LINCOLN–The Revenue Committee heard debate on a bill Feb. 8 that would raise the documentary stamp tax in Nebraska.
Legislative Bill 393, introduced by committee member Sen. Mike Groene of North Platte, would raise the tax from $2.25 to $3.25 for each $1,000 in valuation. The tax is imposed in the transfer of a legal title or real estate.
The rate, which has not been adjusted since 2005, currently contributes to a county’s general fund, affordable housing trust fund, site building and development fund, homeless shelter assistance trust fund and behavioral health service fund. The additional $1 would go toward the property tax cash fund.
Groene said he doesn’t see the bill has a tax shift. When homeowners are willing to pay high prices for property, this can cause property valuations to rise, he said.
“If you’re the person driving up the valuations, maybe you ought to help offset the property taxes of your neighbors by paying the property tax credit fund,” Groene said. “We have to do a shift somewhere.”
Unlike the internet sales tax, Groene said LB 393 is a measurable tax that can be easily calculated. The tax would also avoid going through the state and would go straight to the property tax credit fund.
“It stays within the same group of taxation: property taxes,” Groene said.
The bill was met with some dissenting voices at the hearing. Justin Burdy spoke against LB 393 as a registered lobbyist for the Nebraska Realtors Association, Home Builders Association of Lincoln and the Metro Omaha Builders Association.
Brady said he agreed with Groene on the bill not being a tax shift and the fact that some people drive up the value. But this bill would also catch people who aren’t doing this, he said.
The bill would affect people who live in the city more, Brady said, as a homeowner will own 11 homes over their lifetime.
“You look at that compared to the ag sector, some will either buy or inherit their farm and hold it their whole life,” he said. “They will receive the benefit from it based on the other individuals paying that [tax] on a regular basis.”
Brady also said other states refer to the doc tax as what it really is: a transfer tax. He said Wyoming, Kansas and Missouri have none, and South Dakota has $1 per $1,000, Iowa has $1.60 and Colorado has 10 cents.
“So, a payment of up to $3.25 would put us extremely out of whack with the surrounding states,” Brady said.
Dustin Antonello with the Lincoln Independent Business Association also spoke against the bill, saying the organization does not believe raising taxes on property in order to reduce taxes on property is the correct approach.
Antonello said if the doc tax were to be raised, it would add nearly $1,500, on average, to the price to acquire commercial real estate. For properties sold over $1 million, which he said is common, the increase would be $6,500.
Raising taxes on property transactions could also lead to negative consequences for a commercial real estate market that is already facing roadblocks, Antonello said.
“Over the last six months, the retail vacancy rate has risen by nearly a full percentage point in Lincoln as brick-and-mortar stores struggle to compete with online retail,” he said. “In addition, building permits for retail building and remodeling only totaled $15.5 million in the second half of 2018, the lowest amount in four years.”
Jon Cannon, deputy director of the Nebraska Association of County Officials, spoke on a neutral position, saying that the amount of the tax that goes to the county general fund has not been increased since 1993, even when the tax was raised in 2005.
“If we’re going to be increasing it by $1, it certainly seems like it would be appropriate to have a share of that go to the county,” he said. “They’re the ones that are doing the work.”
Groene gave a closing speech by providing statistics that other states charge for doc taxes, including Arkansas, which has $3 per $1,000, Minnesota, which has $3.30 and Nevada, which has $3.90 for smaller counties and $5.10 for larger ones. He said that those who drive up valuation should help lower property tax for their neighbors.
“I think any homeowner would gladly pay [extra] if we could fulfill a promise that we’re going to lower property taxes,” Groene said. “But we’ve got to start accumulating some money to offset that property tax reduction.”