a way that led to our current tax structure, and it is worth considering them again now.

What does the government have to pay for?

First, let’s distinguish between “needs” and “wants,” which is tricky. Gov. Jim Pillen has suggested that not everything the government pays for is a need, and we applaud his efforts to “clean out the closets” by eliminating various unfunded state mandates for local governments.

Political divisions are state creations. Their “needs” are largely determined by state statutes. The Legislature has assigned counties the responsibilities of roads, bridges, law enforcement, jails, courts, elections, and the collection of some taxes and fees. Municipalities are responsible for community and economic development; providing public safety, including law enforcement, fire protection, and emergency medical services; public transportation infrastructure, such as streets, roads, and bridges; safe drinking water; sewage treatment; solid waste management; libraries, parks, and recreation centers; and other services that improve the quality of life. Schools are required to provide free tuition for children ages 5 to 21 in our state’s public schools. This requires teachers, teaching assistants, bus drivers, coaches, administrators, janitors, and other staff.

How much do you need?

Counties, townships and schools have an annual public budgeting process. Counties are required to publish annual and six-year plans for what the highway inspector will do with roads and bridges. Law enforcement needs are determined by state statute and oversight agencies such as the Crime Commission. Prisons receive basic requirements from the state. Elections are overseen by the secretary of state.

Schools face numerous mandates from state government, federal government, and courts. These mandates are rarely tied to the necessary funding.

Local governments also face increasing costs and budget challenges due to unfunded obligations imposed by state and federal laws, regulations and court orders, ranging from additional training requirements to the preparation of reports and documents to be filed with state or federal agencies.

The key point is that government costs have risen independently of the CPI. The goods that government pays for—gravel, asphalt, law enforcement vehicles and equipment, road graders, etc.—are not purchased at Walmart or off Amazon. Governments seek deals from a limited set of suppliers, and individual municipalities, counties, and school districts don’t always have the purchasing power to drive down prices.

Who do we want to pay?

As a state, we have determined that local taxpayers should pay for things that are local in nature. Traditionally, these have been (for counties): roads, bridges, law enforcement, jails, courts, tax collection, and elections. For schools, these have been teachers and facilities. For cities and towns, local taxpayers pay for the salaries of city employees; city facilities and equipment related to law enforcement, fire protection, streets, and roads; safe and plentiful drinking water; sewage treatment; solid waste management; libraries; parks and recreation centers.

All of these elements have a mix of local and state influence. Roads and bridges, for example, are critical segments of our state’s network of highways and byways. Law enforcement, courts, and prisons are geared toward enforcing and defending state laws. Elections are held in local, state, and federal races.

A high-quality public education provides every child with the skills necessary to compete and thrive in the 21st century.^saint age.

How do we want them to pay?

The three main sources of revenue are property, income, and sales taxes. Income taxes should be tied to a citizen’s ability to pay, but they can fluctuate from year to year. Lower-income areas would not be able to pay for basic needs.

Sales taxes are related to a person’s willingness to pay, which is a measure of the ability to pay, but also traps less densely populated areas in a loop of increasingly limited infrastructure. Property taxes are generally stable and are related to the value of the property, but not necessarily to the owner’s ability to pay.

Nebraska has consistently chosen the property tax as the primary source of funding for local governments because of its stability. However, we are not limited to the property tax alone. Other states have adopted a tax structure that directs sales and income taxes to the communities in which they were raised.

Having said that, we have experienced that when a country experiences an economic recession, state aid to local governments can and will be drastically reduced or eliminated. If that were to happen, we advocate for a guarantee of local funding to be placed in the Constitution.

Application

We do not advocate any particular position or policy on how taxes should be administered. Instead, we advocate a thoughtful approach to what government should be responsible for. It is then the legislature’s responsibility to determine how to raise the revenues necessary for the government to carry out its assigned duties. In fact, raising “necessary revenues for the State and its political subdivisions” has been enshrined in our Constitution for over 100 years.

Schools, counties, and municipalities are the primary recipients of property taxes, and these taxes are spent on essential infrastructure and services for Nebraska residents that allow our communities to thrive. Our organizations support relief for property owners through additional property tax relief as long as our communities and citizen services are not negatively impacted.