| When it comes to property taxes, farmers and ranchers in Nebraska continue to shoulder a heavier burden compared to producers in bordering states, but the gap is narrowing. Effective tax rates allow comparisons of property tax burdens across state borders without getting bogged down in differences in tax policies. Effective rates equal the share of taxes paid relative to total market value. They were employed by the USDA for 80 years to compare relative tax burdens among states until it was discontinued in 1995. The approach was also utilized in a 2014 interim study by the Legislature’s Revenue Committee to study methods used in other states to set taxable values for agricultural land. For this article, Tidbits resurrects the approach using data from the USDA Economic Research Service (ERS) and National Agricultural Statistics Service (NASS) to compare tax burdens on agricultural property in 2017 and 2022. |
| FIGURE 3. EFFECTIVE TAX RATES (%), NEBRASKA & BORDERING STATES |
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| Source: Rolling Prairie Economics, based on USDA Economic Research Service and National Agricultural Statistics Service data. |
| Figure 3 shows the estimated effective tax rates on agricultural property in Nebraska and bordering states in 2017 and 2022. In 2022, Nebraska’s effective tax rate, 0.88 percent, was noticeably higher than any neighboring state. Kansas’ rate, 0.58 percent, was nearest Nebraska’s, but Nebraska’s rate was still 1.52 times greater. Wyoming, Missouri, and Iowa had the lowest rates at 0.38 percent. Nebraska exceeded these states by 2.31 times. However, progress has been made. Nebraska’s effective rate in 2022 was 15 percent less than 2017 when it equaled 1.04 percent. And the gap between Nebraska and other states narrowed as well. In 2017, Nebraska’s rate was 3.31 times greater than Missouri’s, and 3.07 times greater than Wyoming’s. So, in relation to neighboring states, the property tax burden on agricultural property in Nebraska has improved. It is unclear whether the USDA data used to estimate effective tax rates accounts for Nebraska’s property tax credit program which directly reduces taxes levied. Also, the effective tax rate estimates do not account for the income tax credits provided for taxes paid to K-12 schools and community colleges. The credits amounted to nearly $600 million in 2022. If included, and assuming all credits were claimed, the effective tax rate on agricultural property would drop to 0.73 percent. Still higher than other states, but the gap narrows. Yet the bottom line is the same—Nebraska agricultural producers are at a competitive disadvantage relative to producers in other states regarding property taxes. |
