Nebraska does not tax all wealth equitably.
The property valuation system varies from County to County and from urban to rural.
Sales tax exemptions are numerous, politically obtained and with no clear justification.
Intangibles (stocks and bonds) are not taxed. The income from these intangibles is taxed, as is their capital gains, but their base value is not.
Agricultural property (land) is taxed as if it were a luxury item, not a business necessity.
A comparison is in order.
a. A cow/calf agricultural business is taxed annually on the property (base value) necessary to raise those cows/calves, including the increased value of that land (equivalent to capital gains in the investment world). This agricultural business also pays income tax on the profits of that business.
b. A holder of stocks and bonds (intangibles) is taxed on the capital gains and the income from those investments but not on the base value of the business. This base value needs to be taxed annually if other business’s base value is taxed annually, as in the cow/calf agricultural business example.
Agricultural business owners are viewed by many in urban centers as wealthy because of the large amount of land that these agricultural producers might own. The reality is that large amounts of land are necessary for these businesses to succeed. Half of the State of Nebraska is suited only to rangeland livestock production. In much of this area up to 30 acres are needed to produce one calf annually. If 300 calves produced annually is the breakeven on such an operation 9000 acres are needed to do so. This is 14 square miles.
A shift in mindset is needed when comparing businesses. The land needed by an agricultural business is the infrastructure needed by that company, just as the buildings and assembly lines are needed in an urban factory.
The tax on the urban factory infrastructure needs to be equivalent to the tax on the infrastructure needed in an agricultural business.
The name for that infrastructure in an agricultural business and the method of determining its value for tax proposes needs to be equivalent to that of the urban factory business.
Property tax, then, in an agricultural business, should refer only to the residential property of the owner.
The residential property of an agricultural business should be valued on the same basis as an urban residential home.
Enroll now in Nebraska Taxes 401, coming soon in this publication.
Editor’s Note: The Chadron Public Schools’ Legislative Committee was formed approximately six years ago in an effort to encourage school district personnel, board members and patrons to take a more active role in lobbying the Nebraska Legislature on issues related to school funding. The committee has met with various partners over the years, including other school boards and industry organizations, and is part of Nebraska United, a coalition of taxpayers, including farmers, ranchers and teachers.