Anderson, the UNL professor, however, said the shift to an income-based method would make Nebraska’s property tax system less fair.
âThe property tax system is not designed to be an income tax, it is designed to be a property tax,â he said.
Anderson said market-based methods provide the most accurate estimate of a property’s value, while income-based systems often lead to gambling, as state officials manipulate various factors to affect ratings.
âThe whole process becomes sort of a black box from a taxpayer’s perspective,â he said.
Fairness and consistency were the main reasons South Dakota switched to an income-based method in 2010, said Matt Elliott, assistant professor of economics at South Dakota State University.
The method produced more consistent valuations and allowed valuations to be set in areas where there were few comparable land sales.
Elliott said the method was structured to be revenue neutral in its first year. Since then, it has produced valuations that closely track reported land prices.
He said the result is not surprising as the new method is similar to the process used when valuing land. It includes calculations of average yield, average price, soil type, rental income, and other factors.