LB 829 (1991)
June 3, 1991
PRESIDENT MOUL: Thank you, Speaker Baack. We will now proceed with a motion to return LB 829.
CLERK: Madam President, I have a series of motions on 829. The first is by Senator Beutler. Senator Beutler would move to return LB 829 to Select File for a specific amendment.
PRESIDENT MOUL: Senator Beutler.
SENATOR BEUTLER: Madam President, I think Senator Hall has a subsequent amendment that will change the whole context of my amendment, and it would be appropriate, at least temporarily, to withdraw that amendment, which I do.
PRESIDENT MOUL: Thank you, Senator Beutler.
CLERK: Madam President, Senator Hall would move to return. Senator, I have your amendment printed on page 2257, AM2235.
PRESIDENT MOUL: Senator Hall.
SENATOR HALL: Thank you, Madam President and members. This is a motion to return the bill to Select File for purposes of dealing with the issue, a couple of issues in the LB 829, as it was advanced to Final; the first being the issue of the corporate minimum filing, corporate minimum tax, if you will. There was much discussion, and Senator Beutler's amendment dealt with the issue of not-for-profits who would be subject to this provision. His original motion to return phased nonprofits in at $50, whereas we were looking at a minimum corporate filing of $150. What my proposal would do is change the corporate fee, the corporate minimum income tax filing from that specific nature to an occupation tax. The way it would work is the current occupation tax is $10. It is paid every other year. In other words, it is paid in odd number years by the not-for-profits, so they would, basically, be skipped. They would not be subject to it and, in essence, by changing it to the occupation tax, putting it at the $150, we, in essence, exempt all the not-for-profits and collect the revenue that we had talked about in the previous provision. We don't collect as much but we do collect nearly all the revenue that the original minimum corporate filing fee would have collected. The other thing we do is that it also puts in place a refund procedure for the manufacturers, the hospitals, the energy users that would exceed the $100,000 in sales tax on energy. Okay, it also
clarifies that the cap applies across the board without exception to the various types of energy sources used. In other words, there may be an energy user that would use one or more, excuse me, two or more types of energy sources. The sales tax would be cumulative and that it would not apply to a specific energy source but to the total amount of tax paid on that. So if somebody used coal for a certain portion of a year and used propane, gasoline, natural gas, whatever it might be, they would only be subject to $100,000 tax cap for the total amount, the cumulative amount, not $100,000 per type of energy source. So it is a clarification amendment. And it also allows for a refund mechanism for those who have exceeded that amount. With these two changes that I would consider technical in nature, they do address the issues that were raised on Select File on this proposal, I would urge adoption of the amendment after we return it to Select File for this specific purpose. Thank you, Madam President.
PRESIDENT MOUL: Thank you, Senator Hall. Does anyone wish to address the Hall motion? Seeing none, do you have closing, Senator Hall?
SENATOR HALL: I will waive closing.
PRESIDENT MOUL: We will now vote on the Hall motion. All of those in favor please vote aye, opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: 25 ayes, 0 nays, Madam President, on adoption of the motion to return the bill.
PRESIDENT MOUL: The bill is returned. Senator Hall, do you have opening on your amendment?
SENATOR HALL: Madam President, I would just urge adoption of the amendment.
PRESIDENT MOUL: Thank you, Senator Hall. Does anyone wish to address the Hall amendment? Seeing none, do you have closing? Closing is waived. All those in favor of the Hall amendment please vote aye, opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: 26 ayes, 0 nays, Madam President, on the adoption of Senator Hall's Select File amendment.
PRESIDENT MOUL: The amendment is adopted. Senator Will.
SENATOR WILL: Madam President, I move that we readvance LB 829 to E R for engrossment.
PRESIDENT MOUL: You have heard the motion to readvance. All those in favor please say aye. Opposed nay. LB 829 is readvanced.
CLERK: Madam President, Senator Hall would move to return the bill for specific amendment. Senator, I now have your amendment, AM2252. (See page 2758 of the Legislative Journal.)
PRESIDENT MOUL: Senator Hall.
SENATOR HALL: Thank you, Madam President, members, The amendment the Clerk mentioned is found on page 2758 of the Journal, and it deals with the funding sources in LB 829. The issue, the other issue that was raised that wasn't included in what I would consider the technical amendment that we just adopted was the issue of motor vehicles and how they were, in essence, with the surcharge going to be double taxed because they were not addressed as it relates to the personal property tax scale. Here with this amendment, we strike motor vehicles to be registered from the sections as they deal with the surcharge and depreciation, and we impose an additional 2 percent on all depreciation of railroad operation property, property of public service entities, property of air carriers, as defined, and the surcharge imposed by this section shall be levied and collected in the same manner as the surcharge imposed in Section I of this section. So, in other words, we take and we hit the centrally assessed properties for an additional 2 percent. We raise the necessary revenue to cover, basically, what was about a 3 to 4 million dollar shortfall and the amount of money that would be covered in the motor vehicles, stripping the 'motor vehicles from the surcharge for depreciation, which is approximately about another 2 to 4 million dollars, so the total package here is about $8 million that we raise through the additional 2 percent on the centrally assessed properties. Now you will hear folks say, and I have got calls already, and there has been articles that were written in the paper over the weekend that, well, that could very well be unconstitutional. That is one approach, I guess. The companies that fall under this category will be taxed uniformly. We don't pick out, as
some previous amendments had, specific entities, specific companies, specific businesses, specific lines of, I guess, businesses, and we don't just pick on the pipelines, we don't just pick on the railroads, we don't just pick on utilities or the phone companies, we pick on them all. And, you know, misery loves company, I guess, in this regard, and what we are doing here is saying that these individuals should pick up a greater share of the cost of what has become the personal property tax problem in Nebraska. Granted, they have used the court system as it is allowed and should be allowed to be used, justifies the fact that the system does work but, in this instance, I think that what we do here is say that we have a shortfall of revenue, where will we pick it up? We will pick it up because we are going to assess, centrally assess companies at a higher level. The purpose for that is that they are a different group of people. They are a separate and distinct class as it relates to all types of property with regard to their valuation and assessment. There clearly is a rational basis for that, to charge a different level for the depreciation surcharge. I would argue it is clearly constitutional and is no different than having, basically, a different level for corporations at a higher income bracket. That is really the best correlation that I can make, I don't see any constitutional question. Does this mean they may or may not go to court? I don't know. That is a decision that they will have to make. They clearly have not shied away from the court system. I would not try to keep them from the court system. The question is, does it make sense? They will decide that after they look at how we have put this bill to bed with this amendment, and whether or not it makes economic sense to them. In most of their cases, it will not, first of all, make economic sense. Second of all, they are going to have to question whether or not they have a case. I would argue they don't, and that they can be treated differently, we have treated them differently in the past, that is all we are doing here. The difference is we are treating all the centrally assessed properties the same within a class. That is constitutional. I would urge adoption of the amendment.
PRESIDENT MOUL: Thank you, Senator Hall. I will now recognize senators wishing to speak to this motion. Senator Hefner.
SENATOR HEFNER: Madam President and members of the body, I don't know whether I quite understand all of your proposal, Senator Hall, but let me just go through it as I understand it. I understand that you want to put a 2 percent surcharge on
depreciation for central assessed property, is that right? You can just nod our head.
SENATOR HALL: I can't nod my head on that one because it would be an additional ... it would be over and above the 2 percent we have currently in the bill.
SENATOR HEFNER: Oh, so then it could be 4 percent?
SENATOR HALL: It would be 4 percent.
SENATOR HEFNER: It would be 4 percent?
SENATOR HALL: Yeah.
SENATOR HEFNER: okay, okay, I am glad...I appreciate your clarifying that.
SENATOR HALL: And a nod of the head wouldn't have worked there.
SENATOR HEFNER: Okay, that is all right. Okay, I guess I am interested then, you said by exempting the depreciation surcharge on motor vehicles, that would take between 2 and 4 million out of the package?
SENATOR HALL: It takes a little more than that. It takes about 5.6, they tell me, out of the package.
SENATOR HEFNER: Five point, six million. Okay, what with this amendment, if we adopt this amendment, what will we be raising then with LB 829 to local government, would that be $95 million?
SENATOR HALL: No, it would be more like about $97 million.
SENATOR HEFNER: Ninety-seven. Is that adequate?
SENATOR HALL: It should be.
SENATOR HEFNER: Pretty close, okay?
SENATOR HALL: It is close enough for the girls that I date.
SENATOR HEFNER: I didn't hear your last remark. No, you don't have to repeat that. Thank you, Senator Hall. I believe with that information, well, I am going to support the amendment, or
return the bill to Select File and then support an amendment. Thank you.
PRESIDENT MOUL: Thank you, Senator Hefner. Senator Pirsch.
SENATOR PIRSCH: Senator Hall, I was going to ask you somewhat along the line of Senator Hefner, but I don't know if I dare. The first part of your amendment takes off all motor vehicles.
SENATOR HALL: Yes.
SENATOR PIRSCH: And the reason we are doing that is because they are in the Constitution and they are already being kept under our personal property scheme of today?
SENATOR HALL: That is correct.
SENATOR PIRSCH: And I am glad that you did that because there was a lot of apprehension and concern by particularly the trucking industry. And I like the second part of your amendment because I think we should, indeed, keep the feet to the fire of those who have been exempted, and so I support your amendment.
PRESIDENT MOUL: Thank you, Senator Pirsch. Senator Lowell Johnson, followed by Senator Schellpeper.
SENATOR L. JOHNSON: Madam President, I would more that we recess until 1:30 p.m.
PRESIDENT MOUL: You have heard the motion to recess until 1:30 p.m. All those in favor please say aye. Opposed nay. We are in recess until 1:30 p.m.
PRESIDENT MOUL PRESIDING
PRESIDENT MOUL: Ladies and gentlemen, welcome to the George W. Norris Legislative Chamber. we will now reconvene. We will proceed with roll call. Please record your presence. Please record, Mr. Clerk.
CLERK: I have a quorum present, Madam President.
PRESIDENT MOUL: Thank you. Are there any items for the record?
CLERK: Bills read on Final Reading this morning have been presented to the Governor. That's all that I have, Madam President. (Re: LB 703, LB 703A, LB 256, LB 256A, LB 638, LB 638A, LB 715, LB 715A, LB 830, LB 830A, LB 419, LB 701 and LB 701A.)
PRESIDENT MOUL: We will return to LB 829,
CLERK: Madam President, the Legislature last discussed 829 this morning. At that time, Senator Hall had a motion to return the bill. The amendment he is returning it for is found on page 2758. That motion is pending.
PRESIDENT MOUL: Are there any senators who wish to speak to the Hall motion to return to Select File at this time? Seeing none, do you wish, Senator Hall?
SENATOR HALL: Again, Madam President, I would urge adoption of the amendment after we return the bill to Select File for purposes of adding it. It is a replacement revenue. It also strikes the provision that dealt with the issue of the surcharge as it relates to automobiles, trucks. I would urge, first of all, 25 votes to return to Select File and then adoption of the amendment.
PRESIDENT MOUL: Thank you, Senator Hall. We will now vote on the motion to return to Select File. All those in favor please vote aye, opposed nay. Have you all voted on the motion to return? Have you all voted? Please record, Mr. Clerk.
CLERK: 25 ayes, 0 nays, Madam President, on adoption of Senator Hall's motion to return the bill.
PRESIDENT MOUL: The motion is adopted. Senator Hall.
SENATOR HALL: Madam President, I would urge adoption of the amendment.
PRESIDENT MOUL: Thank you, Senator Hall. Is there anyone who wishes to speak to the Hall amendment? Seeing none, do you have
closing? Closing is waived. We will now vote on the Hall amendment. All those in favor please vote aye, 0 opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: 26 ayes, 2 nays, Madam President, on the motion to adopt the Select File amendment.
PRESIDENT MOUL: The amendment is adopted. Anything further on the bill, Mr. Clerk? Oki, I'm sorry. Senator Will.
SENATOR WILL: Madam President, I move the readvancement of LB 829 to E & R for engrossment.
PRESIDENT MOUL: You've heard the motion to readvance. All those in favor please say aye. Opposed nay. LB 829 is readvanced.
CLERK: Madam President, Senator Withem would move to return the bill for a specific amendment. (The Withem amendment, AM2260, appears on pages 2780-81 of the Legislative Journal.)
PRESIDENT MOUL: Senator Withem.
SENATOR WITHEM: Yes, Madam Chair, members of the body, this is, hopefully, will be considered a technical amendment. On LB 719, Senator Hall had filed an amendment which would have delayed by one year the implementation of the ... implementation of the corrective mechanism that the Department of Revenue was supposed to provide for ... supposed to provide for local assessments if they don't reach the 100 percent level category as a position in LB 10...it was part of LB 1059. Senator Hall had moved to delay this for one year on LB 719. 1 was thinking over the weekend it's possible we will not get to 719 and we really do need to delay this another year. I think it's about another $500,000 expenditure. So I ... turn about, fair play, I guess. Senator Hall had offered an amendment to LB 719, 1 am now offering his amendment as an amendment back to his bill here so we'll mike sure and get this done. Pardon me, Senator Lindsay. Slow down just a little bit. What it does is it delays for one more year a mechanism we had placed in LB 1059 that would cause the Department of Revenue to provide an adjustment in locally certified valuations of property so that they Would be equalized to a point where no county would be rewarded for unfairly undervaluing the property in their district. You remember, 1059 gives more money to areas that have lower valuations. This
is... the federal revenue is not really ready to do this.. There is some evidence that it may not be needed. We would like to take another year before it goes into. effect and that's basically what the amendment does.
PRESIDENT MOUL: Thank you, Senator Withem. I will now recognize senators wishing to 'speak to the Withem motion. Senator Moore. Okay, Senator Hall.
SENATOR HALL: Thank you Madam President . ;I rise in support of Senator Withem's amendment. The issue is clearly spelled out, as he said. It saves the state's money. I would urge adoption of it.
PRESIDENT MOUL: Thank you, Senator Hall. Does anyone else wish to speak to this motion? Senator Withem, do you have closing?
SENATOR WITHEM: Yeah. Hopefully, we have explained the amendment a couple of times, probably not very well, but it is a delay in a valuation adjustment provision we had in LB 1059 that (a), the department is not ready to do; (b), it's quite expensive; and, (c), it may not be as big a problem as we thought it was when we first passed LB 1059. This doesn't abolish the concept, it delays it one more year.
PRESIDENT MOUL: Thank you, Senator Witham. We will now vote on Senator Withem's motion to return to Select File. All those in favor please vote aye, opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: 25 ayes, 0 nays on the motion to return the bill, Madam President.
PRESIDENT MOUL: The motion is adopted. Senator Witham.
SENATOR WITHEM: I would like to do a better job of explaining this but I'm probably not capable of it so what I will do is just let the explanation stand. If there are any questions, I would be happy to respond to those.
PRESIDENT MOUL: Thank you, Senator Witham. Senator Lamb, do you wish to address the Withem amendment?
SENATOR LAMB: Yes. 'Thank you, Madam Chair, and members, I have a question of Senator Withem, please.
PRESIDENT MOUL: Senator Withem.
SENATOR WITHEM: I am here, ready to respond.
SENATOR LAMB: Okay. Well, I guess my problem with this is that if this amendment is adopted to this bill, thin there will not be as much emphasis on passing LB 719 and getting to that bill. Is that correct?
SENATOR WITHEM: There are 22 amendments on 719, this is one of them. So there will be one twenty-second less of a need to get to LB 719.
SENATOR LAMB: Thank you. That's my problem. You see, LB 719 is essential for many of us and I think the Department of Education would agree. And if we're going to take one amendment off of that bill and put it on this bill, then there will 1 be certain people who will not be as interested in getting LB 719 up on the agenda and voted on today. It's a very important bill, not only for this amendment but for the bill itself. I would hope that the other amendments would go away so that the bill could be considered today and I guess, for that reason, I'm going to vote against this amendment because I want to emphasize how important it is to the schools of the state to have LB 719 up on the agenda and advanced today.
PRESIDENT MOUL: Thank you, Senator Lamb. Senator Hall,
SENATOR HALL: Thank you, Madam President. Members, again I rise in support of adoption of the amendment. I think it's the second time this amendment has been here on some bill in the last two years. It is not my intent to forever delay this process and I would hope that the folks that understand the implementation of this is going to eventually take place take heed because I don't know that I will sponsor another amendment to delay it. It is an issue that needs to be addressed in the very near future. It makes sense to adopt the amendment, put it off at present, but I hope we don't make this an annual event and I guarantee you that I won't be offering it down the road. But, with that, I would urge adoption of the amendment. It is absolutely necessary for this year.
PRESIDENT MOUL: Thank you, Senator Hall. Senator Moore.
SENATOR MOORE: I, too, rise to support Senator Withem's amendment. This is actually an amendment I think Senator Hall had filed for a couple of months now. It makes not a whole lot of sense for me to commence on a statewide equalization program, given the vast uncertainties that we have in the State of. Nebraska regarding, one, the valuation of property, and, two, what is taxed. And so, given that, I think it is wise to postpone it to '94. By doing that, probably the most ... one of the more important things, to me, I guess, is the fact that there is presently roughly a half a million dollars appropriated each year of the biennium for this project. By adopting this amendment, we postponed it till '94 and thereby there was some safety in that language in the mainline bill that if this amendment was adopted, that roughly a million dollars would free up for the biennium. So, given that, I rise to support Senator Withem's amendment.
PRESIDENT MOUL: Thank you, Senator Moore. Senator Ashford. Okay. Does anyone else wish to speak to this amendment? Seeing none, do you have closing, Senator Withem?
SENATOR WITHEM: Yes, I do, basically, just in reference to what Senator Lamb had to say. This amendment is basically a revenue type of issue. It is not a school issue. That's why it ' a appropriate for it to be-placed on a revenue bill. Secondly, Senator Lamb, between trying to... Senator Lamb, maybe if you would listen to this, between trying to argue the merits of this amendment and visit with Larry here, I am trying to get some plan together where we can utilize one of the approaches you mentioned this morning in getting LB 719 up and I'm... I will say it publicly now that I'm willing to go along with that if it will help expedite the consideration of the concepts in 719. So, hopefully, we'll deal with your concerns although I can't guarantee anything and if it's good strategy from your point of view to hold this amendment along with the rest of them, I can understand your voting that way. As far as the body is concerned, I think it's only appropriate and just to delay this process. It is about half a million dollars per year. We're looking at a bit of a gap in our budget at this point. So let's go ahead and adopt the amendment.
PRESIDENT MOUL: Thank you, Senator Witham. We'll now vote on the Withem amendment. All those in favor please vote aye, opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: 25 ayes, 0 nays, Madam President, on adoption of Senator Withem's amendment.
PRESIDENT MOUL: The Withem amendment is adopted. Senator Will.
SENATOR WILL: Madam President, I move the readvancement of LB 829 to E & R for engrossment.
PRESIDENT MOUL: You've heard the motion to readvance. All those in favor please say aye. Opposed nay. LB 829 is readvanced.
CLERK: Madam President, the next motion I have is by Senator Moore. He would move to return the bill for a specific amendment. (The Moore amendment, AM2249, appears on pages 2781-83 of the Legislative Journal.)
PRESIDENT MOUL: Senator Moore.
SENATOR MOORE: Well, Madam President and members, I guess I need to begin by maybe apologizing to Senator Hall for not being totally true to my word. I think I told him before the noon hour if lie got 25 votes and his amendment got on, there was no reason to run mine. And I guess if, indeed, the vote on his amendment was as unanimous as it appeared, I really have no purpose to run this. But I guess I don't... obviously, I was caught a little off guard that that adopted with no debate but that's certainly not Senator Hall's fault at all, obviously, his plan, I think. But other than that, regardless of that, my amendment is the same one that we visited before dealing with trying to collect this money for the income side. And I think a variety of things have changed since Select File. One of the biggest problems that whatever package we advance today I think needs to address or at least we need to address it if we don't address it on the revenue side, we need to address it on the spending side because, as you remember, when it passed on Friday there was somewhat of a cash flow problem with 829 as it was sitting when we started today. We're not exactly sure, Senator Hall's amendment that we just adopted I think still has, though not quite as acute, I still think you're talking about a, you know, a $13 million gap for this biennium that you still have there, but what I'm saying is that not the total amount of money for this biennium comes in this biennium and because of that, you know, unless there's some other scheme to make it cash flow, quite honestly, what happens is the Governor has to veto
additional money out to make it balance or we ... or maybe there's some A bills that we can't pass yet but the way it sits right now there is still the $13 million ... up to a $13 million cash flow problem for this biennium. Now if nothing else happens today, another amendment I may want to introduce here is anamendment that would, on a pro-rata basis, that if this doesn't happen, if nothing happens to solve the cash flow problem, at the very least we would give the Governor some ability to either veto things we have spent money on or veto this down to a level that it does cash flow for the biennium. But, nevertheless, the amendment that I'm bringing here is the same amendment you've seen before that changes the income tax rate. I think it's, as I said in March and even in April, it was always my intention that we should try to recreate as close to as possible the status quo, that by being ... trying to go back in and tax the people that are getting the benefit from exempting personal property. And the body, and particularly Senator Hall, has made some great efforts to do that and I think with the bill, as it stood on Final Reading and even with the Hall amendment now passed, I would certainly argue that those amendments do a better job of recreating who is taxed as opposed to this amendment but both of those have a problem with implementation as well as the cash flow problem I have already discussed. Now this amendment, once again does, if you look in the back, it will cash flow better for this biennium and actually there is some additional money collected in the next biennium that I don't know if you want to... it's $6 million more than you actually need that actually comes in the next biennium. it's not my intent to collect more than we have to but unless you want to even decrease the depreciation surcharge even more, that money is there and, certainly, I don't know... it's not my intent to overtax people and that may be something else we need to deal with but that would be the next biennium as far as revenue coming in and we have to deal with it. I guess my concern is this biennium and developing a replacement revenue stream for the lost personal property tax that brings in adequate cash to pay the bill dollar for dollar for the subdivisions this biennium. And this amendment does. Obviously, the bitter pill to swallow is that it avoids the corporation surcharge, the corporation tax, the Variety of items that have been attempted to try and tax the very people that are exempted. And I guess I have become more and more convinced you can't do that without developing a whole variety of new taxes that, indeed, may or may not be temporary and you can't do that, at least today we've not found a way to do that, where you can do it and generate enough
revenue for the state to pay the bill in this biennium. So because of about that I hesitate because I know there is... this is an amendment we've seen before but I still think if you keep coming back to it, is the best way to solve the problem, one, because of the cash flow, and two, because if you're indeed talking about a temporary tax, which I do or do not know whether or not this will be temporary, it doesn't make a whole lot of sense to me to impose a variety of new sort of taxing schemes that are only there for 12 months because I'm sure they will continue on above that and if that's what the body wants to do, that's fine. But if you really have an intent of making temporary, it makes more sense to go with a straight income tax increase and those of you that don't like ... didn't like LB 773, I will admit that this kind of scraps LB 773 and returns some progressivity to our overall tax system which I've always wanted to when I opposed that bill in 1987. And there's a variety of reasons why you may not want to do that, as Senator Schmit well knows, on both sides, but I guess I've always been of the opinion that it's something we ought to do. And one of the problems, if you argue that the upper bracket, the $90,000 and above bracket certainly is not exactly the same people that you would argue you're trying to get with a corporate income tax increase. It... I would argue this is better in lieu of a corporate income tax increase because you can collect the money in a given year, whereas if you deal with the corporate side, you know, the tax liability occurs one year, it's due the next year and oftentimes it's not paid till the third year. And that third year is the next biennium and therein lies our cash flow problem. I don't need to spend a whole lot of time explaining this. I think that's... for a variety of reasons, I still think it's something that the body ought to return to, to look at solving this problem, because if we don't, and if we do not adopt some pro-rata amendment later on today, we are going to have a funding gap that will have to be dealt with somehow in the remaining three days, and if that is what we want to do, that is fine with me. But I think if we are going to pass LB 829 and call it dollar for dollar for this year, we need to generate the money to do so. And with that, I would ask for the adoption of the amendment.
PRESIDENT MOUL: Thank you, Senator Moore. The speaking order now is Senator Hall, Schmit, and Hefner. Senator Hall.
SENATOR HALL: Thank you, Madam President and members. I rise in opposition to Senator Moore's amendment. I don't know what
he had for lunch but it affected his memory, let some form of legislative amnesia set in, and he is running his amendment, which is fine, but the fact of the matter is, is that we are right back where we were about three weeks ago, and that is with an income tax proposal that shifts the burden from business to individuals, and that has been, I think, the one thing that more than any other that we have talked about in terms of criteria for trying to solve this problem was that we were going to steer clear of tapping into individuals' pockets as best we could. We have done that with the package that is currently before us. The way the bill sits on Final Reading, it allows for that to happen through the surcharge, the sales tax collection fee reduction, the other issues that we have dealt with in terms of funding this proposal, the utilities tax. When you shift to Senator Moore's proposal, what you do is you say, look, we are going to take it out of those individuals who happen to be in, well, just about any bracket when you talk about increasing the base and you say that we are going to build in some progressivity, and then we are going to reduce the depreciation surcharge. Well, there is another plan floating around that says what we want now, at this point of the game, we want to take and raise that depreciation surcharge and do away with the issue of the centrally assessed people. I guess that is fine, well, and good, but it is also, I think, late in the game to be rerunning proposals that have been offered, been fought, and have lost. I would urge you to reject this proposal. The issue of what we do in terms of the corporate income tax, it was Senator Moore who offered the amendment on Select File to change the provision dealing with corporate income tax to a corporate surcharge on income. The purpose behind that was twofold; one, to collect the payment quicker, and the other was to deny 775 credits from being used. I would have preferred we used up those credits because they are a liability that is out there that affect our balance sheet as much as any slow pay, maybe even more so, because you don't know when they are going to be used. They don't have to let us know., They go about that process themselves internally, whatever fits their corporate tax schedule. In this case, we shift away from a pretty well agreed on proposal to all extent, I think, to now saying we are going to tax the individuals on their income in order to make this up. I guess Senator Moore has his reasons for doing that. Clearly, it can't be the issue of just dealing with the shortfall. Any shortfall that we may or may not, as a matter of fact, feel could lie made up in the next legislative session. -We won't be paying this out until '92. We are scheduled to pay it out to
the subdivisions from January through September, the first three quarters of next year. There is no reason, if at all necessary because of any kind of slow pay that may take place, that we can't deal with that in the first four months of next year when we are in session at that point in time. What you are doing is taking a complete 360 on this issue and moving away from what I would call an agreed-upon package to a total new way of funding this proposal. I would hope you would reject the motion to return the bill and, if it should return, reject the amendment.
PRESIDENT MOUL: Thank you, Senator Hall. Senator Schmit.
SENATOR SCHMIT: Mr. President and members, I really want -to speak in support of a subsequent amendment which Senator Moore will offer, which states that we could reduce pro rata the amount of money reimbursable to subdivisions, it the amount collected is not sufficient. I believe that ought to be, as was outlined by Senator Hall sometime ago, one of the options, and one very real option, because I do not believe that this Legislature is mandated to replace on a dollar for dollar basis the money that, and I say, "is lost" because of the personal property tax decision. The other point I want to make is this. I have never agreed very enthusiastically with the principle that the money that we raise to replace the revenue lost should come from, again, "those businesses which benefited from the exemption." It would be just as easy, and all of you who know me know that I have long stood on this floor and defended the railroads and the telephone companies, that it would be just as easy to argue that those entities have been unjustly taxed for years and, therefore, to put the tax back on them in some other manner is a perpetuity of an already unjust tax, and I think that was reflected in the meetings I have had with hundreds and hundreds of my constituents, who have said, Loran, don't fool around and try to play games with us. Just put it on sales tax and income tax and we know where it is coming from and we won't have to hunt for it and, worst of all, we won't be blindsided when it hits us. Secondly, I still think that the depreciation surcharge is an unjust tax. It is not easy for those of us who pay property tax and suffer a loss to pay any taxes, but it is very easy for us to suffer a severe financial loss, have a 30 or 40 thousand dollar depreciation, and still be charged $1,000 on that to reimburse this fund. I think that is inequitable. I couldn't help but smile at Senator Moore's reflection upon 773. That tax exemption lasted about four years, which is longer than most exemptions last on this floor, and was really probably not
destined for much more life than that anyway. I don't know if it can survive the reorganization of taxes here today or not, but I do believe that the concern the Legislature shows in shying away from increased sales tax and increased income tax is not reflected among the population. It is always amazing to me how much farther ahead of the issue the people are rather than we are, and the people have told me, time after time after time, don't play games with us, put it on sales tax and income tax. If you get either one of them too high, we will vote you out of office and find someone else who will find a better solution. That isn't maybe the best solution to me, but it is one which works pretty effectively. So, at this time, I will support the Moore amendment, and I really want to support the next one, which I think is most critical and which, very well, Senator Hall, could solve your problem in a more equitable manner than what we have proposed thus far.
PRESIDENT MOUL: Thank you, Senator Schmit. Senator Hefner.
SENATOR HEFNER: Madam President and members of the body, I rise to oppose Senator Moore's amendment. I think that we adopted an amendment just previously, Senator Hall's amendment, that will do the job for us. And I realize there may need to be a little fine tuning to it yet, but I think we are about there. But last year, remember, we raised state sales tax 25 percent, state income tax approximately 17.5 percent, so that is a terrific increase. Like even in your medium bracket income taxpayers, this with the two years total together, well, this would be a 21 percent increase, and for the next bracket, a 33.7 percent increase, and the top bracket, a 43.7 increase. I believe what we are saying to these people, hey, go out there and make more money so we can tax you more, and you know what we are going to do, we are going to destroy the incentive for people to go out there and work and be more productive and make more investments. And, of course, if we can get them to make more investments, we have economic development, and that is one of the reasons why we have such a low unemployment rate in Nebraska is because we have a lot of economic development going for us in our state. And I don't think we want to destroy that, Senator Moore. So I would be against increasing the state income tax right at this time because we just increased it 17.5 percent last year. Besides, Governor Nelson has said he will veto any sales or income tax increase. Senator Moore was worrying about our cash flow. Senator Moore, eventually, that money will be there. Eventually, local government will get that money and so I just
think we ought to oppose this amendment and and keep Senator Hall's amendment on the bill. Thank you.
PRESIDENT MOUL: Thank you, Senator Hefner. Senator Hall, followed by Senators Lynch and Nelson. Senator Lynch.
SENATOR LYNCH: Madam Chairman and members, I just thought I would rise to react to my good friend Senator Schmit's statement that hundreds of people in this district have told them how they want a sales and an income tax and I just want to say that not even one in my district said they wanted an increase in the sales or income tax. You get quite a few calls on the weekends and, in fact, during the day, none of them had suggested that that would be an acceptable alternative. So I simply want to alert you to what people in my district think, at least, and tell you that I would also, because of that, suggest we support the Hall amendment.
PRESIDENT MOUL: Thank you, Senator Lynch. Senator Hall.
SENATOR HALL: Again, Madam President, I rise in opposition to the Moore amendment. The funding package in the proposal is not perfect but find me a tax plan that everyone can agree on and we'll make you king for a day, I guess. I don't know that there is any proposal out there that is going to be more roundly received than the one that's currently in LB 829 as it exists. I would urge you not to tinker with it. It's had plenty of time to be tinkered with. At this point, to come in with a complete different funding mechanism for the proposal, I would argue, is ill-advised because I would think that the entire package would tend to fall apart at that point. And as much as I've gotten very fond of this bill, that has nothing to do with it. It is clearly an issue of are we going to deal with it on a one-time funding basis, one-time funding proposal to the local subdivisions to deal with the personal property tax problem. If we are, what's in LB 829 is I think fair to all involved. If you go the route of returning the bill to Select File for Senator Moore's amendment, then it's Katy bar the door at that point. The whole thing opens back up again and I ... you know, that's fine if that's the will of the body to deal with this because we'll be here a while. I would urge you to reject Senator Moore's amendment. It, I think, is a little late in the day.
PRESIDENT MOUL: Thank you, Senator Hall. Senator Nelson.
SENATOR NELSON: Madam Speaker, I can agree it may be a little bit late in the day but I will tell you I think I represent fairly well a mixed district. And I took a ... quite a large survey, of course, not the whole town, cost me too much money,, but sales and income tax was one of the favored means of if we had to increase tax or whatever we had to do. I can see a difference in the constituents. I would imagine that most of Senator Lynch's constituents do not pay a depreciation surcharge. One that I very definitely sympathize with and I can't see that they're getting any advantage of it is the trucking industry and it's unfortunate that one industry gets hit far harder than the other. They have not been recipients of any necessarily excepting their repair parts maybe in their business and they do have an accelerated appreciation. And those semis at a $100,000 are big figures and with the increase in fuel. But that's the same thing that hits the farming industry right now. I don't care how much you increase the tax, it isn't going to change the price of a bushel of wheat or a bushel of beans. So, depending on who you're talking about or so on, and very fair, but when you move from Minnesota to Nebraska and you take a $28,000 income or 30,000, what are you going to get? You're going to get about a $700 increase in your take home pay. And just check out your top income tax bracket. I admit the 90,000 or so on, the difference in the lower bracket Senator Hefner is talking about percentages, that is a big percentage. It was rather amusing though. He said something about, well, takes away all the incentive to work, Well, what's the difference between a kid getting 3.85 an hour or 4.15, maybe it takes away the incentive to work. And, again, I know we had an increase in tax, it's very easy to throw percentages around, but YOU must look at the final figure. And the depreciation surcharge is a tax on a tax again. I can't see anything wrong with raising that top individual tax bracket. And, incidentally, I visited a few minutes ago with the Governor's office. We're going to have to come up with some more money one way or the other and I hope we can do it as fair as we can or there is going to be some severe vetoes that many of us may or may not like.
PRESIDENT MOUL: Thank you, Senator Nelson. Senator Schellpeper, followed by Senator Lynch.
SENATOR SCHELLPEPER: I call the question.
PRESIDENT MOUL: Senator Lynch was the only one left wishing to speak so I think we'll go ahead and close. Senator Moore.
SENATOR MOORE: Well, Madam President and members, it's getting to afternoon, a late day and we're going to be here a long time tonight but there is probably nothing more important we're going to deal with in the remaining hours of the session than what we do in 829. And Senator Hall may, indeed, be right, if you adopt this amendment, you may be back in the thick of things trying to solve something, recreate the whole mess. But I think it's kind of like the Fram Oil Filter commercial, you can pay me now or pay me later, because I'm of the opinion if, indeed, you advance the bill as amended, for one, you're going to have a veto that the Governor... I mean, unless he wants to do something else, he's going to have to veto something out of the budget because you don't have enough money to make it work, as simple as that. That's one problem. The second problem is that if you pass the bill as it is right now, the railroads will go to federal court, probably in a couple of months they'll have equalization under the 4-R Act. After that, the remaining public service entities may, indeed, file suit in state court, get another $3.5 million, you've lost $6 million, and the people you're trying to get get off the hook one more time. If you don't really solve anything then you'll be back in later sometime this summer probably trying to find another way to recreate that. And I guess, sadly enough, maybe I'm ready to throw in the towel saying for a temporary without a lot of thought we cannot recreate the status quo. And so, given at least that fact in my mind, I think you're better off creating something that generates enough money to pay off the locals dollar for dollar, use an existing tax base that I'm not going to sit here and tell anybody that people are beating down my door to get their income tax raised, I know that's not the case and it's not the case at all. But, on the other hand, if you ... you're going to have a lot more constituents to answer when...in July and August when the railroads get exempt from this little surcharge scheme we adopt on the 87th day and you're going to get a raft of phone calls about why you didn't get it right. In October and November when the remaining public service entities get off the hook, you're just having more of the same problems. I guess I just reiterate, as I did before, that if you cannot recreate the tax on the same people you benefited, you need to at least generate enough money to fulfill your promise to the locals and you can do that with sales tax and do it by increasing the depreciation in surcharge. I guess, as I sat and listened to this debate,
I'm not wild about the depreciation in surcharge a bit, I know there's a little amendment floating around that's going to raise the depreciation surcharge to 2.3 and that still leaves you with the same cash flow problem because that's what gets you into trouble, takes you three years to collect that. And so, given the' variety of alternatives we looked at, we still come back to income. I think you put some progressivity back into the income tax system in the State of Nebraska. A lot of people don't like that. If this, indeed, becomes permanent, we'll have to deal with that but at least for the short term you collect the money from all citizens of Nebraska, one, to protect our real estate base for the time being; two, to generate sufficient money to reimburse the locals; three, to generate sufficient money that we can pass the budget intact this session without having to make some additional cuts the following two days. And so it's just your choice. If this amendment fails, then maybe we need to look at the pro-rata amendment and then just pass it off on property taxes. That's what I think in the end what's going to happen. So I ... I know Senator Hall is not making a threat, he's making a promise because he does not like this, I understand that, but if you don't do it now, I'm going to eventually do it later on at a special session or later on as soon as Wednesday when we battle over what can and what cannot fit into our state budget. So, with that, I would ask for adoption of the amendment.
PRESIDENT MOUL: Thank you, Senator Moore. We will now vote on the Moore amendment. All those in favor please vote aye, opposed nay. The motion is to return to Select File. Have you all voted? Have you all voted? We have a request for a record vote. Please record, Mr. Clerk.
CLERK: (Record vote read. See pages 2783-84 of the Legislative Journal.) 10 ayes, 20 nays on the motion to return, Madam President.
PRESIDENT MOUL: The motion fails. Are there further motions, Mr. Clerk?
CLERK: Madam President, Senator Hall would move to return the bill for a specific amendment. (The Hall amendment, AM2266, appears on pages 2784-86 of the Legislative Journal.)
PRESIDENT MOUL: Senator Hall.
SENATOR HALL: Thank you, Madam President, and members, the amendment that has been passed out to you is an amendment drafted by the department and it is a technical amendment. it deals with five different things. First, is that it clarifies that the $150 increase of the occupation tax is in addition to the current $10 tax. Secondly, it clarifies that the 100 percent reimbursement of subdivisions would be for 1991 tax years only, tax year only, and that it does not include refunds or penalties. It is only for tax, not for refunds or penalties from prior years. Thirdly, it amends the Byars amendment which was adopted that dealt with the refund provisions. It was a sentence that was inadvertently left out and it provides refunds not claimed by June I of the following year or forfeited and returned to the subdivisions. Fourthly, it clarifies that the exclusive method for appealing an order of the State Board of Equalization shall be to the Supreme Court. And, fifthly, it provides the elimination of property tax for personal property from 1991 shall be reflected in the property tax statement rather than simply left off. In other words, the value of the property will be presented in the tax statement, then it will show it as exempted so that the amount is not lost forever, it's there, the value can be determined. I would urge adoption of the amendment after we return the bill to Select File.
PRESIDENT MOUL: Thank you, Senator Hall. Senator Schmit.
SENATOR SCHMIT: One question, Senator Hall, relative to the occupation tax. You say it will now be $150. What is the present occupation tax?
PRESIDENT MOUL: Senator Hall, question from Senator Schmit.
SENATOR HALL: I'm sorry, I wasn't...excuse me.
SENATOR SCHMIT: You want to raise the occupation tax to $150, Will you live me information as to what is the amount of the present occupation tax?
SE ATOR HALL: Senator Schmit, this amendment does not raise it. We 've already raised it.
SENATOR SCHMIT: Yes.
SENATOR HALL: The present occupation tax is $10. This took the place...remember the issue, the minimum corporate income tax
that addressed the not-for-profits and we were going to attach the ... hit the not-for-profits for $150.
SENATOR SCHMIT: Uh-huh.
SENATOR HALL: Well, with the amendment that we adopted earlier this afternoon that we started on this morning, we changed that, took out the minimum corporate income tax for all corporate filers and put in instead an occupation tax that dealt with only companies that file in the 1992 year. Not-for-profits only have to file every other year. They file in odd number years so they wouldn't be hit by this. We just took and shifted it to a different area. The occupation tax is currently $10, it will go to 160. The purpose of this amendment is to clarify that the 150 increase is in addition to the current $10. That's all we do in this amendment.
SENATOR SCHMIT: Thank you, Senator Hall. I'm sorry I was off the floor some of the time this morning. Can you give me the rationale other than the fact that most people do not realize what is happening and that they won't recognize the increase in the tax until it hits them as to why we go from $10 to $160 on the occupation tax?
SENATOR HALL: The only...there's only two rationales. One is that it impacts virtually every business that's not filed as a not-for-profit, and, secondly, that it raises revenue.
SENATOR SCHMIT: Thank you, Senator Hall. Your honesty is refreshing if not reassuring. But, in any case, as you have already pointed out, the damage has substantially been done and we are on our way on this road and I'm not a good enough mathematician but I would guess that Senator Moore or members of the Appropriation Committee can tell me what percentage that is, but it's mighty big numbers for a percentage increase. And if the usually alert and visually impressed report it in the manner in which it really comes about, I would guess there will be a flurry of mail on that but it may come too late. You may survive it anyway. Thank you.
PRESIDENT MOUL: Thank you, Senator Schmit. Senator Kristensen.
SENATOR KRISTENSEN: Thank you, Madam President, and members of the body, Senator Hall, I appreciate your explanation to Senator Schmit on the nonprofits because that's what I was going to ask
you about. The other day we talked in terms of numbers. Approximately how many corporations will this occupation tax cover?
SENATOR HALL: It's my understanding, Senator Kristensen, that there would be approximately 50,000 in the state, 8,000 of those which would be not-for-profits, so if you throw those out because they don't have to file in '92, you're looking at 42,000.
SENATOR KRISTENSEN: Forty-two thousand corporations, and these would be the not-for-profits then are the odd numbered year filers, so our intent is that ... well, and on it's face they won't be covered as well. Then all the other smaller corporations, regardless of size or status, will pay it, companies that won't...let's say they refuse to pay it, let's just say some corporation says, nope, not going to do it, then they can be defunct because of nonpayment of occupation tax and that's how you enforce it. Is that correct?
SENATOR HALL: That's correct. The Secretary of State has the ability to dissolve them, in essence, as a corporate entity and they currently do that now. That's the process if they don't pay a $10 fee, which is the current occupation tax.
SENATOR KRISTENSEN: Thank you very much. I do think this is a much better approach towards the payment of fees by corporations because you have an enforcement procedure that's already in law and you also exempt out people that don't need to be paying, these are the not-for-profits, these are people that most of the time don't have a $100 in their bank account at any one time because they're there for that very reason, they don't make any money. I don't have a, I guess, an opinion on the rest of the amendment but I certainly think that this solves any problems I had with the nonprofits earlier and thank you, Senator Hall, for doing that.
PRESIDENT MOUL: Thank you, Senator Kristensen. Does anyone else wish to speak to the Hall amendment? Seeing none, do you have closing, Senator Hall?
SENATOR HALL: Only, Madam Chairman ... Madam President, to urge the body to return the bill to Select File so that we can then adopt the amendment.
PRESIDENT MOUL: Thank you, Senator Hall. We will now vote on the motion to return to Select File. All those in favor please vote aye, opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: 26 ayes, 0 nays, Madam President, on the motion to return the bill.
PRESIDENT MOUL: The motion is adopted, Senator Hall, do you have opening on the amendment itself?
SENATOR HALL: Just move adoption of the amendment.
PRESIDENT MOUL: Does anyone wish to speak to the amendment? Seeing none, we will now vote on the Hall amendment. All those in favor please vote aye, opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: 27 ayes, 0 nays, Madam President, on adoption of Senator Hall's Select File amendment.
PRESIDENT MOUL: The amendment is adopted. Senator Will.
SENATOR WILL: Madam President, I move for the readvancement of LB 829 to E & R for engrossment.
PRESIDENT MOUL: Heard the motion to readvance. All those in favor please say aye. Opposed nay. LB 829 is readvanced.
CLERK: Madam President, Senator Moore would move to return LB 829 to Select File for a specific amendment. Senator, AM2237. (See page 2786 of the Legislative Journal.)
PRESIDENT MOUL: Senator Moore.
SENATOR MOORE: Madam President and members, I have passed out on your desk an amendment. I think Senator Hall and I even can agree on this one, the way it sounds, and I'm pleased for that. What this is, if you read it, and basically I'll read it to you, it's so if you can't find it on your desk. It says... it amends some language in there that says, except that if funds appropriated in LB 828... LB 829A, Ninety-second Legislature, First Session, '91, are insufficient to pay the total amount, of tax lost, the amount paid shall be prorated as determined by the Tax Commissioner. Now, as I've stated there, right ... presently
we have two problems at least from a payout with 829. First is that the bill, given its present revenue projections, if you take into account the total life span of what it takes to collect the money, on it's very face is about $4 million short between '93 and '97. Secondly, as I've mentioned when I failed in my, attempt to amend the bill to include the income tax, there's a cash flow problem with the bill as it now reads, even with the $93 million because a portion of that up to, depending on how it comes in, 7 to 13 million dollars will not come in until the next biennium. And, you know, if you would ignore biennial budgets, the money would come there but the concern at least I have is the Governor...as the Governor tries to balance the budget within the biennium, he may or may not wish to include that that's coming in the next biennium in it's payout. I don't know the answer to that. I guess I just don't really care to take that chance. What this amendment would do is basically, quite honestly, give the Governor some additional flexibility as he sets the state budget because my concern is if we pass this bill as is, he will not only take the $4 million but he will also take the other 7 to 13 million dollars out of all the remaining part of the budget. If we adopt this amendment, he would have the ability to decrease the line item in LB 829A whatever dollar amount he wants to, and I would hope at least we would have the ability to override that if he wants to decrease that. But I think by doing this you give the Governor some additional flexibility, one, to balance the total state budget for the next biennium because instead of taking the shortfall of 829 out on the budget or remaining A bills, the Governor could choose to take it out of the local subdivisions' hide, as simple as that. And if we don't adequately fund it, I guess my attitude is if we're not going to raise enough money to pay off dollar for dollar, then maybe we shouldn't say we're going to pay off dollar for dollar and we should prorate it back to whatever amount we choose to fund it at. And, as I mentioned, it says that it shall be prorated, that's only if the funds are insufficient. Now, obviously, some are of the opinion at least that we have been more than adequately conservative on our estimates on what depreciation will bring in. And I, you know, that's just that, an educated guess, and we could be way low and when it's all said and done will bring in more than enough at the end of this biennium. But, nevertheless, as we set our budget in the final three days, I think we're better off guessing low than guessing high and with this amendment if we do not choose to fully fund it -or if we... some are of the opinion that not only do we not fully fund it but it has a cash flow
problem and we're only going to pay out in this biennium what comes out ... comes in in this biennium, this amendment would give the body some additional flexibility in making our books balance. So, with that, I would ask for the adoption of the amendment.
PRESIDENT MOUL: Thank you, Senator Moore. The speaking order is Senator Hall, followed by Senator Schmit, Kristensen and Wesely. Senator Hall.
SENATOR HALL: Thank you, Madam President. I rise in support of Senator Moore's amendment. I don't know that it hurts the bill or helps the bill. It's like one of those famous amendments Senator Schmit always talks about, does nothing, doesn't affect anybody but it does give Senator Moore peace of mind and allows him to keep the icing on his budgetary cake. For that purpose, I have no problem with the proposal, would urge adoption after we return the bill. I clearly, from day one, have said that one of the options was that we had to ask ourselves if we wanted to reimburse completely the subdivisions in terms of the dollar figure. I think we're very, very close to being there. Senator Moore's amendment is prudent in that it guarantees that if we're off a couple million dollars that that will have to be picked up at the local level. The state won't be expected to come in and reimburse that as well. I would urge the body to return the bill to Select File to adopt the amendment.
PRESIDENT MOUL: Thank you, Senator Hall. Senator Schmit.
SENATOR SCHMIT: Yes, Mr. President ... Madam President, I also join in support of the Moore amendment and I think it does mean slightly more perhaps than Senator Hall wants us to believe that it means because it certainly means that departments do not need to engage in all sorts of sleight of hand to show for increase of revenue when it isn't there. And, on the other hand, Senator Moore, they might very well say, well, we just don't have the money and, therefore, haven't collected it and, therefore, we're not going to send it out. And it does provide for some flexibility. I just want to call your attention, I'm not going to read the names, and it is kind of an interesting review if on Se Hall amendment, to note the people who you read the vote on the have voted for perhaps the most regressive tax we have ever passed because I want to note that the ConAgras will pay $150 or $160 and the Schmit Farms Corporation, somewhat smaller in size, will also pay $160 for the occupation tax. That may be the wave
of the future, ladies and gentlemen. If it is, you better get your train ticket back home because eventually it will catch up with us.
PRESIDENT MOUL: Thank you, Senator Schmit. Senator Kristensen.
SENATOR KRISTENSEN: Senator Moore, could I ask you a few questions, please.
SENATOR MOORE: Sure.
SENATOR KRISTENSEN: When you talk about insufficiency to pay the amount of tax lost, what effect would that have with the lids that are currently in place with, let's say the various school districts and the political subdivisions? What might be the interplay there between they having to eat part of that, in other words, cut and reduce services because they're under a lid? Or if they're not up to their lid limitations, I assume they would then be able to do whatever they needed to do, raise property tax or whatever to cover this part. What would be your opinions on that and views as it relates to the lids?
SENATOR MOORE: Well, my opinion is, if for some reason this body does not choose ... when it's all said and done, we don't appropriate the whole $97 million and let's say we're $10 million short, you know, the local subdivisions will get about a little less than 90 percent of the dollar for dollar loss. That remaining 10 percent, they would indeed have to get up... they would have to make up for on the revenue side or on the spending side. Obviously, if they're hitting their lid, that would be something that would have to come in... that's something that would have to be considered within that lid and they would know this well before they set their budgets this summer.
SENATOR KRISTENSEN: In other words, what's going to occur here is that they're going to have to bite the bullet one way or the other, that they're going to help us share in this burden and I guess I think that's probably something, at this point in time, that's somewhat attractive to me is that they also help share the risk that if some of our projections aren't close, that they are going to share, although maybe in a smaller percentage, quite frankly, but they probably have less of the ability to share in it than we would have at the state level and thus this would be sort of a way of spreading the risk for, you know,
numbers that we may not have any idea what's going on particularly in the depreciation surcharge and certainly I think in the end of putting on the centrally assessed tax which at least, in my opinion, is probably a clear violation of the federal act and is going to get us in court quicker than anything else we've done so far this year. But if that's true, the subdivisions help share the loss and I think they need to be as concerned as we are about making sure we get the correct amount of replacement revenue and getting it from the right places. With that, I would support the Moore amendment.
PRESIDENT MOUL: Thank you, Senator Kristensen. Before we proceed with debate, I would like to direct the senators' attention to the area under the south balcony. Special guests of the Legislature today are former Lieutenant Governor Don McGinley and a friend, Nelson Moore, of New York City. Would you please rise and be recognized. Welcome back, Governor McGinley. Thank you. Is there anyone else who wishes to speak to this amendment... or this motion? Seeing none, do you have closing, Senator Moore?
SENATOR MOORE: Well, I'm almost concerned if Schmit, Hall and Kristensen are all agreed that this is a good amendment. But, nevertheless, that does make sense because I think it is. And as far as Senator Kristensen's comments, you know, obviously, it's not...our estimates are just that, estimates on what amount of whatever we finalize here today that-money will bring in. Now, obviously, if we decide that we're only going to estimate that this biennium, well, it's only going to bring in $87 million and we prorate it back, obviously, that will probably be the prudent course now. It's certainly my opinion, at least, that if, indeed, that depreciation surcharge brings in much more than anticipated, which some say it will, then come January we ought to go back in and that... that tax was put on to reimburse the locals, if indeed that tax is generating more money to be projected, the honest thing for us to do at that time' would be go back in and if. you prorate them back $10 million now, we ought to come back in in January and February and give the locals another $10 million to make up the difference. But, for the time being, if we do prorate it back, they would indeed have to eat it through either their budget side or the revenue side. And I guess also this amendment, in our final two days, it gives us some additional flexibility, as we eventually come sine die on Wednesday, it gives some additional flexibility on how we choose to balance our books.
So, with that, I would ask for adoption of the amendment.
PRESIDENT MOUL: Thank you, Senator Moore. We will now vote on the motion to return to Select File. All those in favor please vote aye, opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: 27 ayes, 2 nays, Madam President, on the motion... adoption of the motion to return the bill.
PRESIDENT MOUL: The motion is adopted and we are at Select File. Senator Moore.
SENATOR MOORE: I have explained it. I would move for adoption of the amendment.
PRESIDENT MOUL: Thank you, Senator Moore. Does anyone wish to speak to the amendment itself? Seeing none, we will now vote-on the Moore amendment. All those in favor please vote aye, opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: 25 ayes, 3 nays, Madam President, on adoption of Senator Moore's amendment.
PRESIDENT MOUL: The amendment is adopted. Senator Will.
SENATOR WILL: Madam President, I move the readvancement LB 829 to E & R for engrossment.
PRESIDENT MOUL: You've heard the motion to readvance. All those in favor please vote aye. Opposed nay. LB 829 has been readvanced.
CLERK: Madam President, Senator Horgan would move to return LB 829 to Select File for a specific amendment. (The Horgan amendment, FA207, appears on pages 2786-87 of the Legislative Journal.)
PRESIDENT MOUL: Senator Horgan.
SENATOR HORGAN: 'Thank you, Madam President, and members, this amendment addresses what I think Senator Hall referred to. This is the amendment that would readdress the issue of the 2 percent depreciation and move it... take it off of the... the additional 2 percent off of the centrally assessed corporations and move it
to 2.3 percent for all corporations' depreciated property. I think there is some serious question about the constitutionality of singling out those three industries for this type of taxation. I think it puts us directly back into the type of situation which we got ourselves in a couple years ago by. starting to come up with specific classes of corporations and taxpayers that get taxed differently. If the need to do this is to raise an additional $10 million and we're going to centrally assess corporations to raise those dollars, I think what we need to seriously look at is raising those dollars equally and across the board with a tax that treats all corporations the same. So this amendment would simply move it from what was assumed to be enough dollars at 2 percent and moves it to 2.3 percent, two point three percent, which would raise somewhere in the neighborhood of fifty-three million and a half dollars. I would ask the body to consider returning the bill for consideration of that and I think we need to have a discussion about the constitutionality of the... of LB 829 under a centrally assessed taxation on those corporations. Thank you.
PRESIDENT MOUL: Thank you, Senator Horgan. Senator Hall.
SENATOR HALL: Thank you, Madam President. I rise in opposition to Senator Horgan's motion to return the bill. The issue is one of how do we raise the money again? And the body responded a little less than an hour ago by adopting the amendment that put in place the additional 2 percent on centrally assessed taxpayers. We deal with centrally assessed individuals differently. We deal with them as a class. They are a separate and distinct class. They are valued different and assessed different and we have the ability to tax them different. They are out behind the glass. They've called you. They've threatened to take us to court if we should do this. Some argue that, well, they've been paying an unfair tax to date. No, we've just had a poor tax system to date as it deals with personal property. They haven't been paying one dime of unfair tax. 'We just have been letting too many other people get... slip through the exemption hole that we placed there. It's clearly a policy question of whether or not you want to raise the money through the group of people we have come to know as centrally assessed companies. They're in a separate class. What's the difference between those individuals and individuals who are in a different class for purposes of income? We make rational and reasonable distinctions as to why we call them centrally assessed is because they have property all over the state in a
number of different counties. They take the whole value of the property statewide. They assess it and then we put a tax levy on it. It can be a different tax levy on those individuals when it relates to surcharge and depreciation than surcharge and depreciation for other individuals. I don't think there is any constitutional question at all. The only constitution, I guess, ., we have to question is our internal constitution on whether or not we have the stomach to do this. These are the people that have brought us to this point. And now they'll come back and say that, well, yes, but it's the exemptions as the Legislature created. Well, that's fine, well and good and probably partly true, but when push comes to shove it's like every other tax proposal, tax plan that we have had out there, they don't want to do it because they don't want to be responsible for their actions, in essence, they don't want to be responsible for any more than a portion that they feel everyone else should have to pay. And this is an amendment, more than any other amendment that's been offered, that will put the burden on the small guy and let the big guy off virtually scot-free. That's really -hat it does, just a plain and simple cut to the quick and that's what you get. You get a proposal that says, well, we want to spread it out to as many of the small people so we, at the top, have to pay that much less. They were able to do it on the income tax proposal and changed that to a surcharge on income so they could basically have it their way instead of the way the Legislature currently or at that time adopted the proposal. Now you've got the Chamber coming back and say, no, folks, you have to take it this way, we're spoon-feeding it to you this way. if you don't take this proposal, sorry, we're not on board. Well, ladies and gentlemen, I don't think that's a problem here. I think what you have is a good tax system that recognizes that there is a distinction between centrally assessed properties. And we can tax them different when it comes to surcharge on depreciation. There's not a case that I know of out there that deals with surcharge on depreciation as a tax.
PRESIDENT MOUL: One minute.
SENATOR HALL: I mean, what basis are they going to go to court on? I don't understand it. I mean, I would be... I would like to see the attorneys for the centrally assessed companies make the arguments that, (a), it's economically responsible for them to fight this in court; and, (b), that they don't have a liability for it. I don't think it will happen. I think they're re blowing in the wind and what you're going to see is a
lot of people that are buying that argument. I hope not. I hope you don't vote to return the bill to Select File because you're shifting the burden once again to the smaller companies.
PRESIDENT MOUL: Thank you, Senator Hall. Senator Schellpeper, followed by Senators Lamb and Horgan.
SENATOR SCHELLPEPER: Thank you, Madam President, and members, I also rise to oppose the Horgan amendment. I think a 2 percent surcharge is all that business and agriculture can really stand. I think if you're going... anytime that you go above 2 percent it is very unfair. If we're going to put a tax onto the same businesses that will benefit under the Supreme Court ruling, we need to keep the plan we have in place right now with 829. 1 think Senator Hall has a good solution. It may not be perfect but it's a solution to our tax problem that we currently have. But this amendment will put us right back into the war again to try to figure out something else. A 2.3 percent surcharge is too much to stand in Nebraska. You're putting... some people have to pay a tax that do not currently pay. A 2 percent, like I say, is even too high but we're willing to live with it, if we have to, to solve this problem. So please vote against this amendment. Thank you.
PRESIDENT MOUL: Thank you, Senator Schellpeper. Senator Lamb.
SENATOR LAMB: I rise to, Madam Chair and members, to oppose the amendment by Senator Horgan. End of speech.
PRESIDENT MOUL. Thank you, Senator Lamb. Senator Horgan.
SENATOR HORGAN: Could you get it a little shorter, Howard? Well, I would just simply want to reiterate that, you know, I think there are a couple of statements... Senator Schellpeper said that anything over 2 percent is too onerous for corporations. Well, centrally assessed corporations will be at 4 percent and the depreciation surcharge was initially developed with the idea of coming up with a solution to the problem and because of a miscalculation in how much money it would raise we're coming back and looking for addition... an additional $10 million. Had we properly calculated, it would have been 2.3 percent. It seems to me if 2.3 percent is the number it should be, 2.3 percent is what it ought to be. If we believe that depreciation surcharge is the right way to go, we ought to raise whatever the tax dollars it is and not create another
problem for ourselves by saying we're going to get back at these beat us in court and the law is on their sea: corporations who id and we're going to say we're still going to pursue a policy of segregating our tax system and treating other people more fairly and less fairly than other people. Two point three percent will raise $53.5 million, does not require that we put a centrally... treat centrally assessed corporations any differently than we treat any other corporations, and I think it's something that, you know, is definitely going to be challenged constitutionally and we know that. And we ought to deal with that perhaps at this time. So I would encourage you to return the bill for reconsideration.
PRESIDENT MOUL: Thank you, Senator Horgan. Senator Hefner.
SENATOR HEFNER: Madam President and members of the body, I rise to oppose this amendment also because I feel that the way we have this bill now with the Hall amendment I think it's about as good as we can do. I don't like everything, just take the retail merchants, for instance, first they have the 2 percent surcharge on their depreciation. They lose a half... they lose half of their collection allowance and if they're a corporation, they also pay a one-time fee of 150 bucks. So I think they're getting a triple whammy at this. Take farmers, for instance, they have a lot of depreciable assets. We go with the 2 percent on them and a lot of these farmers are incorporated so they would be also paying the $150 corporation tax. But I understand that this is just a temporary deal, that it, hopefully, will be there just for one year only. So I don't think it's unfair to ask the... these other companies, these central assessed companies for a 4 percent surcharge. Therefore, I would encourage you to oppose the Horgan amendment.
PRESIDENT MOUL: Thank you, Senator Hefner. Senator Kristensen, followed by Senator Hartnett.
SENATOR KRISTENSEN: Thank you, Madam President. I forgot the last time I rose to speak to address you properly. I apologize for that. Members of the body, I rise here with sort of mixed emotions. I agree with Senator Lamb and probably Senator Schellpeper that the 2 percent rising to 2.3 percent is more than most of those individual entities can absorb and pay and probably it's a matter of how much they can absorb. But without speaking directly to that, I guess, what disturbs me the most is what we're going to do with these centrally assessed pieces of
property. Politically, we've reached the right 'answer. Politically, this body has said we're going to go after and we're going to get the guys that caused us all the problems. But that isn't the correct answer and that's not the legally correct answer. And, with that, I want to read to you what got us into this problem and you tell me whether we just violated it or not. It says here... and this is quoting from the Natural Gas Pipeline Company of America versus our state board of equalization, March 1st of this year. "A legislative classification must operate uniformly in all within a class, a class which is reasonable." The key issue here, is this a reasonable class? The court is going to tell this body it is not. In fact, the court went on and they have already told us once, here is what they said. The Legislature's stated justification is illusory. We fail to see any real and substantial difference between personal property used for income production by one type of business and the same type of income producing personal property used by another type of business. It cannot be any plainer. That's as plain as it gets. It isn't going to fly. And the court goes on. "The Legislature's effort to exempt railroads is not based on a reasonable classification and violates both the proportionality and special legislation." If it doesn't violate that, what it does violate is the federal 4-R Act. The 4-R Act, I don't like that. You don't like that but the 4-R Act tells you that you cannot discriminate against the railroads. And in our zeal to go get a political answer, we're going to shoot ourselves in the foot just like we did before. We're going to be back in court because we're treating them differently. We don't want to treat them differently. I don't... I do, I want to go after them. I want them to pay their fair share, in fact, I would like them to pay a little more but you can't do it. And I don't have a good answer back on the amount of 2.3 percent depreciation surcharge. Perhaps those entities can't do it. But I tell the body this is not going to solve the problems. This is not going to go away and you're going to be back in because you're going to be in federal court because you violated the federal 4-R Act. And we're going to be back here in two more years and you're going to be blaming the courts again and it is not the courts' problem, it's our problem because we continue to do this. With that, out of with no other solution, I would support the Horgan amendment. Thank you.
PRESIDENT MOUL: Thank you, Senator Kristensen. Senator Hartnett.
SENATOR HARTNETT: Madam Chairman, I would call the question.
PRESIDENT MOUL: You've heard the motion to call the question. Do I see sufficient seconds? I do. We'll now vote on the motion to cease debate. All those in favor please vote aye, opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: 25 ayes, 0 nays to cease debate, Madam President.
PRESIDENT MOUL: You have ceased debate and I will recognize Senator Horgan for closing.
SENATOR HORGAN: Madam President, members, I think one of the things that we need to recognize is this $10 million that we think we're going to get from centrally assessed corporations is likely to be in jeopardy should we choose to tax them differently than we do other corporations. And what's going to happen then, we're going to be even further in debt, another day older and deeper in debt, and I think it's not wise of us to be doing the same things that we've continued to do for the past 20 years and that's to treat taxpayers differently than we treat other taxpayers. It's a lesson that we seem not to learn very easily or very well and I believe we're doing it again here. I think LB 829 is an important bill and I will continue to support it, whatever form, but I think it's important that we at least have in the record that this body discussed what we were doing and that we knew full well what we were doing so that when we come back here in a year or two and may find ourselves in the same situation that we can't say, well, somebody should have told us so. With that, I would recommend that we vote to return the bill from Final Reading. Thank you.
PRESIDENT MOUL: Thank you, Senator Horgan. We'll now vote on the motion to return to Select File. All those in favor please vote aye, opposed nay. Have you all Voted? Have you all voted on the motion to return? Please record, Mr. Clerk,
CLERK: 9 ayes, 18 nays, Madam President, on the motion to return the bill.
PRESIDENT MOUL: The motion fails. Is there anything further on the bill?
CLERK: I have nothing further pending to LB 829 at this time,
PRESIDENT MOUL: We'll proceed with LB 829A.
CLERK: Madam President, 829A, I have no E & R amendments. pending. I do have an amendment to the bill by Senator Will. Senator, I have your AM2275.
SENATOR WILL: Thank you.
PRESIDENT MOUL: Senator Will. (The Will amendment, AM2275, appears on pages 2787-88 of the Legislative Journal.)
SENATOR WILL: This amendment to LB 829A is the... it is the amendment that reflects the Withem amendment that was adopted to LB 829 earlier today. It reduces the appropriation to the Department of Revenue by $593,790, because, as you recall from the debate on the Withem amendment, the department will not be required to implement the central assessment check on counties that would be required under some of the provisions of LB 1059. This simply harmonizes the A bill with the substantive changes that were made in LB 829. 1 would move the adoption of the amendment.
PRESIDENT MOUL: Thank you, Senator Will. Does anyone wish to address this amendment? Seeing none, do you have closing?
SENATOR WILL: No.
PRESIDENT MOUL: We'll now vote on the Will amendment. All those in favor please vote aye, opposed nay. Have you all voted? Please record, Mr. Clerk.
CLERK: 28 ayes, 0 nays, Madam President, on the adoption of Senator Will's amendment.
PRESIDENT MOUL: The amendment is adopted.
CLERK: I have nothing further on the bill, Senator.
PRESIDENT MOUL: Senator Will.
SENATOR WILL: Madam President, I move the advancement of LB 829A to E & R for engrossment.
PRESIDENT MOUL: You've heard the motion to advance.. All those in favor please say aye. opposed nay. LB 829A is advanced. Speaker Baack.
SPEAKER BAACK: Madam President and colleagues, we're going to go on with Select File now. And I just might remind people that right now I think, at the last count, there were 58 live amendments yet on Select File bills, and we're going to come to a point, sometime later today, I don't know exactly what time yet, when we can still send things up to E & R and still get them back by the time we adjourn tonight, because today is the last day to amend bills and still have them read on Wednesday. So, if you have amendments that you're not going to run or something, why don't you go up and let the Clerk know that, so we have a better idea of where we stand right now. But we're going to start running out of time in a few hours. So I just want you to keep that in mind. Thank you.
PRESIDENT MOUL: Thank you, Speaker Baack. Proceed with LB 849.
CLERK: Madam President, 849, E & R amendments have been adopted. When the Legislature discussed the bill, last Friday, Senator Rod Johnson had an amendment pending to the bill. Senator, your amendment is on page 2759 of the Journal.
PRESIDENT MOUL: Senator Johnson.
SENATOR R. JOHNSON: Madam President, I'd ask to withdraw that amendment, please,
PRESIDENT MOUL: -If there are no objections, it will be so ordered. Further amendments?
CLERK: Yes, ma'am. Madam President, the next amendment is by Senator Warner. Senator, AM1680. (The Warner amendment may be found on page 2045 of the Legislative Journal.)
PRESIDENT MOUL: Senator Warner.
SENATOR WARNER: What page?
CLERK: Page 2045, Senator.
SENATOR WARNER: Madam President, members of the Legislature,