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Nebraska’s Property Tax Problem is Not a Valuation Problem

Nebraska’s property tax system has a spending problem it keeps calling a valuation problem. That’s not the same thing, and landowners, farmers, and investors are starting to notice.

Nebraska agricultural land valuations increased roughly 14% between 2024 and 2025, according to the Nebraska Farm Bureau. State agency spending climbed approximately 18% over the same two budget cycles. The Legislature put more than $1.6 billion toward property tax relief, and property taxes declined by about $6 million overall.

Let that sink in. $1.6 billion toward relief. $6 million of actual reduction.

As a land broker who works with farmers, ranchers, investors, and landowners across Nebraska and into a dozen other states, I have watched this cycle run its course more than once. Valuations go up. Assessments follow. Credits get expanded. Politicians hold press conferences. And the people who own productive ground keep writing bigger checks.

Strong land values are not the problem. Agricultural land in Nebraska reflects real underlying strength: productive soils, water access, limited supply, and long-term confidence in what the ground can produce. I want farmland values to be strong. So do the landowners I work with.

The problem is what happens when those values become the primary mechanism to fund government spending that grows faster than the economy it draws from.

The question isn’t why land is valuable. The question is why Nebraska keeps treating its farmers and ranchers like they’re a budget solution instead of an economic engine.

Nebraska Has a Property Tax Problem, and the Numbers Confirm It

Nebraska now ranks fourth highest in the nation for property taxes as a share of home value, according to the Tax Foundation’s 2025 analysis using 2023 data. The effective rate on owner-occupied housing sits at 1.44%. It was eighth highest the year before.

For agricultural land specifically, the burden is more significant. Nebraska’s effective tax rate on ag property was 0.88% in 2022, according to Nebraska Farm Bureau analysis using USDA data. That was 1.52 times higher than Kansas, the nearest neighboring state, and more than double Iowa, Wyoming, and Missouri.

What does that mean practically? Take a 1,000-acre irrigated operation that sees a 14% valuation increase. Even holding levy rates constant, the annual tax liability on that operation increases in a material way, and that cost lands somewhere. It comes out of operating margins, gets pushed into higher cash rents, or limits what the operator can reinvest into the land, the equipment, or the next generation.

For landowners evaluating whether to hold, sell, or reinvest in Nebraska, that math matters. I have clients who are selling Nebraska ground and using 1031 exchanges to reinvest in other states because the ongoing carrying cost here no longer pencils compared to alternatives. That capital does not come back once it leaves.

The Legislature Has Tried. So Why Doesn’t It Feel Like Relief?

To be fair, Nebraska’s legislature has been working on this. The 2024 special session produced LB 34, the Property Tax Growth Limitation Act, which capped taxing authority for political subdivisions and frontloaded a 30% credit on school district taxes directly onto property tax statements. The companion bill, LB 34A, appropriated $750 million for fiscal year 2025-26 and $780 million for 2026-27.

That is real money. Governor Pillen originally sought 50% relief. He got about 3.5% of total property taxes collected. State Sen. Brad von Gillern called it ‘pathetic.’ Sen. Steve Erdman said the Legislature put in 17 days and accomplished ‘so little.’

The 2025 session followed up by making the 2024 levy caps workable, after the original language created implementation problems for local governments. LB 81 was introduced to fix a ‘gap year’ where some taxpayers missed relief due to how the credit transition was structured.

In 2023, LB 754 delivered the most significant income tax reform in Nebraska in decades, phasing down to a flat 3.99% by 2027 and fully exempting Social Security income starting in 2025. That is meaningful for retirees and for state competitiveness, though it also reduced state revenue, which creates downstream pressure on the property tax credit funds.

Governor Pillen has now promised that 2027 will be the year for real property tax reform. The Nebraska School Financing Review Commission is examining how the state funds K-12 education. Hard spending caps on local governments remain on the table but have consistently run into resistance.

The structural problem is clear. Nebraska is ranked 49th in the country for state aid per pupil, according to the Center for Rural Affairs. That makes Nebraska’s schools the third most dependent on property taxes in the country. When you combine that with the fact that roughly 60% of Nebraska property taxes go directly to K-12 school districts, you end up with a system where any meaningful ag relief requires either significantly more state revenue or meaningful spending restraint at the local level. Neither has happened at the scale required.

Here is the treadmill: valuations go up, the state sends more credits, local budgets expand to absorb the new capacity, and the net reduction to landowners amounts to a rounding error.

The Case For the Current System (And Why It Matters to Understand It)

Before I make a policy argument, I want to be honest about the strongest case against my position. People who disagree with me are not wrong to raise these points.

Nebraska’s property tax structure reflects deliberate choices about local control. School funding is local because Nebraskans have historically preferred local school boards making local decisions over state bureaucrats in Lincoln controlling curriculum and spending. County road maintenance is local because counties know which roads actually need work. That preference for local control is a real Nebraska value, not just a political talking point.

When critics argue that shifting funding to state income taxes creates volatility, they’re right. Income tax revenue swings with economic cycles. Property taxes are more stable, and stability matters for schools and infrastructure planning. South Dakota’s reliance on sales taxes hits lower-income rural households harder as a percentage of income. Wyoming’s mineral revenues are something Nebraska simply does not have.

The assessor’s argument also deserves acknowledgment: if irrigated farmland in Nebraska genuinely appreciated 14% in value, then assessed values following market reality is not the system misbehaving. That is the system doing exactly what a market-based assessment process is designed to do. The issue is not that assessors are wrong. The issue is whether the system is designed in a way that serves Nebraska’s long-term economic interest.

Those are legitimate arguments. They deserve a real answer, not dismissal.

The real answer is this: local control is worth protecting, but it has costs. Stable funding mechanisms are important, but stability that concentrates burden on a single productive sector is not stability, it’s structural inequity. And a market-based assessment system working as designed can still produce outcomes that undermine the agricultural economy it depends on. The design itself is worth examining.

What Neighboring States Are Actually Doing

The Tax Foundation’s 2025 State Tax Competitiveness Index placed Nebraska at 22nd overall. Iowa ranked 17th. The gap matters, but the reasons behind it matter more.

Iowa has pursued targeted agricultural property tax relief alongside broader competitiveness reforms. That combination is deliberate policy, not accident. South Dakota relies heavily on sales taxes and has no state income tax, which shifts burden off property. Wyoming benefits from mineral and energy severance revenues that offset what would otherwise fall on property owners. Kansas has a broader population base distributed across larger metro areas.

None of those models transfers directly to Nebraska. We have real infrastructure demands, a large geographic footprint, and a small population to spread costs across. But the common thread across every neighboring state that outperforms Nebraska on property tax burden is that they found ways to fund government without treating agricultural land as the primary revenue base. Nebraska has not done that yet.

The 2025 Nebraska Farm Bureau report on agricultural property tax burdens found Nebraska’s effective rate on ag property remains the highest among its bordering states. Progress has been made since 2017, when the rate was 1.04%. It was 0.88% in 2022. But the remaining gap is still substantial.

The Spending Side Nobody Wants to Talk About

Here is the part of this conversation that tends to make people uncomfortable.

Nebraska state agency spending climbed approximately 18% over the past two budget cycles, according to Nebraska Farm Bureau’s state governmental affairs director Bruce Rieker. The Legislature put over $1.6 billion toward property tax relief during the same period. Property taxes declined by $6 million overall.

That is the treadmill. The state sends money for relief. Local governments, unconstrained in meaningful ways, expand spending to meet or exceed the new capacity. The net effect on landowners is minimal. State Sen. Rob Clements, who chairs the Appropriations Committee, acknowledged the property tax credit approach ‘may not be the wisest way to implement property tax relief, but it was the easiest way.’

Nebraska’s own state budget administrator Neil Sullivan told legislators in 2026 that the budget shortfall is ‘a spending issue.’ He reviewed 900 funds across 79 state agencies and proposed transferring or reducing almost $358 million from funds carrying excess balances. That review itself tells you something about how government tends to accumulate resources beyond immediate need when the pressure to hold the line is not consistent.

I am not arguing for gutting schools or leaving gravel roads unpassable. Roads matter. Schools matter. Emergency services matter. But I had a conversation recently with a county commissioner who, the moment he understood the state was placing limits on levy authority, immediately started talking about roads being the first thing to go. Not about finding efficiencies. Not about prioritizing core services. Roads as the first cut, as if that were the only option.

That is the wrong starting point. Roads should be the first thing funded and the last thing cut. What should face scrutiny first are the programs that have expanded without rigorous evaluation of whether they are producing real value for taxpayers. Farmers and ranchers do that analysis every year in their own operations. They cut what doesn’t produce. Government should operate the same way.

Every tax dollar starts somewhere in the private economy. For a large share of Nebraska’s property tax base, it starts on a farm or a ranch. That reality should never be treated as an afterthought.

The Capital Flight Nobody Is Tracking

Here is something I watch happen in real time that does not show up in the tax burden statistics.

Nebraska landowners sell ground and use 1031 exchanges to reinvest in other states. The 1031 exchange itself is a legitimate and useful tool, and there is nothing wrong with using it. The problem is when the primary reason investors and landowners are directing that capital out of Nebraska is ongoing carrying cost relative to what they can get elsewhere.

I work with investors who have evaluated Nebraska farmland against comparable ground in Kansas, Iowa, the Carolinas, and other markets. The conversation increasingly includes property tax burden as a meaningful line item in the underwriting. When that burden consistently disadvantages Nebraska, the capital flows elsewhere.

That capital does not come back. And when it leaves, it takes with it the economic activity, the local business relationships, and the long-term stewardship that comes with invested, active ownership. Absentee ownership driven by tax arbitrage is not the same as an owner-operator or an engaged investor who is building something in the state.

This is the long-term consequence of a system that consistently over-taxes a productive asset class. It does not happen all at once. It happens one 1031 exchange at a time.

Growth Is a Tax Reform Strategy, Not Just an Economic Goal

One of the most underused arguments in this debate is simple math. When more people and businesses are in Nebraska, fixed infrastructure and government costs spread across a larger base. Every new family, every new business, every new investor who comes to Nebraska reduces the per-unit burden on everyone already here.

High property taxes work directly against that. A young farm family weighing rural Nebraska against another state is doing the math. A business owner evaluating where to relocate their operation is doing the math. An investor looking at agricultural markets across the Midwest is doing the math.

Nebraska has genuine competitive advantages: strong communities, productive land, a culture of work and personal responsibility, and affordable housing relative to major metros. But when property taxes consistently appear in the ‘reasons people left or didn’t come’ category, that is a structural problem, not just an inconvenience.

Growing the tax base is not just good economic policy. It is property tax relief delivered through a mechanism that does not require anyone to argue about levy rates or credit formulas. More taxpayers sharing fixed costs means lower burden on existing landowners. That case should be made explicitly in every property tax conversation.

What Should Actually Change

I am not a legislator, and I am not here to pretend I have a full policy prescription ready to hand off to the Revenue Committee. But I do work with this issue every day, and I think the conversation needs to center on a few things that it currently avoids.

1. Spending Discipline Has to Come First

No amount of credit programs will produce lasting relief if local government spending continues to expand at rates that exceed revenue growth and economic productivity. Hard caps on local government spending growth, with appropriate mechanisms for genuine emergencies and population changes, deserve serious consideration. The resistance to caps has historically been framed as a local control issue. That framing protects spending patterns more than it protects communities.

2. Schools Need a Different Funding Model

Nebraska being 49th in state aid per pupil while being third most dependent on property taxes for school funding is not sustainable and is not equitable. The School Financing Review Commission is the right body to be looking at this, and its recommendations deserve legislative follow-through, not the usual dilution that comes when local taxing entities push back hard enough.

3. Agricultural Land Should Not Be the Budget Backstop

There is a reason Nebraska provides agricultural land a 75% assessment ratio rather than 100%, and there is a reason the property tax credit allocation formula gives ag land a 120% weighting. These adjustments acknowledge that the burden on ag land is already disproportionate. The next step is designing a system where ag land is not the first place local governments look when they need revenue.

4. Broaden the Conversation About Revenue Sources

Nebraska does not have Wyoming’s minerals. It does not have South Dakota’s tourist-driven sales tax base. But it does have options it has not fully explored around diversifying how government services are funded. That conversation requires political courage, because every alternative funding source has a constituency opposed to it. That is exactly why it keeps getting deferred and why landowners keep absorbing the result.

5. Track What We’re Losing

Nobody is systematically tracking how much capital is leaving Nebraska via 1031 exchanges into other state markets. Nobody is quantifying the cost of investor and producer outmigration driven by carrying cost. Making that data visible would change the conversation. Right now, the costs are real but invisible in the aggregate.

The Real Question

Nebraska’s property tax problem is not fundamentally a valuation problem. Farmland values reflect real underlying productivity, real supply and demand, and real confidence in agriculture’s future. Those are things worth celebrating.

The problem is structural. A system that funds 60% of K-12 education through local property taxes, that ranks 49th in state aid per pupil, that consistently puts spending growth ahead of taxpayer relief, and that treats agricultural land as a revenue mechanism rather than an economic engine, that system is working exactly as designed. The design is the problem.

The Legislature has made genuine efforts. LB 34 was real, even if it fell far short of what the situation requires. The income tax reform in LB 754 was significant. The School Financing Review Commission represents a real opportunity. But none of it will add up to lasting relief without spending discipline at the local level and a serious political conversation about how Nebraska funds the services it actually needs.

Until that conversation happens honestly, Nebraska landowners, farmers, and ranchers will keep opening valuation notices and doing the math. And some of them will keep deciding the math works better somewhere else.

That is the cost of a deferred conversation. And it is a cost Nebraska cannot afford to keep ignoring.

Are we taxing land, or are we funding government? The honest answer right now is both. The real question is whether Nebraska has the will to change that.

Frequently Asked Questions

Why are Nebraska property taxes so high compared to neighboring states?
Nebraska funds roughly 60% of K-12 education through local property taxes and ranks 49th in state aid per pupil. That structural dependency, combined with rising assessed values and spending growth at the local level, produces effective tax rates that consistently exceed neighboring states.

What did LB 34 actually do for Nebraska landowners?
LB 34, passed in the 2024 special session, capped taxing authority for political subdivisions and provided a 30% credit on school district taxes appearing directly on property tax statements. The companion appropriation was $750 million for fiscal year 2025-26. Despite this, overall property taxes in Nebraska declined by only about $6 million, because local spending growth largely offset the relief.

What is a 1031 exchange and why does it matter for Nebraska landowners?
A 1031 exchange allows property owners to sell investment real estate and reinvest the proceeds into like-kind property without triggering capital gains taxes at the time of sale. For Nebraska landowners facing high carrying costs, this tool makes it financially practical to sell Nebraska ground and reinvest in states with lower property tax burdens. That capital movement represents a real, ongoing cost to Nebraska’s agricultural economy.

Is the problem Nebraska’s farmland values or the tax system itself?
Strong farmland values are economically healthy and reflect genuine supply, demand, and productivity. The issue is a system designed to fund government primarily through property assessments rather than diversified revenue sources. When spending grows faster than relief mechanisms can offset, the burden falls disproportionately on agricultural landowners.

What would meaningful Nebraska property tax reform actually require?
Meaningful reform requires local government spending discipline, an alternative school funding model that reduces dependence on property taxes, hard caps with appropriate flexibility mechanisms, and a broader conversation about revenue diversification. Credits and valuation adjustments alone have not produced lasting relief and are unlikely to do so.

Sources and Additional Reading

Picture of Koby Rickertsen

Koby Rickertsen

Buying and selling property is always a significant decision, but when it comes to land, the stakes and the opportunities run deeper. I’m Koby Rickertsen, Founding Partner, CEO, and Managing Broker of Ironhorse Land Company, a multi-state brokerage specializing in farm, ranch, recreational, and development land. I’m a Nebraska native with deep agricultural roots, raised working on my family’s farm in Lincoln and Dawson Counties. My connection to land started early, from agronomy classes before I was ten years old to scouting fields for a dollar an hour. That hands-on upbringing, combined with 13 years in the U.S. Navy Submarine Force, shaped my work ethic, discipline, and respect for the people who earn their living from the land. Over the years, I’ve built, led, and sold multiple successful businesses, including RE/MAX Home, Farm & Ranch. Today, through Ironhorse Land Company, I lead a team of elite land professionals united by a single mission, helping landowners, investors, and buyers make informed decisions and build lasting legacies. As an Accredited Land Consultant (ALC), Senior Real Estate Specialist (SRES), and proud member of the REALTORS® Land Institute, I bring practical expertise, straight talk, and integrity to every transaction. I am licensed across Arkansas, Alabama, Colorado, Iowa, Kansas, Missouri, Nebraska, Oklahoma, South Dakota, Wisconsin, and Wyoming. Whether you are buying your first parcel, selling a generational family farm, or evaluating land investment opportunities across the Midwest and Great Plains, my objective is simple, to ensure every acre you own, buy, or sell reaches its full potential.