LB 829 (1991)
May 14, 1991
General File, special order, LB 829.
CLERK: Madam President, LB 829 was a bill introduced by Senators Will and Hall. (Read title.) The bill was introduced on January 23. It was referred to the Revenue Committee for public hearing. The bill was advanced to General File. I do have committee amendments pending by the Revenue Committee.
PRESIDENT MOUL: Senator Hall.
SENATOR HALL: Thank you, Madam President. As you all know, LB 829 was the vehicle that was selected by the Speaker to be used for purposes of discussion of personal property tax debate. Up until yesterday we had thought LB 320 would be the bill that would be used. Speaker Baack came to me yesterday and said he would prefer that 829 be used because it would allow for the three full stages of debate in addition to probably eliminating discussion of germaneness, not that any of my amendments would ever be questioned on germaneness by a member of this body, but it would eliminate a number of parliamentary potential problems, I guess, if you will, that might focus the debate as opposed to the issue of the amendments that would be before us. I said, fine, I have no problem with using 829 as opposed to 320 and any amendment that is filed to LB 320, 1 think, would be a perfect fit into the first amendment that I have on LB 829 because there is virtually no change to those amendments. So that's just a little explanation of why we're here with LB 829 on the agenda. With that, since we are using 829 as opposed to 320, and since the proposal that I'm offering as an amendment which would be the Governor's proposal, I would ask that rather than waste time discussing the committee amendments to 829 that we pass over them and get to the amendment that I have in front of that. So, Madam Speaker, I would ask unanimous consent to pass over the committee amendments at this time.
PRESIDENT MOUL: If there are no objections, it is so ordered.
CLERK: Madam President, in that event, Senator Hall and Will would move to amend. Senator, I have your AM1772 in front of me.
PRESIDENT MOUL: Senator Hall.
SENATOR HALL: Thank you, Madam President, and members, AM1772, which the Speaker has mentioned, is the proposal that was
offered as an amendment to LB 320. You have all seen that in terms of the amendment that is filed in your book. You can just open your bill book. There is a slight change. The slight change is that the technical amendment that I had offered to 320, the first one to that amendment, is incorporated in this draft, so there was some things that just had to be restructured. They really amount to nothing more than E & R amendments and they are incorporated in this proposal so that there is no substantive change at all. There is really virtually no change. There just had to be some corrections made in terms of really nothing more than typographical error kinds of proposals. So there is no substantive change. When you are looking at that amendment you are looking at the same amendment. The proposal is the one that we have come to call Governor Nelson's plan B. You are receiving right now the handout from the committee staff on what the proposal does. I would just like to very briefly walk you through that. I know that there are a number of amendments to this amendment, as well as amendments to the bill that will follow. The explanation that you have in front of you lists eight different items that are substantive in nature and then four that follow that really are not. They're boilerplate. The first proposal and the substance in the bill is the... one of the issues that we dealt with when we talked about personal property and I would like to say that we talked about personal property on three different occasions. We had two full hearings and a hearing on this proposal yesterday where they were all well attended and the public had much input, as well as interest groups, in determining what form this proposal should take, or at least making public comment on ideas that have been surfaced to date. Section (a), as you look at that on the ... or point (a) on your sheet that you have deals with the statute of limitations with regard to the refunds of property, personal property statutes. These have been much of the debate that is, I guess, centered around the whole personal property tax crisis. The issue of what happens when refunds are filed by these entities that are, I guess, perfected and are due and owed to them. This provision does not impact any of those that are currently in the works. This provision with regard to refund statutes is only prospective, meaning that it will only apply down the road, it is not retrospective and it is not something that will affect any of those folks who current ly potentially could file for refunds, but we don't want to have the same problems. We want to have as uniform a refund system in place and this first portion of the amendment would deal with that issue. The second portion is the motor vehicle fee
schedule that this, of course, is the revised fee schedule. it is found on pages 4 through 64 and 70 through 78 of the amendment. It is the replacement for the personal property tax that would be stripped with the other provisions in this bill. It, again, is another issue that has had much discussion. it. impacts counties differently. It sets up three tiers, one for Douglas, one for Sarpy, and one for the balance of the state. Thirdly, there is the definition of real property that is redefined. This is the LB 1 issue from the special session in 1989. It specifically includes mobile homes as a real property that would fall within that definition and it takes, for 1992 and beyond, all the commercial, industrial and personal property is to be taxed except for LB 77S exempt property. So in this proposal that the Governor has before us, we would redefine real property. We would, in the (c) provision, we would take and remove all personal property, effective January 1, 1992. This has been known as the hammer, if You will, to work on a tax code over the summer. And it would exempt all property except for 775 exempt property. Section (d) of the handout would be the portion that deals with the depreciation in surcharge of 1.75 percent for the tax year '91, provides for the allocation of surcharge among partners subchapter (s) shareholders and trust beneficiaries, multistate corporations, appropriate depreciation in Nebraska in the same way as income. In other words, those are the people that this would apply to. That list that follows the 1.75 allocation is where it would be spread out, who it would be applicable to in terms of their income tax filing. Section (e) reduces the sales tax collection fee for retailers from 3 percent on the first 5,000 to I percent thereafter and to 1.5 in the first 1,000 and one-half thereafter. In other words, we cut the 3 percent fee in half on the ... only the old schedule was from the first 5,000, the new Schedule will be on the first 1,000 and 1/2 percent thereafter. so, in other words, you would receive 1.5 percent on the first 1,000 in tax you collect per month, thereafter it would be one-half a percent no matter how much was collected. This would, again, be a July 1 of '91 to July 1 of '92 for one fiscal year approach. Section (f) repeals the sales tax exemption for utility purchases, using agricultural, manufacturing and/or hospitals from July 1, '91 through July 1, '92. This is the other and the last of the funding mechanisms used to raise the approximately $95 million. So, in other words, you have the Surcharge in depreciation, the reduction in the sales tax collection fee, and then the repeal of the sales tax exemption on utilities in the commercial, industrial, and agricultural
areas. Section (g) of the handout of the bill, Sections 79 and 80, deals with the sunset on aid to cities, counties, NRDs in July 1 of '92 and it reimburses the subdivisions for revenue loss for the '91-92 due to the elimination of the personal property tax. This is the funding mechanism, the formula to send back that $95 million that we just talked about in raising to the local subdivisions of government. Section (h) of the handout and Sections 81 to 87 of the amendment deal with the lid proposal. As you remember, actually the proposal, as it was sent out of committee in the form of committee amendments on this bill, were to have the 1059 lid continue for another two years. The Governor's proposal puts that lid in and it is a zero percent growth lid in taxes levied. It does allow for 5 percent growth, with a three-quarter percent vote of the governing board. It also allows that the refunds of the ... excuse me, refunds of past property taxes do not count against the lid and allowable growth is defined to exclude property added to the tax rolls by this bill for 1992. In other words, any property that comes on is allowed to fall into that allowable growth section so if there is a new development that takes place in an area, you're not penalized by this lid proposal, it just automatically goes on.
PRESIDENT MOUL: One minute.
SENATOR HALL: But it does require three-quarters vote in order to raise the budget any at all in terms of the tax levies and school districts are made subject to this lid as well. The lid will be extended from July 1, 192, to July 1, '94. Sections (i), (j), (k), and (1) of the handout that deal with Sections 88 through 95 are really the boilerplate that I mentioned in the opening that deal with the operative dates, severability, the repealers, and then the E clause. With that, Madam President, the bill ... excuse me, the amendment is in front of us. It is the Governor's proposal plan B, as he has offered it, as we, the Revenue Committee, had a public input on it yesterday, and I offer it to the body.
PRESIDENT MOUL: Thank you, Senator Hall. Before we proceed, I would like to direct the senators' attention to the south balcony. Special guests today of Senator Scott Moore are 26 third and fourth graders from Pleasant Dale, Nebraska and their teachers. Would you please rise and be recognized. And welcome to the Legislature. Thank you. Mr. Clerk, are there amendments on the desk?
CLERK; Madam President, there are. I have a series of amendments. Senators Hall and Will, as co-introducers of the bill, have priority pursuant to the rules. Senator Hall and Will would move to amend, Madam President. Senator, I have your, AM1775 pending.
PRESIDENT MOUL: Senator Hall.
CLERK: AM1775, Senator.
SENATOR HALL: Thank you, Madam President, and members, AM1775 is an amendment that's found on the Journal page 2019. It is the amendment that was offered to the same amendment that was going to be offered to LB 320, So to look for this amendment, please turn to page 2019 of the Journal. And you won't find much. You will see 10 lines. It says strike Sections 5 to 30, 34 to 41, and 54 to 82. Hut, hut, hut! It is an amendment that does this. It strikes the entire section dealing with the motor vehicle fees. The question has been raised, or a number of questions, I guess, have been raised dealing with the issue of the motor vehicle fee schedule and the proposal that the Governor has offered. This clearly is not an amendment that has the blessing of the Governor. Please do not misinterpret that. These are amendments that I have offered, along with Senator Will, to the Governor's proposal. The Governor's proposal, as I have introduced, has a fee schedule in there. Make no mistake that the Governor will probably not be very pleased as he is listening to this. But, be that the case, the amendment is here because I question the need to make this change. There is... and I think it's a radical change, if you will, to deal with the problem on a short-term basis. I do not have a problem and I know, I saw Senator Schmit out of the corner of my eye wheeling his chair as I said that because I just gave him his best argument for one of his amendments to follow. But this proposal of the motor vehicle fee schedule impacts everyone in the state. Some people impact -better than others and it is, I guess, a short-term solution that I'm not convinced that we need. We deal with motor vehicles ... could I get a hammer, Madam President, please. Thank you. Could I get a hammer? Thanks. (Gavel.) Thank you. This provision deals with the issue of the motor vehicle fee schedule. It says that we are going to keep the personal property tax as it's levied on motor vehicles in place. We are not going to make that change. I do not feel that there is a need there because of the distinction that we
make for motor vehicles in the Constitution to separate that out and provide for the fee schedule. The argument on the other side is going to be that you cannot make this change in terms of the constitutionality of repealing the personal property tax unless you repeal it all because the argument could be made that you are subject...Iaying open subject to a lawsuit that would look at 100 to $120 million in terms of personal property or tax base under the Governor's proposal fee schedule that you would potentially jeopardize if you left this provision in statute, in other words, left the system the way it currently is for purposes of taxing motor vehicles as personal property. my point in bringing this up is that, again, I am not convinced that it need be done. It is a dramatic change that for a short-term ... on a short-term basis I do not believe is very equitable in terms of how it is approached. Some counties, people will be paying more because of the fee schedule. In other counties, there will be much less coming in. Actually, the county that I happen to reside in and my district is in would receive much less because of the reduction from personal property to the fee schedule. It would have a dramatic impact on the amount of dollars that would be available for road projects in that area. Whereas, other communities, other areas, other counties will be paying more on the fee schedule than ,they're currently paying on personal property tax on their cars. So it's a mixed bag sort of approach. It does affect everyone. Other communities, like I said, mine will be... I, actually I think, would pay less on my car than I ... under the Governor's proposal than I will under the current system. But the fact of the matter is-that the potential is there for millions of dollars less revenue for the County of Douglas and I think that this change is at present not necessary. There is going to be, like I said_ arguments to the fact that you cannot change the rest of the system and leave personal property tax on automobiles. I would argue that we treat automobiles differently. They are specifically and separately designated in the Constitution and the ability to do that is there. That, I think, is where the arguments and the discussion should lie on this specific issue. I guess, when that argument comes up my response will be that if you must repeal everything, then why not repeal 775 exemptions to be consistent. That's the next amendment that follows. With that, Madam President .... Mr. Speaker, I would urge for the adoption of the amendment to the amendment. It strikes the motor vehicle fee schedule from the Governor's proposal.
SPEAKER BAACK PRESIDING
SPEAKER BAACK: We are talking about the Hall amendment to the Hall-Will amendment. I think that's correct. And I will go through the list of speakers and see if you are ready to speak, on that. Senator Will, did you wish to speak to that?
SENATOR WILL: Thank you, Mr. Speaker, and members of the body, I want to... I rise in support of the amendment that Senator Hall and I have introduced to take out the motor vehicle provisions of this amendment. I want to preface my remarks a little by ... by telling you that I am the principal introducer of LB 829, and LB 829, as originally introduced, would have put all personal property back on the tax rolls. It would have said that the property that we exempt now, agricultural equipment and inventory and business inventory, would be taxed. I introduced this bill in anticipation of a Supreme Court decision that indeed did come down the way I suspected it would, indicating that a good portion of our property tax base is in jeopardy because of the way that we structured our tax system. And I think that the only clear constitutional approach to the property tax dilemma that we have now is LB 829 in its original form. I am not operating under the delusion that LB 829 will pass in its original form, nor do I think that that's the best policy for the State of Nebraska, but I would want to indicate to you that we're going to have a number of amendments that we're talking about as we work through the property tax problem and a lot of those amendments are ... the debate around them will focus at some point as to whether this is constitutional or not. And it's proper that we're starting with this amendment because this is one of the amendments that is exactly of that type and that is that we have a ... we have a Constitution that says that all property has to be taxed uniformly and proportionately, and then the Constitution goes on and makes a number of exceptions to that. Well, what has happened is that our Supreme Court has said that that uniformity clause, coupled with the equal protection clause of the federal Constitution, essentially take precedence over some of the exceptions that we make in the Constitution. So, to a great degree, any of the debate that we do over what is constitutional and what's not is we're counting the number of angels that can dance on the head of a pin because we just don't know what our court is going to say about it. This amendment is a prime example because the Department of Revenue and the Governor's staff have looked at those court decisions and they said, you know, our entire personal property
tax is suspect constitutionally because of the ramifications of the court decisions that we're dealing with. And, because of that, even though the Constitution makes a specific exception for motor vehicles as a class of personal property, the Governor's people are nervous. They're saying, you know, we better just take them off and establish a fee schedule and do a state excise tax on motor vehicles instead. And we're bringing this amendment saying, you know, the court decisions just aren't that clear with respect to what you can do with personal property. And, at this point, while we may want to say we're going to take all the property off the tax rolls, Senator Hall and I are arguing through this amendment that there is sufficient constitutional language to justify continuing to tax motor vehicles as property, continuing to apply property tax levies that are established that apply to real property, and continuing to value those motor vehicles the way that we do now. As Senator Hall indicated in his opening on the amendment, the ramifications of changing the system are so dramatic, have such varying effects as you go across the state, have such varying effects as you go from motor vehicle owner to motor vehicle owner that probably at this point it's prudent to continue to tax motor vehicles the way we do now. That's what this amendment says. I would urge your support for it. Thank you.
SPEAKER BAACK: Thank you, Senator Will. Senator Hefner.
SENATOR HEFNER: Mr. President and members of the body, I rise to support this amendment. I didn't ever think that we needed to change the way we tax motor vehicles because right in our Constitution I feel that we have language saying that motor vehicles can be taxed differently than other personal property. I know that some of our legal scholars say, well, maybe it doesn't, but according to the reading... the way I interpret it in our Constitution, we can do this. And I ... I've had quite a few calls on the Governor's proposal where he would add a fee and I believe this would... this would be a regressive tax. it would be a regressive excise tax because we're taxing the motor vehicles that are older. We're taxing them more in proportion than the newer ones and I certainly don't want to see us go regressive, in a regressive way. I think that we need to, if anything, go the other way. And so I would support the Hall ... the Hall amendment to his amendment, the Hall-Will amendment.
SPEAKER BAACK: Thank you, Senator Hefner. Before I go to the
next speaker, I would like to introduce some guests of the Legislature. They are guests of Senator Nelson. We have 35 fourth graders from the Starr Elementary School in Grand Island and their teachers. Would you folks please stand and be welcomed by the Legislature. And we also have some guests of, Senator Beutler. We have 34 third graders from McPhee Elementary here in Lincoln and their teachers and they're in the south balcony. Would you folks please stand and be welcomed by the Legislature. Thank you for being with us. The next speaker is Senator Schellpeper.
SENATOR SCHELLPEPER: Thank you, Mr. Speaker, and members, I would like to ask Senator Hall a question, if he would.
SPEAKER BAACK: Senator Hall, would you respond?
SENATOR SCHELLPEPER: If we did this, Senator Hall all, if we took this amendment and took it off of the other amendment, would that give us any constitutionality problems that we could live with or would it be something we have to do this year, do you think?
SENATOR HALL: Senator Schellpeper, my argument for doing this his is that automobiles are dealt with separate and distinctly in the Constitution. I mean, they're just a separate class. it's spelled out in the Constitution that they can be treated differently for tax purposes. I would argue that we don't need to" make this change this year, I don't believe. I know that there are those that do and the administration is one of them that the ... you need to repeal all the personal property tax to protect against the potential for your real property base to be declared unconstitutional, the real property tax base to be declared unconstitutional'. I don't... I don't think that's, frankly, a threat. The argument of the personal property tax on automobiles is clearly one of do we need to do it? If you think there is a constitutional risk there, then I would argue you would not want to vote for this, you would want to put the fee schedule in place. If you think that it is not a problem until we address the overall tax system, which means personal property, in the interim, I think we can get by. I don't think that there is going to be a case that comes up that jeopardizes the million dollar... excuse me, $100 million ... plus dollars that is represented in the personal property tax on automobiles.
SENATOR SCHELLPEPER: Okay, thank you, Senator Hall. I really
have mixed emotions about this part of the Governor's proposal. I don't think it's a very fair proposal when you take these older cars and you put them all in the same fee schedule, it seems like we're penalizing the individual that has the older car at the expense of the ones that have the newer, more expensive automobiles. And I think we need to take a look at that. Even though it's something we may have to do eventually, I think it's ... we need to look at the whole big picture because it's estimated that this will raise $15 million statewide. And when you're going to raise $15 million statewide with this vehicle tax it's going to come from the ones that can least afford to pay, which are your older people that have older vehicles. So I really have mixed emotions about this part of the Governor's plan anyway. And I guess, by taking it out would help me, although I realize we have to raise $90 million and this was a place to get 15 million of it. But I think maybe that if we took it out, we could find the 15 million someplace else. So I will listen, I guess, and decide later on. Thank you.
SPEAKER BAACK: Thank you, Senator Schellpeper. We'll now go to Senator Schmit.
SENATOR SCHMIT: Mr. President and members, I really hope that as Senator Hall addresses this bill in more detail, this amendment in final detail, that people will listen. I'm amazed that we are about to embark upon this kind of amendment and everyone is not sitting on the front seat... the front four inches of their chair. They say there's something good in everyone and there's something good in every bill and this is, I guess, that one redeeming quality perhaps in the amendments that Senator Hall is providing. And I certainly would support this amendment. I just want to say that it's sort of interesting that when we begin to split hairs and we allow someone other than this Legislature to draft tax policy we are asking for nothing but trouble. Now I'm not critical of Governor Nelson. Governor Nelson has been in office for fewer weeks than I've been here for years and we have told the Governor, you bring us a plan. That is nonsense, sheer, simple, pure, and honest. The Governor should not be drafting tax policy for the State of Nebraska, nor should the Supreme Court. That is our responsibility. As odious as we find it to be and as burdensome as we find it to be, and as threatening to our political careers as it may be, it is our responsibility. It is an impossibility to craft on this floor, under this bill or any other bill or any
other amendment, including the one that Senator Carson Rogers and I prepared in the manner and the amount of time that we have left to do it. That needs to be done in a very methodical, lengthy, prolonged discussion by members of this body. We are embarking here today again on a procedure which is going to, result in total chaos and to the extent that this amendment will reduce that by one teeny weeny bit, I support it. But it's an interesting concept, indeed, that we say, well, we can go back and reinstate the tax law on automobiles, but we cannot do segregated types of taxing on other personal property or even although, God forbid, we talk about intangibles. I notice that we're going to tiptoe around the 775 exemptions, and I stood at this microphone a number of years ago, four years ago, and reminded this body, and it's always embarrassing to say, I told you so, but some of you were here, and I said, you cannot bind a succeeding Legislature, in theory, but what we are doing with this procedure is that we are allowing ... Mr. Speaker, will you give me a hammer at this time? Obviously, no one is listening. (Gavel.) It's nothing new, they didn't listen four years ago and that's why you've got your neck in the noose right now. The facts are, I said, we are, in fact, by allowing the Department of Revenue, we are advocating our responsibility again, we are allowing the Department of Revenue to draw up contracts for tax exemptions which can run for 15 years and no one knows what they will do and no one knows what those exemptions will cost us. And I'm suggesting it would be an interesting exercise if we were just to repeal, and we may even try that, just repeal outright the 775 exemptions and see what happens. Obviously, there would be lawsuits and deservedly so because we did what we were told was the right and proper thing to do to keep business in Nebraska. But this bill is going to reverse many of those actions we took under 775, 73, and 72, and a number of other actions which we took. I think that it is time that we recognize... and I hope that this...
SPEAKER BAACK: One minute.
SENATOR SCHMIT: ... that this debate goes on and on and on. I have some bills I would like to have passed but if this debate takes the rest of the session, so be it. I want to say it again, I said this in the committee hearing yesterday to Senator Hall, who was about the only one there at the time, I said this Legislature ought to recess, we ought to recess and meet as a committee as a whole under the leadership of the Revenue Committee and address a permanent tax solution. We should not
try to foist another temporary tax plan on the people of the State of Nebraska this year with a promise of better things to come. We will not get it done and we should not expect the people to swallow that.
SPEAKER BAACK: Thank you, Senator Schmit. Senator Wesely.
SENATOR WESELY: Thank you, Mr. Speaker, members, I, too, would rise in support of this amendment. It seems to be a consensus .. that always worries me when Senator Hefner and Senator Hall agree on any particular proposal, and they seem to. Nevertheless, it makes a lot of sense. I raised objection and concern about the fee proposal when it was first issued by the Governor. I received numerous calls to my office of people who shared that concern. I think the context of the issue has to be taken into account here. I don't think that the fee idea is all wrong and I think perhaps, obviously, it's something we need to look at over the interim. But one of the things we need to consider is we're looking for a short-term fix to the problems so that we can look at long-term solutions, and this change to a car fee should be considered in the context of a long-term solution, not a short-term fix. And I think, in that context, we need to spend more time with it and consider it more carefully. And so it doesn't seem to fit with the rest of the bill and I think it ought to be deleted, hopefully, without any impact in terms of the constitutionality of the rest of the bill. I think that's, obviously, a great concern. But, nevertheless, I did get a number of calls in to share my concern about the fee schedule and the Governor, to his credit, came back and tried to make an adjustment to make it more progressive. gut we've had three or four years now of taxes, tax policy that shifted the burden from the wealthier to those that are the working poor and the working class and people objected to that, are still concerned about that. And when this proposal came forward and showed Cadillacs and other expensive cars having their fees cut in half or more, well, the old guy with the clunker out there trying to get by had their fees increased, obviously, following on the heels of the other tax policy changes, found objection, a strong objection, let me tell much, you, from the public. And so I think everybody's pretty much, as you can hear from the floor debate, inclined to remove this section of the bill. I think, in looking at the fee schedule, it was ultimately proposed in this by the Governor. Some of the increases for those old ... older cars are not that significant. Increases from 8 to $10 or 12 to $15 or whatever are not
particularly significant increases. I think, again, it's the symbolism. It's the idea that we continue to have tax policy that shifts the burden from those that are most able to afford the taxes to those that are least able to afford the taxes that people really object to. That's the bottom line concern that's. being expressed and that's why this... this dog won't hunt and this proposal won't fly and I would support the Hall amendment.
SPEAKER BAACK: Thank you, Senator Wesely. The next speaker is Senator Lamb.
SENATOR LAMB: Thank you, Mr. Speaker, and members, I guess mine is going to be a lonely voice here, from what I'm hearing. But I really... I really don't have any objections to this new proposal. You may remember yesterday in some of the testimony before the Revenue Committee there was the suggestion brought up that our current system of taxing motor vehicles may be unconstitutional simply because every 1966 Chevrolet is taxed at the same rate, same amount, no matter whether it's in good shape or in poor shape. So I guess, while the schedule could be adjusted perhaps if somebody... some people think it is unfair to a certain class of motor vehicles, I think in general going to this sort of system is better than the system we have now. And if there is a problem of unconstitutionality in our present system, I see no real reason for not changing it to a fee system, maybe not exactly the same fees that are in here but I guess I have no problem with the Governor's proposal.
SPEAKER BAACK: Thank you, Senator Lamb. Senator Wehrbein.
SENATOR WEHRBEIN: Yes, Mr. President, and members, I am going to rise in support of Senator Hall's amendment. Senator Hall, could you answer a question quickly or briefly?
SPEAKER BAACK: Senator Hall, would you respond, please.
SENATOR WEHRBEIN: You're simply saying that to take this out as a potential way to raise money we need to raise the money some other way rather than finding the money in this particular proposal, in addition to the idea of the way we tax the vehicles, right?
SENATOR HALL: Well, Senator Wehrbein, none of this money that would be... the additional money that would be raised with the fee schedule would not ... could not be used for purposes of
offsetting the $95 million we need to raise to reimburse the counties. This is just repeal the personal property tax on autos that all that personal property tax goes to the counties, you've got to replace it. The fee schedule is the way to replace it. Unfortunately, the way the fee schedule is structured, it raises more than the personal property. That additional money that it raises stays in that county, is not figured into the formula for reimbursement.
SENATOR WEHRBEIN: Oh, okay, thank you. I didn't understand that. Okay. Well, I rise to support the amendment at this time. I, too, think long term we ought to probably look at this and it's worthy of a study and probably a public hearing on this issue itself come next January. But, at this stage, I think we ought to continue on the format that we're using for taxing vehicles and take a little more time and effort to study this. I, as... repeating, I think long term it probably behooves us to look at this area and to come out with a realistic schedule of values on these vehicles so that it's perceived, at least, to be more fair. But, at this time, I think we might be rushing it too fast to make these changes. So, at this time, I will support Senator Hall's amendment.
SPEAKER BAACK: Thank you, Senator Wehrbein. Senator Warner.
SENATOR WARNER: Mr. President, and members of the Legislature, this is... like everyone else, this, I suspect, will be true throughout the day. There's a whole series of policy alternatives that have things we like and do not like and it's hard to sort it out. The first thought that occurs to me is that, well, this raises, as I understand it, additional 15 million that you could look at two different ways. One is that you could ... well, it's not in the Governor's plan, you could offset the 90 million that's proposed to be made up. That drops that to 75. That may have some attraction. Or you can deal with it as I believe it would be in the bill itself in which it becomes additional revenue in the amount of 15 million for local governments but then you put in the lid provision and you could argue that's 15 million of property tax relief, real property, and you shift it to motor vehicles. Well, there may be some merit to that. Certainly, the concept of fees, as I understand, it's not all that unusual in other states, and may have ... may have some appropriate aspects to it as far as public policy since a number of states currently do do that. The other thing that strikes me, interestingly as I hear this discussed
though, and I suspect later on we'll hear the same argument in reverse, but here in motor vehicles we're saying, well, this is not fair because it ought to be based on value. Later on, I suspect, we'll be arguing that some other form of property tax isn't fair because it is based' on value, a series of, contradictions that becomes a little bit difficult to handle, it seems to me. The other aspect, if you do not do it here, if you think it's a good idea, you obviously are putting it off at least two years because, at least as I understand it, it would need to be done at the beginning of a year, the licensing cycle, which commences January 1. So to 'not do it now obviously will put it off until at least January 1 of 1993. On the constitutional issue, obviously, that's one we all have to use our own judgment. I certainly was of the feeling that, as I think most people were prior to the last few months, that the Constitution clearly had an exception that did permit a different valuation for motor vehicles. Now I'm not so sure. I suspect that the real thing that's going to be the argument as we get through this session on this whole aspect is how pure do you want to make a bill to attempt to go back to the Supreme Court. Originally, when this last decision came down it was my personal reaction, not what I liked, but it was my personal reaction that probably we had to put every... at least the absolute safest thing to do was to put everything back on. Well, there was economic ramifications that I didn't like about that. That appeared from a constitutional viewpoint the most logical thing. Now if we begin not doing that... let me rephrase it, now if we start making some exceptions to things that we take off, it would appear to me that the possibility, at least, of having an unconstitutional act will grow as we add more exemptions from taking... let me rephrase that, as we add more items to the list of things...
SPEAKER BAACK: One minute.
SENATOR WARNER: ... that it would be... still come under property tax and evaluation and the possible problems of equalization. I'm not sure how I'm going to push the button yet because I'm like others, I do not like the shift that occurs but I also can recognize that from a public policy viewpoint that the concept of a fee is not all that different from what is used in other states, it certainly does eliminate the issue of constitutionality for this particular part of motor vehicles. And I think of the ramifications of refunds which it will be a major issue, it might mean that for one year at least a more
reasonable public policy...
SPEAKER BAACK: Time.
SENATOR WARNER: ... shift to this fee base.
SPEAKER BAACK: Thank you, Senator Warner. The next speaker is Senator Hall.
SENATOR HALL: I will waive till closing.
SPEAKER BAACK: Senator Schmit.
SENATOR SCHMIT: Mr. President and members, I think Senator Warner touched upon something which needs to be discussed a little. He said, just how pure do you want the bill to be that you send over to the court? Well, if you want a really pure bill, you will vote for the Carson and Schmit amendment which will be coming along after a while. It may also be your ticket into retirement, but you will at least know that you did what had to be done for the people of the State of Nebraska. I want to just say again that we are here today because we did not address the problem the way we should have time after time after time. And we are trying to buy a short-term ticket to a long-term problem and it is not going to work. There aren't five ... well, maybe the members of the Revenue Committee understand this bill, I will give the Governor and his staff credit that perhaps they understand it, but do they understand the impact of it? As I told Senator Moore, and I'm sure Senator Warner would agree, the impact of the Appropriations Committee upon the people of Nebraska is minimal, it is minuscule contrasted with the impact of a bill such as this. Once the Appropriations Committee brings their bills to this floor and we adopt them or reject them, that's it. We spend the money and it's gone, or we sometimes tie ourselves into a program year after year, but not in any way do we impact upon the people of the state as seriously as we do with revenue bills. I well recall when I stood here and discussed with Senator Vard Johnson the impact of 773. And when I challenged his assertion that it would raise taxes only a few million dollars, he said, as usual, Senator Schmit, you exaggerate. The truth then came out that I was way below the power curve, way behind, and, in fact, we raised millions upon millions of dollars and for a variety of reasons and no one will yet agree upon the exact reason. But it did set off a spending binge which today we are still trying to
keep up with. I think that it is important that we recognize and that we give back to the Supreme Court something which they can chew on. And I think this, for years, has been an accepted fact that the Constitution has addressed automobiles in a certain manner and that we can continue to do so. One of the... another reason why I oppose the fee amendment is that I am adamantly opposed to the use of fees in state government for the purpose of raising money. I know that we do it. I have from time to time supported those. But the fee for the service of state government ought to cover the cost of that fee of that service and nothing more, and it should not be revenge producing because if it is, then we find ourselves being dishonest with the taxpayer in the manner of raising money. The fees ought to only cover the cost of doing the service and I do not like them to place a fee system in the statute for automobiles which could easily be confused with other types of fees. I don't think we should do it. It's kind of like the old story about calling the dog's tail a leg, it isn't going to be any different, it's still going to be the dog's tail. And we know that you cannot do indirectly what you cannot do directly and, therefore, we should not try that system here. If, in fact, if, in fact, the personal tax on automobiles is unconstitutional, then I predict the fee system would be unconstitutional because we know that it's going to raise about the same amount of bucks, here and there a little difference perhaps, but it's designed that way.
SENATOR CONWAY PRESIDING
SENATOR CONWAY: One minute.
SENATOR SCHMIT: Are you saying to me and to the rest of this body that the members of the Supreme Court are not going to be able to see that? Of course, they are. Now, let me tell you something, hey, look, how many times do we have to slap your hands? How many times do we have to take you by the nose and lead you back to the basic principle we started out with? While you're not doing anything better, if you read the newspaper, the editorials and the funnies, pick up your Constitution, ladies and gentlemen, and read what is your responsibility, your responsibility. Our responsibility is to draft the tax statutes of this state. I said that in the committee yesterday. My good friend, the reporter here, did not put that in there. But that's the important thing. The Governor is the administrator, we have the weakest Governor of most states in the United States with the possible exception of Texas. He's an administrator. He
administers the laws which we pass. We pass a bill into law and if he doesn't like it, he can veto it. If we don't like his veto...
SENATOR CONWAY: Time.
SENATOR SCHMIT: ... we can override. If we ... if we override, he has to live with it. If we can't override ...
SENATOR CONWAY: Time.
SENATOR SCHMIT: ... we have to go back to the drawing board. We are ... we have abdicated our responsibility and we ought to be ashamed and the people will one day hold us accountable. I'm going to speak as long and as often as I can on this because for the past 20 years we have tip-toed around the truth and we can no longer put it off.
SENATOR CONWAY: Thank you, Senator Schmit. Senator Rod Johnson.
SENATOR R. JOHNSON: Mr. President and members, I would echo what Senator Schmit has just raised. I realize it's somewhat hypocritical to complain about the proposals that are being thrown out to us today but, as I told Loran earlier, I said, you know, once we build these short-term solutions into law they somehow gravitate to be long-term solutions or long-term commitments by the state to tax whether it's depreciation, whether it's energy cost, whether it's a car or an auto issue here. It just seems to me, at this point, I'm not willing to vote for any of these proposals and I said... as I said earlier, it's hypocritical for me, I guess, to stand up here and say, I don't like what's being proposed but I don't have any better plan. Well, I guess I'm going to be a hypocrite at least for the temporary purposes of saying, I don't like any of the plans being circulated at this point. I'm willing to look at the other ideas or other proposals but, as I have seen on a lot of other issues, we make what we think are short-term commitments to a policy decision and after that those short terms become long term. A case in point would be the Whitney amendment. That was supposed to be a short-term solution to the solid waste problem. Well, it's still on the books 20 years later. And I can see that many of these fees or proposals being circulated by the Governor or by someone else, or anybody, are obviously meant to be short term but if we can't find a better solution, they
are built into the system and become long term revenue generators and I'm not, at this point, willing to go down that path. And so, at this point, my light is going to be red most of the day here today because I just don't like the path that we have been asked to walk down and, hopefully, a better idea or better solutions will be offered as this debate continues today.
SENATOR CONWAY: Thank you, Senator Johnson. The next speaker is Senator Hall.
SENATOR HALL: Thank you, Mr. President. Members, the issue has moved away, I guess, a little bit from the motor vehicle fee schedule, which is fine, because probably we should talk a little bit about what we're going to before everybody's attention, I guess, withers farther, talk about what the options are here. Senator Warner, I think, clearly laid out a number of issues that need to be addressed here today and probably will be from time to time. But, really, you have two options. Senator Johnson said, I don't like any of them. And that clearly is an option, that clearly is an option. What happens when the Legislature doesn't do anything on this? Two things will probably happen, one, budgets will be cut at the local level, and, two, property taxes will go up, real property taxes will go up, because that $90 million loss of revenue base in the form of the personal property tax that the Supreme Court ruled unconstitutional is not going to, I guess, remanifest itself some way in any form other than reduction in spending and increased property taxes, real property taxes at the local level. The Legislature does not have to act, that's absolutely right, that's true. That is clearly a policy decision that we have to make here today. And the other options are options like the proposal in front of us, either LB 829 that was introduced, the Governor's proposal as it is in front of us, other amendments that have been placed on the desk. They need to all be looked and examined. To say that we have abdicated our responsibility in terms of taxation, I think, is ridiculous. if you would carry that argument to the fullest extreme, you would lock the door in back and you would not listen to a word at a public hearing. As a matter of fact, you would do away with public hearings and you would never respond to constituent calls or letters. You would just operate in a vacuum irrespective of what goes on in the world outside. That is not what's going to happen here. That's not what's going to happen in the real world and, for my purposes, that's not what is going to happen in the next seven to eight months when the 3-R Committee meets
to draft tax policy for the state. Now that tax policy comes in and the Legislature takes a look at it and the Legislature makes up the bulk of that committee, seven out of the 12 members are represented-by members of the Legislature. That's what their responsibility is to do, is to draft proposals that the Legislature can then examine, peruse, rip apart, make recommendations to amend, but, hopefully, adopt something along the way. Nobody loses their tight, their responsibility, or their duty as given by the Constitution to draft tax policy. That just does not happen. It's not a part of this discussion, at least not an appropriate part of this discussion. Right now, you have a choice of addressing the short-term problem, what I would call a responsible way, or addressing it in another way and that would be to let the locals eat it. Just let them eat the increase that they're going to have to face in real property taxes or reduce their budgets. That's what one of the testifiers at yesterday's hearing recommended. Ed Jaksha came in and said, I don't think the state should even deal with this. I think you ought, at best, pick up half of it and the other half ought to come out of the counties because it's their tax base that you're dealing with. So it's not... I don't think... I don't mean to say that that is a responsible approach...
SENATOR CONWAY: One minute.
SENATOR HALL: ... because I don't believe that. I do believe it is a policy choice that has to be questioned. I'm glad Senator Johnson raised it because it clearly is one side of the issue that not much has been talked about lately and I think it is an area that we need to address here today. Looks like we're going to address a lot of different areas, which is fine. The question before us though is an amendment that deals with a motor vehicle fee schedule. I think that it should be pulled out of the amendment as I have offered it. I would urge your adoption of the amendment.
SENATOR CONWAY: Thank you, Senator Hall. Senator Schmit.
SENATOR SCHMIT: I think Senator Hall is correct. We need to remain on the target a little bit, but it is also true that when you do what is being proposed with this amendment it is like anything else that you do. You cannot adjust the throttle on an engine without adjusting other parts of the engine. You have to adjust all simultaneously and at the same time because when you do what we are proposing to do with this amendment we are
setting the stage for what will happen later on in the bill and we are saying, yes, we're going to take all the tax off personal property but we're going to have this one little exception, which then, of course, is the crowbar under the door to make for other exemptions. I think it is important that we adopt this. amendment though for another purpose and that is what is the purpose, ladies and gentlemen, of this Legislature taking to the people a constitutional amendment for their approval? Drafted by our own-people here who are skilled, looked at carefully by the 49 members of this body and their various staff people, perused with great detail ... by great detail by the lobbyists to make sure that their particular little ox is not being gored, and then when the people take a look at it and the people adopt the amendment and we come back and implement the amendment through statute and the court says, no, you can't do that, you didn't do it right. One of the reasons we are here today is that this court disagrees, at least in part, with previous courts. Previous courts have said what we had done was all right and this court says no. Ladies and gentlemen, if, in fact, we send the bill and again maybe, maybe God will smile upon us and. there will not be the bill in the original form going to the Governor, but if we send that bill to the Governor and he signs it and the court says it's okay, then we have struck one blow for the independence of this body. I still say it is this body's responsibility to draft the statutes and particular the tax statutes under which we operate. It is not the responsibility of the Supreme Court. If the Supreme Court wants to be involved, there's a way they can do that. They can resign their esteemed positions and I respect all of them. They can pay a $120 filing fee and they can sit here and they can draft and have fun to their heart's content. But they are not supposed to draft detail by detail the tax structure of this state. It is the citizens of this Legislature who need to answer to the people and we have done so time and time again. What is frightening to me is that this bill, as proposed by the Governor, should not even be here, We had about an hour hearing yesterday. Some people came in, voiced their concerns, and the bill is on the floor, a bill which has impact upon a 1,600,000 people, every business, every industry, every personal income, every home, every farm, and we act as if it's a casual as you were. It is not and we should not do it. As Senator Rod Johnson has said, every temporary plan becomes permanent. And any farmer in this place who votes for a reimposition of the tax upon personal property under the assumption that we will meet sometime in the future and accept the mandate of the 3-R
Committee, whatever that is, and that's another really bad situation, has got to have...
SENATOR CONWAY: One minute.
SENATOR SCHMIT: ... sawdust for brains because it's not going to happen. It's not going to happen. Once you reimpose that, there are going to be a lot of people breathing a sigh of relief and they'll say, aha, we solved a problem, the personal tax is back on the books, and the local subdivisions will go home and relax and they ... because they will say, we will relax until 1992 when all our problems will be solved and we'll once again have a broad base of revenue for whatever purpose we want to spend the money. Ladies and gentlemen, I hope that this amendment passes. I hope that it does what Senator Hall says it will do and that it establishes the independence of this body and our ability to say to the court, this was passed and approved by the people of the State of Nebraska and we are incorporating it into the statute. And I predict again that if it does not pass and if the Supreme Court will take a look at the fee schedule and say, aha...
SENATOR CONWAY: Time.
SENATOR SCHMIT: ... you're trying an end run (microphone shut off) ...or else, and I don't think we're going to like it.
SENATOR CONWAY: Thank you, Senator Schmit. Senator Will, please.
SENATOR WILL: Thank you, Mr. President. I would call the question.
SENATOR CONWAY: The question is called. Do I see five hands? I do. The question is, shall debate cease? Mr. Clerk, record.
ASSISTANT CLERK: 28 ayes, 0 nays to cease debate, Mr. President.
SENATOR CONWAY: Debate is ceased. Senator Hall, would you like to close on the amendment to the Hall amendment?
SENATOR HALL: Thank you, Mr. President. The amendment deals with striking the motor vehicle fee schedule from the bill which would leave the personal property tax on automobiles as it
currently exists. Article VIII, Section 1, of the Nebraska Constitution reads that the necessary revenue of the state and its governmental subdivisions shall be raised by taxation in such manner as the Legislature may direct. Taxes shall be levied in valuation uniformly and proportionately upon all tangible property and franchises except that, one, the Legislature may provide for a different method of taxing motor vehicles. It's the basis on which I argue that this is not a constitutional problem for purposes of the balance of what we are doing here today in terms of a short-term solution as it relates to personal property. I would urge adoption of the amendment.
SENATOR CONWAY: Thank you, Senator Hall. You've heard the closing. The motion before the body is the acceptance of the Hall amendment to the amendment. All in favor signify by voting aye, opposed no. Mr. Clerk.
ASSISTANT CLERK: 26 ayes, 3 nays on the adoption of the amendment to the amendment.
SENATOR CONWAY: The amendment to the amendment is adopted. Mr. Clerk, next on the bill.
ASSISTANT CLERK: Mr. President, the next amendment to the amendment that I have is from Senators Hall and Will. This is AM1774. (See pages 2130-34 of the Legislative Journal.)
SENATOR CONWAY: Senator Hall, for opening, please.
SENATOR HALL: Thank you, Mr. President, and members, this amendment is found on page 2019 of the Journal. It's listed as an amendment to LB 320. It is identical in nature. It is a provision that in the Governor's original proposal we exempted all ... excuse me, we put all personal property back on the tax rolls effective January 1 of 1992 except for 775 property. Property that was exempt under the 775 proposal was left in place, personal property, most notably the computers and jet aircraft. What this amendment does is to strip that from the bill. The proposal that the Revenue Committee sent out in the... in LB 829 committee amendments would have exempted ... would have put the 775 property back on the tax rolls as well. Again, this is a prospective issue so it is not something that would affect contracts that are currently in place. What it does is, I think, bring us in accord with all the other personal property
out there that is not dealt with separately, such as motor vehicles which we just voted on. But I think it brings uniformity to the proposal. I see no need to exempt 775 property, make it different than any other personal property that is out there. I would urge for adoption of the amendment so that effective January 1 of 1992 this property goes back on the tax rolls just like everybody else's personal property. I would urge adoption of the amendment.
SENATOR CONWAY: Thank you, Senator Hall. The next speaker to the amendment to the Hall amendment is Senator Schmit.
SENATOR SCHMIT: Senator Hall, if you would yield to a question, please.
SENATOR CONWAY: Senator Hall. Senator Hall.
SENATOR SCHMIT: I would like to ask Senator Hall...
SENATOR HALL: Yes.
SENATOR SCHMIT: ... to state specifically that if we adopt this amendment, then we are, in effect, terminating LB 775 as enacted into law on... in 1987, with the exception of allowing the contin... the existing contract to continue in place. Is that right?
SENATOR HALL: That's my understanding, Senator Schmit.
SENATOR SCHMIT: In other words, this is a repealer of the major Business Incentive Act of 1987 which I voted against at that time?
SENATOR HALL: Senator Schmit, this is an amendment that you should embrace with both hands, you should love it to death, and please don't speak on it too much or it might hurt its chances. But, to answer your question, yes, it deals with a... it deals with a portion, Senator Schmit, of the personal property tax portion of 775 and that's the issue of the turbine powered aircraft, the computer operations that we exempted under that. What it does... and take your time back if you want, I'll explain it again, but it says that we're going to take all personal property tax off the tax rolls for 1991. Effective January I of 1992 we're putting it all back on. The Governor's proposal said we're going to exempt 775, personal property, so that it doesn't
go back on. My amendment says, no, we're going to treat it all alike, we're going to put it back on the tax rolls as well.
SENATOR SCHMIT: Does the bill carry the emergency clause, Senator Hall?
SENATOR HALL: The amendment carries the emergency clause.
SENATOR SCHMIT: Then, in other words, if I want to trade my 25-year-old airplane off on a new Gulf Stream and get the benefits of the personal property tax exemption, I've got about 15 days in which to do it. Is that right?
SENATOR HALL: Well, you've got about 15 days and you need about, I think, $1.2 million, Senator Schmit, but I forget what the going price is.
SENATOR SCHMIT: Well,- you're partly right. You're about ... well, you've got the down payment, the 10 percent down payment there, otherwise...
SENATOR HALL: I figured your...I figured your crop duster was worth about the other nine.
SENATOR SCHMIT: (Laughter.)
SENATOR HALL: I was figuring trade-in value in that answer.
SENATOR SCHMIT: I think you might have here the biggest business incentive act amendment of the year because...
SENATOR HALL: For the lobby though, Senator Schmit.
SENATOR SCHMIT: Yeah, there ought to be a ... ought to be a big rush out there in the lobby to go out and buy the new aircraft and the new mainframes and that sort of thing because after we adjourn we will no longer be in business. I do want to say this, once again... I'm going to vote for the amendment, but once again we do that which we should not be doing. Four years ago we said we're going to adopt a policy, we're going to do this and this and this. Well, there were certain groups of people who were able to take advantage of that and they did so. That's what the law was for. There are certain entities now that are just coming on line and they may be looking at 775. And I want to ask one more question, Senator Hall. Does the Governor feel
that this amendment will be damaging to business development here in the State of Nebraska, or have you discussed it with him?
SENATOR HALL: Senator Schmit, I have not discussed it with the Governor. I, frankly, have not discussed this specific amendment. I don't understand the purpose for it but my best guess would be that it would be his fear that it could put a damper on business development, economic development, if you will, if these provisions are to fall off effective January 1 of 1992. It's not mine.
SENATOR SCHMIT: Thank you, Senator Hall. Remember that 775 passed with 38 to 11 votes.
SENATOR CONWAY: One minute.
SENATOR SCHMIT: I am going to watch very carefully and closely and I'm going to do some comparing of names to see how many of my colleagues here will vote for this amendment who voted with a straight face and a firm upper lip for LB 775 because, at that time again, we said we're going to adopt a policy which will bring business to Nebraska, it's going to add jobs, etcetera. You can't hardly find someone to work in this city any more, they tell me, because unemployment is so low. But now this Legislature, if we adopt this amendment, is going to say, well, 775 program wasn't really good after all and so, therefore, we are going to repeal it. One more argument for the Carson-Schmit amendment, ladies and gentlemen, but you are going to hear that from me as we continue. I would hope Senator Carson Rogers and Senator Coordsen and Senator Pat... or Senator Cap Dierks and some of the other people who voted against 775, and Senator Ernie Chambers...
SENATOR CONWAY: Time.
SENATOR SCHMIT: ... would be up here giving me a little moral support, if not otherwise, because I think it's important to point these things out. And it reinforces again my argument that we should not move in haste.
SENATOR CONWAY: Thank you, Senator Schmit. Before we go to the next speaker, I would like to announce the guests of Senator Arlene Nelson. We have 27 seventh graders from Trinity School in Grand Island and their teacher. And they're up in the south
balcony. Would they stand and be recognized by the Legislature. The next speaker is Senator Robinson. Senator Robinson. I don't see Senator Robinson. We will move to Senator Will.
SENATOR WILL: Thank you, Mr. President, and members of the, body, I rise in support of this amendment that Senator Hall and I have cosponsored. And the reason I'm supporting that amendment is not because I am completely disenchanted with LB 775. 1 made no secret of the fact that I'm not the biggest fan of that piece of legislation. However, that's not the reason to vote against this amendment. The reason to vote against this amendment is that this amendment contains exemptions for personal property, and exemptions for personal property that have caused us problems, you know, in the past that we need to at this point take a hard look at and LB 775 1 think is sitting out there right now and the property tax portions of 775 open a hole that someone who is not eligible for 775 benefits could potentially, I think, bring to the attention of the courts and eventually subject the tax system to continue challenges that we've been experiencing thus far. I think that's the reason to take a hard look at this amendment. And I do want to point out that this amendment does not affect the Sales and income tax credits that are available to a corporation under LB 775. This leaves those alone, leaves them intact, addresses only the property tax portion of LB 775, and at this point I think it would ... the most prudent way to proceed with respect to solving our personal property tax crisis is to adopt this amendment that repeals these provisions and make sure that that avenue is not available for someone as far as a court challenge would go and with that I would ask your support for the amendment. Thank you.
SENATOR CONWAY: Thank you, Senator Will. Senator Schellpeper.
SENATOR SCHELLPEPER: Thank you, Mr. Chairman and members, I rise to support this amendment also. I've always... I was one of the senators that was never in favor of LB 775. I think it's something that helps the cities at the expense of rural Nebraska and I think this is a way to get a little bit of that back to make a little more fair to the small companies. I guess 775 was designed mainly for large corporations, but we did nothing in this state for small corporations and this will help a little bit to get some of that back so that the large corporations, put them on a little bit more even keel with the small companies that we have in rural Nebraska. So I will support this
amendment at this time. Thank you.
SENATOR CONWAY: Thank you, Senator Schellpeper. Senator Labedz.
SENATOR LABEDZ: Thank you, Mr. President. Senator Hall, would you yield to a question, please?
SENATOR HALL: Yes.
SENATOR LABEDZ: I was sitting on the side. Did I hear you say that this amendment would not affect the existing contracts under LB 775?
SENATOR HALL: That is correct, Senator Labedz. What would happen, for all practical purposes, is that the companies that are currently contracting with the state would have to probably file a personal property tax schedule for those items that would be exempt and namely the computer, mainframe computers and the aircraft. If the state attempted to tax them, they would just file a lawsuit for breach of contract and they would win. I mean, frankly, that's just how it would work. What this would do is say that for purposes down the road we are not going to put that property in any different situation than property that we would put back on the tax rolls January 1 of 1992.
SENATOR LABEDZ: Okay, so then the... I read in the newspaper the other day that Data Resources, I believe that's the company that is thinking about building a new business downtown. They would come under the new regulation, but the existing contracts would not.
SENATOR HALL: It would depend on, Senator Labedz, when they contracted, under what conditions they contracted, whether this amendment was adopted or not, but potentially that could happen. That is correct.
SENATOR LABEDZ: Thank you.
SENATOR CONWAY: Thank you, Senator Labedz. Senator Hefner, please.
SENATOR HEFNER: Mr. President and members of the body, I'm going to oppose this amendment because the way the original Hall amendment is drafted, it's true that airplanes and mainline
computers would be removed, because as it now stands all personal property is removed from the tax rolls except vehicles, so airplanes and mainline computers, as I understand it, would be removed too. But January 1, 1992 all personal property goes back on the tax rolls if we don't have a long-term solution., But I don't think we want to put this threat in this bill. it would send the wrong message to industries and businesses that was contemplating and thinking about coming to Nebraska or expanding in Nebraska. And we talk about, well, LB 775 didn't help the rural areas. Well, I beg to differ on this. We have a very large, a very large development taking place in northeast Nebraska and that's the Waldbaum Egg Plant and that has added tremendously to the economic development up there. But getting back to this particular amendment, I have an amendment up there that will strike the hammer section, the so-called hammer section, because I don't think come January 1, 1992 we want to put everything back on if we don't have a long-term solution, because if we put livestock, farm machinery and inventory back on, it will cause a severe, a severe recession in our state. Agriculture and business and industry just can't afford that. And this is one of the reasons why I'm opposing this amendment and I would hope that you would oppose it too because what we're doing here this morning, we're removing all personal property from the tax rolls except vehicles. But come January 1, 1992, then we put it back all on if we haven't found a longterm Solution and I just think we're sending the wrong message to these industries that want to locate in Nebraska or expand in Nebraska. I would certainly encourage you to vote against this amendment.
SPEAKER BAACK PRESIDING
SPEAKER BAACK: Thank you, Senator Hefner. Before I go to the next speaker I would like to introduce some guests of Senator Hall. There are 12 eighth graders and their teacher from the Assumption School at Omaha. Would you folks please stand and be welcomed by the Legislature. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members, let me just clarify some things. I was told that, I think led some people to believe something different when I opened on the amendment. The amendment only deals with the personal property exemption portion of the Investment Growth Act that we passed that is commonly known as 775. Doesn't deal with the income tax, doesn't deal with the sales tax credit, doesn't deal with any
other provision than what you see on Journal page 2019 and 2220, 2221, 1 think, three pages, and it, as Senator Labedz asked me, is there a potential for at some point in time for, with the adoption of this amendment, that somebody would be dealing with a little different rules. There would be but it would have to be after the exemption went away and that would be January 1 of '92. Anybody who contracted with the state, for example, for 775 provisions between now and that time when they would fall off and that date would be the first of next year, would be playing under the same rules, so the example that she laid out for us, if that business were to contract anytime between now and the first of the year, there would be no difference in the provisions that are currently in the 775 package, were they to contract with the state for those benefits. The only time that there would be, I guess, a window where the rules would be different, if you will, would be from January I until the point in time where a new tax plan was put into place. I guess, you could say that it might be done the last day of the session, so you'd be looking at January 1 through about the middle of April at the outside unless nothing is done by the Legislature next year, so then that would extend that. And it would only deal with the areas that are listed, and the clearest way to look at what is involved is to read the amendment. I know that 'sounds rather childish but it's just that simple. There are only three sections that, excuse me, four sections that you need to look at and they're listed as number two, and then subsections a, b and c of subsection (2) and they deal with the $10 million investment which allows you to qualify. Then the turbine power aircraft, including turbo prop, turbo jet, turbo fan, then you go down to the mainframe business computer issue and the, I guess, attachments to those types of properties. So it doesn't deal with the program as a whole as it was adopted in 1987. It only deals with personal property that was a portion of that that would be exempt, would continue to be exempt for the balance of this year, but would fall off and be taxable again the first of next year just like every other portion of personal property that would fall under the hammer, as Senator Hefner put it. Now the question and the argument and the reasoning behind Senator Hefner's opposition to the proposal, I think, is valid because what he is saying there is that, well, I'm going to be consistent, I've got an amendment up there that says I'm going to make the January 1 date go away altogether and let's just continue to exempt it. That's fine, if that's the approach that you're taking. If you're taking the approach that, well, I want to protect 775 in this area, you're not jeopardizing 775 to any
you're not jeopardizing 775 to any extent. The impact of that program is in the sales and income tax credits, it allows for the investment.
SENATOR BAACK: One minute.
SENATOR HALL: This is only an add-on. It is the frosting on the cake, the personal property tax provisions. If I remember right, it is the insignia of corporate headquarters or... corporate jets represent corporate headquarters. Mainframe computers represent corporate headquarters. That was the argument that was made four years ago and not all that long ago across the street. But the issue here is one of, in my opinion, there is no difference between any other personal property in the personal property tax, personal property that is represented and exempted under 775. There, clearly, you have a real constitutional problem, in my mind. We don't have 775 in the Constitution although some would like to. We do not have that, you cannot make the distinction between the two. The state has contracted with these operations. We would...
SPEAKER BAACK: Time.
SENATOR HALL: ... by trying to tax those, be in violation of that contract. I do not see it as a problem. I would urge adoption of the amendment.
SPEAKER BAACK: Thank you, Senator Hall. Next speaker is Senator Wesely. Senator Wesely, you're up next.
SENATOR WESELY: Thank you, Mr. Speaker, members, I obviously, would rise in support of the amendment. I have been quite critical of LB 775 over the years and have felt that my concerns have been accurate in the cost of the program and some of the ,other effects of the program on revenues and the fact that some of the jobs created in the activity involved with it would have occurred anyway in all the other arguments involved with it. But we're really not talking about that issue at this point. We're talking about the particular issue that Senator Hall is raising about personal property and I think in that light it makes absolute sense to proceed with this amendment. If we do not, we continue to have an exemption in the statutes come next January that, again, is that little string that starts to unravel the cloth and fabric that cover us with the proposals
that are perforce from the Governor in terms of putting everybody back on the tax rolls next year. This is the way we have led down the path before. You start with this good idea or perhaps this not as good an idea, but popular idea, and you start this exemption and goes to that exemption. Before you know it, you have a number of exemptions and you have a level of exemption that is unfair and unreasonable and the Supreme Court has stepped in and said we can't do that anymore. So I think we need to understand the context of the issue, and whether you like or dislike LB 77S, isn't really at issue here. It's the question of equity and fairness in how we provide for exemptions or provide for taxation. In that light, it makes absolute sense. Now for these particular exemptions, the aircraft and computers, the report, and I don't have it right in front of me, as I recall, indicated there weren't that many aircraft that were exempted. Its impact has been limited. As I recall, the computer impact has been greater, that it has greater utilization and would be more of an impact. But again, even then, the question comes back, can we allow for this exemption to continue when other exemptions are discontinued and, in that light, again, whether you like or dislike 775, you've got to deal with things square and on a level playing field and that's what I think Senator Hall is trying to do. Let's be fair, let's be square, let's play level with everybody and let's take this exemption off as we are the others. So I would support this amendment.
SPEAKER BAACK: Thank you, Senator Wesely. Senator Horgan.
SENATOR HORGAN: Thank you, Mr. Speaker and members, I would rise in opposition to Senator Hall's amendment. I believe LB 775 is one of the pieces of legislation that helped Nebraska and helped Omaha particularly to grow and prosper in the last part of the eighties and now into the early nineties. I think for us now to attack 775 in this way is a breach of faith that we made, this body made, with the business community in the state. Growth in Nebraska is growth in the urban areas and if 775 favors the urban areas, then that is a fact of life perhaps. But, indeed, we need to be concerned about the rural areas but we also needed to be concerned about our large population base which is in the urban areas. LB 77S has saved jobs for this state. LB, 775 has created jobs for this state. LB 775 is probably the largest employer in the State of Nebraska and for us to now come in and to try and chip away at that in a piecemeal fashion on a bill that is supposed to only be a
part-time solution to a problem, seems to me to irresponsible and the message that we send to the business community is that we can't be trusted, that we'll give you a tax break this year and we're going to take it away the next year. It's not the right thing to do, particularly investments in computers will. hurt large businesses in Omaha and in Lincoln and throughout this state. It will cut off investment in this state and those companies who are looking for a place to put new businesses and new employees will look to Nebraska and will say, indeed, Nebraska is not a place where you want to do business because they don't keep faith with you. I think this amendment is not... this is not the right time to be talking about this type of an amendment. The Governor does not want it. It is a disincentive to economic development. We're in a recessionary period. We need to encourage businesses to come to Nebraska and do business in Nebraska and for us to do anything less is going to put us in the situation of some other states where we're seeing declining populations and declining business growth and Nebraska needs to be on the cutting edge of the economic incentives to encourage businesses to come here and to employ our people, and this amendment is going to send exactly the wrong type of message to those businesses and to those decision makers and I would encourage you not to vote for this amendment. Thank you.
SPEAKER BAACK: Thank you, Senator Horgan. Next is Senator Abboud.
SENATOR ABBOUD: Mr. President and colleagues, I regretfully rise to oppose this amendment as well. There is really... it's a rather unfortunate situation that the Legislature is left in and that is a situation which our Nebraska Supreme Court is writing our tax policy. We've been led by the court. We've been required by the court, in some instances, to make some rather major changes in our tax policy and, to my opinion, it's a change that could lead to a situation where it could hurt Nebraskan's economic development, as well as the jobs that have been created in recent years. The court has taken the approach that the policies that have been adopted in the past by this Legislature involving taxes do not align themselves properly with our Nebraska Constitution, even though there have been constitutional changes made by the people of this state, back in the sixties and seventies, that I believe allowed the Nebraska Supreme...or allowed the Nebraska Legislature to make the kinds of legislative changes that we made in the seventies, as well as
in the eighties. I don't believe that it's a good policy for the Nebraska Legislature to be allowing our Nebraska Supreme Court to be setting our tax policy and that may involve some major revisions in our Constitution. We apparently aren't going to deal with those particular major changes until some time later, at least not with this piece of legislation. It's a stopgap method, but I feel that it's a very dangerous method in that we are following the lead of the court. Now this particular amendment has a great deal of supporters in the body. Some of the members in the body, such as Senator Wesely, look at the results of LB 775 in quite a different light than I do, as well as Senator Horgan and other members in the body. They look at the revenues that have been costs to the State of Nebraska as a result of 77S being enacted. I look at the jobs that have been created from 775. And while this amendment is a rather small amendment in the entire scheme of LB 829, 1 feel that it sends a' message and that message is that the promises that we made to Nebraska businesses, the promises that were made to corporate headquarters are being broken. They are being changed. And it is rather ironic that we're considering this particular amendment dealing with mainframe computers when, I believe, next week they're going to be opening up that new facility in Omaha with US West that provides a large number of jobs to Nebraskans, a large number of high-paying jobs to Nebraskans in keeping with their construction of a large mainframe system, a huge building in downtown Omaha. It sends a bad message. Now those contractual obligations that the State of Nebraska obligated itself to provide tax breaks to companies that have already purchased or using corporate jets or for that matter, mainframe computers, I don't feel are being infringed upon even with this amendment. But look at what we have accomplished up to now with this piece of legislation. It has provided thousands of jobs for the state. It has provided economic hope for countless Nebraskans and at a time when we've seen...
SPEAKER BAACK: One minute.
SENATOR ABBOUD: ...our state as well as other states had problems with their population. I think of Iowa with their loss of a congressional delegation or congressional delegate because of their loss of population and Nebraska still had that trend. If you look at our figures that have come out across the state on reapportionment, we still have more and more people leaving the state even though the population stabilized because of new
births. We still have people leaving this state. And the only way you're going to have people stay in the state is provide economic opportunities for people that graduate from high school and college. And one way to do that is to keep a bill intact that has provided economic growth for the state, and that is, LB 775. 1 strongly oppose this amendment. I feel that the Supreme Court has provided a lot of problems to this Legislature but let's not make the matter worse. Let's not create more problems by adoption of this...
SPEAKER BAACK: Time.
SENATOR ABBOUD: ... particular amendment. Thank you.
SPEAKER BAACK: Thank you, Senator Abboud. Before we proceed any further, I would like to introduce some guests of Senator Rogers. We have 47 eighth graders from Centura Consolidated schools from Bolus, Cairo and Dannebrog and their teachers and they are in the south balcony. Would you folks please stand and be welcomed by the Legislature. Thank you for being with us. Senator Schmit.
SENATOR SCHMIT: Mr. President, members, I really have a little bit of a concern, I guess, about what we are doing here because I think from time to time we recognize that changes take place that we don't like, but I was just out in the Rotunda and they're milling around out there like a bunch of cattle before a storm. They never know when the next shoe is going to drop or when the next rock is going to come flying out. And, I guess, I am amazed that the business community is not going berserk and maybe they are. But I'm going to say this, that as we proceed with this amendment it will take on less and less the characteristics of the Governor's bill and maybe more of ours and that is not all bad, but I would suggest also that we will know less and less about the impact of the entire proposal upon the people of the State of Nebraska than we do now and that is not good. I would suggest that at one point in time Governor Nelson will say, wait a minute, maybe there are some reasons why I administer the laws and the Legislature drafts them and sends them over to me for my approval or disapproval. It would not surprise me if Governor Nelson would get out his little veto pen and veto this bill and then after we adjourn sine die and we think we're all heading back for the farm, he would call us back into session and do that which Senator Carson Rogers and I are suggesting we do ourselves, that we remain in session until we
get a bill which we know will meet the legitimate needs and the legitimate constitutional questions that have been raised. What we are doing here today, ladies and gentlemen, is that we are reinventing the wheel and we are saying that some of the things we did in good faith a few years ago, now we're going to undo and I'm almost inclined to wonder. I remember the stirring speech that was made by Senator Pappas and the closing on 775, 1 believe it was, and I can't help but wonder now if maybe old "Pappy" lied to me when he told me all the benefits that were going to accrue because here we are. Old "Pappy" must have lied. We're going to repeal 775. Isn't it strange? I thought it would probably last longer than that, but here we are four short years and unless you got through the gate the first four years, the gate is going to be closed. Now if you got through the gate and you got that contract, maybe you're all right, but maybe you're not. Maybe some business out there which has already spent millions of dollars, in an attempt to qualify for the 775 benefits, will file an action and challenge the constitutionality of the existing contracts and that will be when the fun begins, ladies and gentlemen.
SPEAKER BAACK: Thank you, Senator Schmit. Senator Robinson.
SENATOR ROBINSON: Mr. President, members of the body, I'd like to ask Senator Hall some questions.
SPEAKER BAACK: Senator Hall, would you respond, please.
SENATOR HALL: Yes.
SENATOR ROBINSON: How many companies are affected by this amendment?
SENATOR HALL: Senator Robinson, it would be my argument that there are no companies currently that would be affected by this amendment.
SENATOR ROBINSON: Well, I know, but if it were permanently... say it was put back on in '92.
SENATOR HALL: If it was put back on in 192, any company ... potential would be there for any company who applied for 775 which would still be in effect. This only deals with a very, very small portion of the 775 program and that is the personal property tax exemption.
SENATOR ROBINSON: I understand that, but how many companies?
SENATOR HALL: Well, however many would apply, Senator. I don't know. A hundred million ... one, none...
SENATOR ROBINSON: How many are involved in it now?
SENATOR HALL: In the 775 program?
SENATOR ROBINSON: Yeah.
SENATOR HALL: Would be affected by this amendment?
SENATOR ROBINSON: No, there are companies now that are not paying personal property tax on mainline computers and jet airplanes, aren't there?
SENATOR HALL: Yes, there are.
SENATOR ROBINSON: How many are there?
SENATOR HALL: I do not know.
SENATOR ROBINSON: How much money are we talking about?
SENATOR HALL: I am of the belief, Senator, that this amendment would not impact those companies at all. That's what I have stated for the record when I introduced this, that this amendment does not affect those who are currently contracting with the state.
SENATOR ROBINSON:. Yes, but if that property were put back on the tax rolls January 1 of '92, how much money would those companies be paying?
SENATOR HALL: None. My argument is they would be paying none. This would not impact those companies that we currently contract with. And I'll explain that if you want me to,
SENATOR ROBINSON: Sure. Go ahead.
SENATOR HALL: Okay, what would happen is that those people who we currently contract with...
SENATOR ROBINSON: Yeah, okay, I understand.
SENATOR HALL: ... they have a contract with the state. What we do here for constitutional reasons, we put the property under 775 back on the rolls. So in other words, we argue that you've got to do this to be uniform, put it back on the rolls. They would probably have to fill out their form, their personal property tax schedule. They'd have to mail it to the state. The state could choose to try to levy tax. If the state levied a personal property tax, or excuse me, the locals, it wouldn't be a state tax, it would be the local who would do it, what would happen is those companies would file for breach of contract against the state and they would win. They would, frankly, win. There is no question about it, they would not have to pay it. It does not impact them. So you can argue, I guess, then why take it off? I argue constitutional reasons and I'll do that on my own time.
SENATOR ROBINSON: If nothing would happen till January I of '92, 1 don't even know why we're fooling around with it. If we pass a bill and we got the committee that's going to work on it, let them address that. I think we're getting people all upset over nothing. Why not wait till January 1st of '92? 1 mean, nothing is going to happen, nothing is going to change till then. January I of '92 everything goes back on and then everyone ... then their mainline computers and their jet airplanes will be taxed. I just don't see the logic of dealing with it now because nothing is going to happen till January 1st of '92. I think we should vote it down and I just don't see the reason for having the amendment at this time.
SPEAKER BAACK: Thank you, Senator Robinson. Senator Wehrbein.
SENATOR WEHRBEIN: Yes, Mr. President, members, I guess, before I discuss this with Senator Hall I'd like to ask Senator Hall a question. The first paragraph on the top of page 2020, if you take out or delete the $10 million entry and the 100 new employees, I can't find where that stays in the bill later on or is put back. Are we cutting out the qualifier here in addition to your personal property tax issue?
SENATOR HALL: Senator Wehrbein, that portion of the 775 provision is in another portion of the statute that deals with the sales and income tax portion of 775 which is not affected by this amendment. So that is protected.
SENATOR WEHRBEIN: Okay.
SENATOR HALL: In other words, that would remain in statute, would remain in the law.
SENATOR WEHRBEIN: And that will be the same. So this was actually a repeat in this section...
SENATOR HALL: That's correct.
SENATOR WEHRBEIN: ... to make as a qualifier on the personal property.
SENATOR HALL: That is correct.
SENATOR WEHRBEIN: All right. I will listen later as you make perhaps a constitutional issue of this, but I, as of this point, I oppose your amendment and if I recall the debate on this four years ago, we talked a lot about the need for having this in there because of the aircraft and the computers. The feeling was then that aircraft moved around the country and if they are going to be taxed in Nebraska, they could easily move across the river into Iowa where they were not, and so forth. The same way with mainframe computers,. I understand it's possible today to have mainframe computers a long ways from their home base and still be used, so it's simply a way for them to, if they're going to be taxed in Nebraska, they simply move into a state where they are not taxed. Whether that argument today is still valid in light of your constitutional issue, I'm not sure, but I would think that it is. And so, at this point, I oppose your amendment. The other issue that I want to bring up is in our food processing industry in Nebraska, which is rapidly developing, this appears to me to be a very valid point for food processing machinery and something that I think is very useful for Nebraska businesses not only now but into the future. So I'm hesitant to remove this at this time without a little more knowledge of the issue. If it puts in jeopardy other sections of it because of the Constitution, then I will listen, but simply taking it out now rather in a hurried form I'm reluctant to do and, at this point, I oppose the amendment.
SPEAKER BAACK: Thank you, Senator Wehrbein. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members, the discussion
has been good. 1, frankly, wish though... I think Senator Wehrbein honed in on the issue of the amendment which is only the portion that deals with the personal property tax exemption. It is only the portion that is laid out in the amendment and it is, I think, fairly clear, just...you need to look at it. This amendment does not impact the 775 package. It's basically that you make an investment and we allow for credits on your sales or income taxes as they may be granted under the provisions of law. It doesn't do that. All it does is this. It says that the Supreme Court has said that, Legislature, you have to treat personal property tax the same. All that personal property out there that you have, it has to be treated uniformly and proportionately and the only exception that I can find is for the automobiles and that is spelled out in the Constitution. And what I think you do by not stripping this as well from the, excuse me, the bill and having it fall off in January is that you jeopardize again the whole issue of your property tax base, the rural property tax base if you believe that is an issue. Now, that's, again, a whole another debate. We'll probably get to that amendment a little later. It's not mine, but the question here, for my purposes is, is that all I do is read the court opinion and the court opinion says this. It says a class must have, and this is quoting from State. Ex Rel. Cone v. Bauman, class must have a substantial quality or attribute that requires legislation appropriate or necessary for those in the class which would be inappropriate or unnecessary for those without the class. The Legislature's exemption of railroad rolling stock is based... is not based on any real distinction between railroads and other common carriers if size and weight mentioned in the Legislature's stated justification for the classification, refer to things which are large and heavy, the restrictions or conditions means that speed is not required, then the expressed legislative justification could just as easily refer to trucks and trucking companies as to railroads. On the other hand, one thinks in terms of things which are small and light and must move quickly, the express justification could just as easily refer to airlines and airline companies. 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 other types of businesses. The Legislature's efforts to exempt railroads is not based on a reasonable classification and violates both the proportional, portionality and special legislation requirements in the Nebraska Constitution. There is no reasonable basis for
treating railroads differently from other common carriers, therefore, the distinction is a classification and the basis for an exemption -for personal property tax, results from special legislation prohibited by Nebraska constitutional Article III, Section 18, and violates the uniformity clause of Nebraska. Constitution, Article XIII, Section 1. Ladies and gentlemen, it's in violation of the Constitution, that's why I offer it. It's that simple. It's an amendment that says you can't treat it this way, so let's change it. It doesn't attack 775. I've not said one bad or ill word about 775 here on the floor this morning. What I'm saying is, is that if you don't adopt this amendment,...
SPEAKER BAACK: One minute.
SENATOR HALL: ... you're not in any better shape than you were prior to coming into session six weeks later when we've got a decision from the Supreme Court that says, if there isn't a difference between Senator Schmit's prop plane and a corporate jet, if you can't draw some kind of distinction, then you have to treat them the same. They're both personal property. That's all we're talking about here. There is no difference or distinction or some separate nature that separates those two types of personal property, They are both personal property, they both happen to be aircraft. The only difference is one of them belongs to a corporate entity that happens to have a turbo, the other one belongs to a farmer who happens to crop dust for a living. The farmer is paying personal property-tax on it, the corporation isn't. The court says you can't do that. There is no separate and distinct nature that draws a difference between the two. You have to treat them alike.
SPEAKER BAACK: Time.
SENATOR HALL: That's the reason for the amendment. It's not an attack on 775.
SPEAKER BAACK: Thank you, Senator Hall. Senator Nelson.
SENATOR NELSON: Mr. Speaker, I will be in support of Senator Hall. It somewhat amazes me how somewhat this discussion went on very much in depth two or three years ago and we all have a concern giving too many benefits to one part of the society and not enough on the other. I can't see, I agree with Senator Hall and probably Senator Schmit, why in the world do we think that
the small business is not important in Nebraska or that the farmer or the crop spraying and whatever tax benefits that we give? Sure, I will admit that Omaha gained tremendously, maybe, in LB 775, but I don't see that their growth in any statistics would prove that out. That 37.5 million that we're talking about now will be passed on again to the backs of the small business person or some other business and to the rural communities. That back can no longer carry it. To stand here on the floor and say, well, so what, we made a promise, we'll come back in again, look at the balance sheets. Do your homework. See who gets what benefits. I have a problem in this particular part of it because they can fly the jets around any way they want to. They can put the computer in any place that they want to, so we're not talking about equipment that is somewhat place bound. So in that respect, I don't know as it makes a lot of difference, but when we get back down to the fact that, say, we just keep continue to give and give and give and take it away from the back of the average person up and down the street or that average small business, I think it's time to say a halt and I might relate this to you. When I was back to the National Council of State Legislators I sat in on a session on budget. Only one thing that was mentioned in tax policy of the 49 states, that was Nebraska's LB 775 is horrendous. The poorest tax policy that we have seen. There were no other comments. I didn't even mention I was from Nebraska. So I think that we need to address the whole issue and take the big picture in mind, but that was, I will tell you, that was singled out as the poorest tax policy that any nation or any state could develop. They didn't mention any tax policies of any other state. So I think it's time that we do address it and that we don't get carried away, we try to make this as fair and as equitable as we can and if this small amount is part of what we need to do, I don't think it's going to help a lot because, as I say, they can move them around as they please and if I recall, this was somewhere like a 2.8 or a $2.9 million amount. So not a big amount, but it is part of the tax picture.
SPEAKER BAACK: Thank you, Senator Nelson. Senator Moore.
SENATOR MOORE: Well, Mr. Speaker and members, I'm amazed at how quickly the conversation can degenerate when the shoe is on the other foot. I listened to Senator Horgan and Senator Abboud talk about, my gosh, you can't do this, it would affect business. My gosh, you put these things back on the tax rolls, it may scare people out of the state. You know, but when I say
that about livestock it falls on deaf ears, When I say that about grain inventory it falls on deaf ears and I love the fact that Senator Hall smokes then out and says, I'm amazed at how the pinstripes can sit back there and say, put farmers back on the tax rolls, put cars back on the tax rolls, but don't do us.. And how this body can sit here and consider at the very beginning of the conversation to put an exemption in is amazing to me. It's amazing to me. I voted for 775, 1 support it, I do not want to repeal these exemptions. But if the ball game is going to be everything is under the gun, everything is going to be considered, then let's make it that way. Let's don't exempt anybody up front and say, you're too important, you're too immune from all this. I don't want to put tax back on these things even though I really did not like these exemptions and this is the one part of 775 1 never did like. But how we can sit here and justify, I understand and I hate to draw the line between urban and rural, all my urban colleagues say, how can you consider taxing these things? How can you consider taxing livestock? We didn't become number one livestock state in the country by accident and that will put us in a very fine -margin, the same argument applies to us. I think it's none of us versus them type things, but in some ways it kind of becomes that way when you have an amendment like this or when you talk against an amendment like this because if you want to put us all in the same package, let's do it. Don't exempt somebody out front. I'm reminded of four years ago when we started debating school consolidation. Many members of the body sat up and said, well, let's close those schools and Senator Lamb, the crafty old silver fox that he is, drafted an amendment to close Westside too and all the representatives from the Westside area stood up and said, why you couldn't do this, the exact same argument Senator Lamb has been giving them for 10 years probably. Now I wouldn't mind if you exempt this whole section of the bill, Senator Hall. I could live with that, but if you're going to Out all things back on the tax rolls in '92, you're right, it has to include these things as well. That's what I think needs to happen and if you're going to start talking about everything but these people, I don't know how anybody in this body can go home because you're going to sit there and say, well, there isn't a segment of society that we do fear and tremble to. if we're going to talk about putting everything back on the tax rolls, the definition must mean everything or' nothing at all. Simple as that. I think I rise to support Senator Hall's amendment. It includes everybody in that definition. I would take it another step farther, include everything including
intangibles too. That's not the debate right here. You simply cannot say from the beginning some people, you know, it's the old George Orwell, some people are more equal than others, you can't do it that way. Everybody is on the table or they're not.
SPEAKER BAACK: Thank you, Senator Moore. Senator Byars.
SENATOR BYARS: Mr. Speaker, how do I follow that? Such eloquence. You know, I think the last time I checked my district I think I checked... I represent both ag interests and business and I hope I continue to do so, and I hope I am not one of those senators who bring forth to you an argument for either side individually, but for all of those interests together. And I agree with Senator Moore, I agree with Senator Hall, I think everything needs to be considered together in a solution to the taxing problem that we have. I don't believe we're doing this in the Hall amendment. I believe that we're starting here to treat certain segments of our economy different than we're treating others and so I rise to oppose the Hall amendment. When my predecessor who sat here before me, Senator Morehead, who voted on 775, supported that legislation, I wasn't sure that she was correct. I honestly wasn't sure that she was doing the right thing, but as I have watched the effect of 775 on the people that I represent in the 30th Legislative District, I think she did absolutely the correct thing. The benefits that have accrued to both Beatrice and Fairbury in my district have been substantial. I don't think this is the place to fiddle with 775. 1 think it needs to be laid on the table with the entire package, but not here piecemeal. Let's do it together in a long-term solution. As I bring to representatives of this body my need for the entire State of Nebraska to be helped by this state in the terms of reimbursements and the loss by the centrally assessed taxpayers in the '89 suit, everybody tells me we can't deal with that now. You have to wait for the long-term solution. I concur with that and I think 775 should be treated the same way and I will be consistent in that regard. It's not that I don't think we need to look at it, but this is not the time nor the place to do it and I will oppose the Hall amendment.
SPEAKER BAACK: Thank you, Senator Byars. Senator Hefner.
SENATOR HEFNER: Mr. President and members of the body, I know that Senator Hall is sincere in bringing this amendment to us, but I just... I want to reiterate that we're -sending the wrong
Signal out there, folks, because it isn't going to do anything this year because all personal property is going to be exempt for one year. But where it is going to take effect, if we don't find a long-term solution, is January 1, 1992, and why should we send that wrong signal out to these businesses and industries. that- want to locate in Nebraska or want to expand in Nebraska? And I know some of you folks say, well, it's rural versus urban. Well, it really... I represent a predominantly rural area and LB 775 has helped rural Nebraska too, and besides, we can't keep all of those young people in our area, but we don't want them to go out of our state. Look at how much we spend for higher education. We spend over a quarter of a billion dollars and yet when we graduate these students we say, leave our states, we don't have a job for you. LB 775 has changed that, not for every student, but it has changed it for a lot of students and this is why we do not want to send that wrong message out. So I would say oppose the Hall amendment and then I'm sure, I'm certain that we can find a long-term solution for our property tax problems. All we do, all we need to do is all work together, all get around the table, get all the special interest groups in there, get the legislators in there, get the administration in there and we can find a solution, but we need a little time. And as for some of these companies having to file a lawsuit, this is bad PR for them. We shouldn't force them to do it. Let's live up to our word, let's vote down the Hall amendment, work on the long-range plan and then go from there. So I would urge you to oppose the Hall amendment at this time.
SPEAKER BAACK: Thank you, Senator Hefner. Senator Pirsch.
SENATOR PIRSCH: Thank you, Mr. Speaker. Senator Hall, about a half an hour ago when you first introduced this I probably would have supported this amendment. You talked about the intent of it being prospective and not retrospective. But in the interim, we have learned that, indeed, this would be retrospective. In fact,, when you spoke and answered some questions you talked about, well, it would be only prospective because those who have already signed contracts can just go and sue the state for breach of contract. That makes me very nervous, not to mention how expensive a process I think that would be. We made a commitment in LB 775 and I supported LB 775 and I do agree with Senator Hefner. It has made a difference in our western, central and north and south Nebraska, as well as in eastern Nebraska, and in that regard it has been effective. I think it
is... the Supreme Court has made it very clear that all property must be treated equitably and that personal property must be put back on and I support that and I realize that that is going to have to cause some adjustments. But it's very clear that we do have to put it all back on or our real estate property evaluation is in jeopardy. But this is not the way to do it, not in this amendment, to do this haphazardously piecemeal and put in jeopardy those contracts that we signed under LB 775. The Department of Revenue assured me that they would interpret this retroactively, that, indeed, 'those contracts would be considered null and all of those who have relied on that contract would then have to go into court and sue for breach of contract. I don't think that's the way to go and I don't think that we should be doing this in this amendment. So I oppose the Hall amendment.
SPEAKER BAACK: Thank you, Senator Pirsch. Senator Will.
SENATOR WILL: Thank you, Mr. Speaker, members of the body, what Senator Moore said is absolutely correct, what we can't allow this debate to generate... to degenerate into is simply a business versus agriculture versus homeowners. We can't segment this completely. We need to find a solution that is equitable for all concerned and I think that's ... one element of that solution is what Senator Hall and I are proposing with this amendment and that is that the business community needs to recognize that the ... whatever property tax system we have down the line, once we have a solution-to the... a permanent solution that, hopefully, we will arrive at prior to next session. Barring 'fundamental constitutional changes, we have a potential out there for our property tax system to be challenged because we're allowing these personal property tax exemptions to corporations that qualify under LB 775. 1 think it's important, the aspect of this debate this morning has sometimes taken on an either pro-LB 775 or anti-LB 775 aspect and I think that that's not the proper way to look at this. I think looking at this in the context of 775 as a whole, this is a very small part of the business incentives that were provided under that piece of legislation. The Department of Revenue tells me that the entire revenue that is lost statewide under 775, under this particular provision, this property tax exemption, is about $2.6 million. Now when you put that in the context of the sales and income tax credits that are earned by corporations statewide under LB 775, it's minuscule and we're talking about tens of millions of dollars in sales and income tax credits that are earned by
companies that take advantage of the provisions of LB 775. This is a very, very small part of LB 775 and, ladies and gentlemen, it's just not worth jeopardizing our property tax system by allowing this portion of 775 to remain in effect. it's important, I think, though as we start down the long road which. we're starting down this morning to arrive at an equitable solution to the property tax crisis that we find ourselves in, it's important that things like this be taken care of along the way, that we make sure that our LB 775 provisions don't jeopardize our entire state property tax system. And, with that, I would urge your adoption of the amendment that Senator Hall and I have filed to the amendment. Thank you,
SPEAKER BAACK: Thank you, Senator Will. Next speaker, Senator Kristensen.
SENATOR KRISTENSEN: Thank you, Mr. Speaker and members, I somewhat hesitate to rise to enter into this debate, but, Senator Hall, and I realize you're busy with a lot of colleagues, but I guess I'm a little confused. As I have listened to the debate this morning, I would kind of think that you'd want to keep these things here because you want to put people's feet to the fire and the way you put people's feet to the fire is to continue exemptions because those, as we know today, those exemptions of 775, 1 think, are unconstitutional. I don't know that anybody is talking about that. They are unconstitutional, in my opinion. Do I think they serve a good purpose? Yes, I do. I do think they serve a good purpose but I think you've got it backwards. What you want to do is you want to put people's feet to the fire. Well, the way to put feet to the fire is to keep those sorts of things that would cause legal challenges in the law. And as soon as people, when you all sit around between now and next year, you're going to say, well, what are we going to do to make the system constitutional? The first thing you're going to say is, we either take it all on or take it all off, or put it all on. You're not going to be able to have those exemptions. The key is you've got those exemptions today. Are those exemptions today, as we set, all right? Well, if they go to court, if let's say we put them back on today, those computers and those airplanes are going to go to court and they're going to win. They're going to win and get themselves taken back to zero as exemptions. The key is that in the long term, what Senator Hall really wants to talk about is how are we going to fix it in the long haul and how we going to get there in between? Taking these exemptions off is not going
to solve that problem. Those exemptions are probably not constitutional law today as they stand if you put everything back on except four, those computers and aircraft. But it doesn't make any sense for me, at this point, to upset that apple cart because all you're doing is talking about positions, you're talking about rhetoric, you're talking about positions for negotiations. We can sit and position ourselves all day I guess on what we're going to do in the long term. The key is that I think you need to search for a short-term answer. Personal property tax is not the answer in the long term. As we get to another amendment, I want to stand up and talk to you about what I think personal property tax and what a terrible system that is in general because it is not a workable system in general. But Senator Hall's approach, Senator Will's approach is to put it all back on so you put your feet to the fire. You don't need to do that and, at this point, I guess I'd oppose the Hall amendment and I'd say we ought to lay the cards out on the table like they really are. These exemptions are not constitutional as they set today, but there is no need to sit and tinker with it. And when I balance that against the commitment that this Legislature has already made, I don't see how you can come out on the... and supporting the Hall amendment in terms of the commitment, the direction the Legislature has given. If, in the long haul, we decide to take everything and put it back on the tax rolls, fine, that's the medicine you've all got to bite. Every one of us will have to bite that, business, farms, everybody's included, but if only you're going to take it all off, then this exercise, this amendment today doesn't make much sense to me and, with that, I would oppose the Hall amendment.
SPEAKER BAACK: Thank you, Senator Kristensen. Senator Abboud.
SENATOR ABBOUD: Mr. President and colleagues, again I rise to oppose the amendment. I'd like to talk a little bit about the constitutionality question and bring back, for some of the members, some of the history behind this particular problem. And really the problem that we're facing right now some may say started back in the sixties with some of the laws we changed. Some may say it started in the seventies when we exempted a great deal of property. Actually, our problems started back in 1976 with the federal legislation that exempt... that provided that railroads throughout this country, if a state Legislature passes a law in a manner or taxes a railroad in a manner that is in any way discriminatory, that that railroad shall not be taxed
by the local government or by the state for whatever reason or way they can go about taxing them. That law, passed back in 1976 by the Senate and House, provided for a law known as the 4-R Act. And this particular issue was debated among state Legislatures. It was debated because ... on an ongoing basis,. even after it was passed because a number of other groups sought the same sort of legislation. The pipelines brought in legislation to be introduced that provided for the same type of law that said if a state or locale passes taxation that is discriminatory, then they should have the federal protection. And it's kind of easy to see what happens. A railroad runs through a county, let's say Boyd County, a railroad runs through there. They don't have much up in that area as far as taxation ability for businesses, it's mostly ag land, and so they say, well, we're going to tax railroads at this level to help pay for county services. Railroads said that's not a fair system of taxation and they found a number of congressmen and senators that agreed with that philosophy and so the Congress passed a law that said, sure, using vague terms, they were vague, they said, you can't discriminate against a railroad. Pipelines came in, tried to pass similar legislation. Telecommunications came in to try to pass similar legislation. Those two groups failed and I was involved with some of the state legislators lobbying with the NCSL group and it was a great deal of concern to states that this not continue clown the slippery slope of other businesses coming in, airlines, anything involved with interstate commerce. The state legislatures were successful in stopping pipelines and telecommunications at that particular time and I thought that, well, probably the issue would go away, but our Nebraska Supreme Court felt otherwise and in a number of states the railroads looked to our state laws and they looked to the taxation of those states and the localities' taxation and they picked out a number of key states and they brought actions in those states to state that they were being discriminated against. Well, that probably would have worked just fine even in Nebraska. The railroads would have come in and said, you're being discriminatory because, instead of taxing 100 percent of that personal property on businesses, you're taxing at a much lower level, maybe 25, 30 percent, I don't know what the final figures were before the court, but they presented enough evidence to show both at the federal and at the Supreme Court Level, Nebraska Supreme Court to show...
SPEAKER BAACK: One minute.
SENATOR ABBOUD: ...that they were being discriminated against. But then other groups jumped on and why not? They were willing to take the chance. Pipelines got involved, telecommunications got involved and all of a sudden we had a crisis in the state. Now really the issue is this. We're betting, with this piece of legislation, that the Supreme Court is going to say we're going to take the next step, even though they have absolutely no grounds whatsoever, they're going to take the next step and state we're going to declare all personal property and businesses as unconstitutional. I, for one, don't feel they're going to take that step. I could be wrong. I could be wrong. But they are taking an awfully large step. Now how does this figure in? How does this particular amendment figure into that entire scheme? Well, I view this particular amendment as a rather small, small piece of sand in a rather large sandy beach. It's a small, small item because...
SPEAKER BAACK: Time.
SENATOR ABBOUD: ... we're looking at the entire question of personal property business exemptions. It's a very small item, but it means so much to this state. I'll speak if I have time with... later, but I oppose this amendment.
SPEAKER BAACK: Senator Warner.
SENATOR WARNER: Mr. President, members of the Legislature, I'm going to temporarily support Senator Hall's amendment because I will have an amendment offering a little bit later that will strike it. Now, let me explain. As I've been hearing the discussions this morning, there is... essentially we've been talking two things. There isn't any question in my mind that the issue of any exemption as things stand today, however meritorious, is constitutionally suspect, as Senator Kristensen has spoken just a few minutes ago, and, as I recall, much of the discussion was how do we make sure that we keep everybody's interest in working our way through the 3-R Committee and the other activity that the Legislature and Governor's office will be doing and you essentially talked about two options, one of which is put everything on, and I cannot politically rationalize, as Senator Moore has pointed out, how I could conceivably leave anything as an exemption if my argument is that we're going to put everything back on at a future date to ensure everybody's interest. There is no way you can justify that. The other option I've heard is, oh, we take everything
off, including the real estate, I believe, a number of things, because that, too. Well, the amendment I have is another option which whatever we enact will return the laws exactly as they are today as of January 1, 1992. Which means that there will be an interim period during this year in which conceivably we have a. constitutional statute, at least an alternative, of not shifting the 90 million to real property tax or an alternative of putting it all back on with those ramifications, but if we return the law as it is today, including that amendment would strike Senator Hall's amendment, might occur on Select File because I don't know what all is going to happen. There is other amendments today. But then we will, in essence, force what is what I thought a lot of people were interested in. We will have, in effect, forced everybody to be concerned in 1992 of getting the whole issue resolved. It does it just as effectively. The advantage of doing it that way is those who are concerned about getting 25 votes to again get exempt, or those who are concerned about getting 25 votes to again be put an ... or not to be put on the tax rolls, whichever the case may be, will not have that same fear. We know what we have today will demand ... we know what we have in the way of current law will demand action next session. There is just no question about it, but if we go the route of the amendment I have, if that will remove the concern that I think what most people have is that if it's all on, I may not get 25 votes to get it all off or if it's all off and we can't get 25 votes to put it on, then it seems to me that it, I don't like the word, but it tends to level the playing field. Certainly it will keep everybody's interest. So to be consistent with the one position, if you want to put everything on., then politically I can't think of any justification for leaving Senator Hall's amendment, that is the personal property covered by Senator Hall's amendment off. There is just no logic to it, If you want to go the route of putting everything... take everything off in the future, then, obviously, you can reject this and then you should take everything off with some amendment that will be coming along, or I would suggest a more reasonable option, it attains everything that people want to do is the adoption of the amendment which just returns the law...
SPEAKER BAACK: One minute.
SENATOR WARNER: ... as it is now on January 1, that will keep the interest up and keeps this a consistent position of everybody's interest being, across the state, being involved
with what is proposed in 1992. It puts nobody at a disadvantage.
SPEAKER BAACK: Thank you, Senator Warner. Senator Landis, you're next.
SENATOR LANDIS: I call the question.
SPEAKER BAACK: Do I see five hands? I definitely do. We will now proceed to vote on ceasing debate. All those in favor vote aye, opposed vote no. Record, Mr. Clerk.
CLERK: 25 ayes, 0 nays to cease debate, Mr. President.
SPEAKER BAACK: Debate has ceased. Senator Hall, would you like to close?
SENATOR HALL: Thank you, Mr. Speaker, members, the debate, I think, has been very good in most cases. The issues that have been addressed run the gamut. The problem is, is that this is an amendment that really, like it or not, is one of consistency. It is a provision in the bill that narrows what is currently a personal property tax problem that the court said you got 25 percent of all the base paying 100 percent of the taxes. The Governor, in his plan, said we're going to wipe all that out except for about 1 percent and that's the 775 provision, so we're going to keep them exempt after January I of 1992. What I do through my amendment is say, no, we're going to take that I percent off and rather than have an even bigger sore thumb, because that's what this is, is a sore thumb amendment, it sticks out like a sore thumb in this proposal, we take and heal that thumb so that the hand is good. And it in no way affects detrimentally, any way, 775, the proposal that was put in place four years ago, just does not do that. Arguments to the contrary are just that, they're arguments. They're not valid, they're arguments. The issue of which is the best way to do it, as argued by Senator Warner, is another question that will come up in other amendments, not in this one. This one doesn't deal with that, doesn't deal with it at all. All we do here is say, let's make this portion of the Governor's proposal uniform. Let's make sure that it applies to every aspect of personal property tax that is out there because right now it doesn't. it singles out one group that qualifies for benefits to the detriment of every other group that doesn't, even though they happen to have the same type of personal property tax because
they meet certain qualifications that, clearly, I think are unconstitutional. On that, Senator Kristensen, we do agree, in a couple different areas, not the least of which is special legislation. Do they, I think, run afoul of the Constitution, but that's not the issue here either. The issue here is simply this. It's that this amendment says if you agree with the issue of having all personal property tax go back on the rolls January 1 of 1992, and even if you don't, you should at least put this proposal in proper form. It should be in the form so that you know what you're dealing with, that you aren't compounding the problem of special classifications for personal property tax even farther because, by leaving this in, by not voting yes on this amendment, that's exactly what you do. You narrow the class even farther, you make the sore thumb stick out even more. I would urge adoption of the amendment. It's pretty clear from the discussion that the smoke and the smog got pretty thick in here. Many people I think still don't know just what exactly this is. It is not an attack on 775. It says that we're going to deal with all personal property tax in the same form and fashion when we address this overall issue when other amendments come up. It is important that this be adopted so that they're all being dealt with equally. I would urge adoption of the amendment. Mr. Speaker, I would ask for a call of the house so that we can get all the members here.
SPEAKER BAACK: We have a request for a call of the house. All those in favor vote aye, opposed vote no. Record, Mr. Clerk.
CLERK: 19 ayes, 0 nays to go under call, Mr. President.
SPEAKER BAACK: The house is under call. All members please report to the Chamber and record your presence. The house is under call. Senator Kristensen, would you check in, please. Senator Schimek, check in please. Senator Robak, please check in. Senator Pirsch, please check in. The house is under call. All members please report to the Chamber and record your presence. The house is under call. We are looking for Senators Lynch, Pirsch, Rogers and Senator Elmer. We're looking for Senators Elmer and Lynch. We are looking for Senator Elmer. Members, please take your seats. We will now vote on the amendment as offered by Senator Hall. All those in favor vote aye, opposed vote no. Yes, Senator Hall.
SENATOR HALL: Mr. Speaker, could I have a roll call vote, please.
SPEAKER BAACK: A roll call vote has been requested. I might remind the members to keep their conversations down if they could so that the Clerk can hear the answers. Mr. Clerk, call the roll.
CLERK: (Roll call vote taken. See page 2135 of the Legislative Journal.) 19 ayes, 22 nays, Mr. President, on the amendment.
SPEAKER BAACK: The amendment fails. Do you have items for the record, Mr. Clerk?
CLERK: I do, Mr. President. Mr. President, an announcement, the Appropriations Committee will meet in Room 1003 at noon; Appropriations Committee, Room 1003 at noon. Reference Report referring to gubernatorial appointment for confirmation hearing. That is signed by Senator Warner as Chair of Reference Committee. Amendments to be printed: Senator Lynch to LB 849; Senator Hefner to LB 91. (See pages 21.36-37 of the Legislative Journal.) That's all that I have, Mr. President.
SPEAKER BAACK: Senator Cudaback, would you like to recess us until one-thirty?
SENATOR CUDABACK: Mr. Speaker, I move that we recess till one-thirty sharp.
SPEAKER BAACK: I like that motion. You've heard the motion to recess till one-thirty sharp. All those in favor say aye. Opposed no. We are recessed till one-thirty sharp.
SPEAKER BAACK PRESIDING
SPEAKER BAACK: Welcome to the George W. Norris Legislative Chamber. Roll call.
CLERK: I have a quorum present, Mr. President.
SPEAKER BAACK: Before-we start with the agenda, I would like to
introduce some guests to the Legislature. They are guests of Senator Morrissey, and there are 24 fourth grade students from the Nemaha Valley Elementary, from Cook and Talmage, and -their sponsors. They are in the south balcony. Would you folks please stand and be welcomed by the Legislature. Thank you for. visiting us. Mr. Clerk, LB 829.
CLERK: Mr. President, if I may right before that, just one item for the record. Report from the Department of Roads filed pursuant to statute will be on file in the office. Mr. President, 829, the Legislature discussed AM1772 this morning which is offered by Senators Hall and Will. I now have pending to that amendment AM1773, offered by Senators Hall and Will. (Hall-Will amendment appears on page 2138 of the Legislative Journal.)
SPEAKER BAACK: Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members. This is the final amendment that I have to this amendment, at present. it deals with basically the formula for establishing the depreciation surcharge that is in the bill. It's found on page 2071 of the Journal, it reads as an amendment to LB 320. If you would turn to that page in your Journal, what you'll find is that the amendment takes and reduces the depreciation surcharge percentage from 1.75 to 1.60, so, in other words, it would be about a 15 percent or 15/100ths of a percent reduction in that. And then it changes that formula, changes that formula. Instead of using the... I think under the current system what we have is we have the sales formula, and the threefactor formula with regard to their Nebraska sales, payroll, and property. What we do with multistate corporations, in other words the large corporations in this state, what we do with those large corporations is we apportion their depreciation surcharge, under the Governor's proposal, in this way, we take and we say that 80 percent of that is going to come out of their sales in the... in Nebraska. In other words; they may be in 50 different states, may have sales in all 50 of those states. Eighty percent of the formula to determine what the surcharge is going to be is going to come out of that ... only the sales that take place in Nebraska. So it could be a very large company that has sales all over the United States, and either a large or a small portion of that could be represented by the sales that take place in Nebraska. Under the Governor's proposal, the basis from which we derive what the base, in terms of value, is
going to be, for purposes of the surcharge, 80 percent of that comes from these multinational companies, multistate companies' sales within the state. And then we take the other 20 percent of the whole 100 percent of value that we're going to determine, and we use the threefactor formula in relation to the share of sales in Nebraska, their Nebraska payroll, and then their property in Nebraska, that's the way the Governor's is structured. In other words, it's a surcharge, 1.75 percent, 80 percent of it, of the value that they start out with in order to tax for depreciation purposes comes from sales within the state, the other 20 percent comes from the relative share of sales in Nebraska, their payroll in Nebraska, and the property that is in Nebraska. That's the Governor's proposal. It uses the 80-20, three-factor formula. What my amendment does is it does this, it says we're going to use the property that's within the state as the only factor. So, in other words, it's going to be based simply on the property of that company within this state. Rather than using the sales that would take place only in Nebraska, we're going to say we're going to use the property. we're talking about a personal property tax issue, we're going to use the value of that property they have based here as the base from which we draw that depreciation line, and then apply the surcharge. By doing that, what we're able to do is this, we're able to say, and this is as clear as I can, I guess, portray it to you, we're going to say that we're, frankly, going to help the little guy out. We're going to help the little business, the little farm, little agricultural interest out because they're property is not going to be nearly as great in virtually every case as their sales may be within the state. And they are hampered because their market, for all intents and purposes, is only within the State of Nebraska. And we are going to say to some of our larger corporate entities, look, we want to use the property that you have based within the state, that's where we feel the value and the use is based in terms of figuring out what that lineitem for depreciation should be drawn from. We feel that property within the state is a very fair determination it is an appropriate one here in terms of the personal property tax problem that we have, and, in order to derive that amount of money, we're able because we use property instead of the sales formula in Nebraska, and then the three-factor, we're able to reduce from 1.75 to 1.60 the percentage that the tax would be levied at, or the surcharge would be levied at. So it actually reduces the rate. It uses what I consider to be a more accurate measure for purposes of depreciation, that being the value of property that is within
the borders of the State of Nebraska, and it, frankly, to be real honest with you, as I always try to be, it is one that is going to help the small businesses out, and big businesses that happen to have a lot of property would, of course, pay to a greater extent. They, frankly, under the proposal that is in. the amendment before you, excuse me, the amendment, not the amendment to the amendment, but in the Governor's proposal, is beneficial to the larger entities at the expense of the smaller businesses. I heard much talk about how we need to take care of small businesses, small farms. I concur with that. I think that that is a, very appropriate way to address this problem. And we need to make sure that we don't inflict on them a greater share of the burden than they would have had had personal property tax stayed the way it was. This amendment does that, it works toward that end. And it says that those at the top and those large companies that have large value here pay in proportion to that value. So it doesn't mean that a small company doesn't pay in proportion to the value of the property that they have, they do as well, they pay at the same rate, no difference in the rate. But what we're able to do, through this amendment, is use property as the base, reduce the rate and, I think, have a fairer system, a more equitable system for business, whether they be big or small throughout the state. I would urge adoption of the amendment.
SPEAKER BAACK: Thank you, Senator Hall. Senator Will, on the amendments.
SENATOR WILL: Thank you, Mr. Speaker, members of the body. I rise in support of the amendment that I signed, along with Senator Hall. This amendment essentially, Senator Hall gave you a very good description of what it does. Essentially, this is the logical extension of the depreciation surcharge that the Governor put into his amendment. The depreciation surcharge was put in because we are exempting property, that's what this proposal is saying, we're going to exempt property from the property tax base. The depreciation surcharge is a logical way to make up for that exemption, because what it does is put a surtax on property as it is depreciated off your income tax. So, it is going back on property, although not in a value based sense that would make this proposal constitutionally suspect. What this amendment does is it simply says that when you apportion the income that is being declared by those corporations that are taking this depreciation off their equipment,. that you use the property only formula to do that.
And that only makes sense, since all we're talking about here is property that's being depreciated, putting a surcharge on that property. This is a completely logical amendment. I can see no reason to oppose this amendment for anyone here. What it would do, in effect, is allow us to have a lower rate of the surtax that we're putting on depreciated property, because it would broaden that base, basically, by bringing in a little more property when you use the property only formula. And, as Senator Hall explained, it would put a little more of the burden on larger entities that have more property in the State of Nebraska, a little less burden on smaller entities that don't have quite as much property and, therefore, I think it's probably more fair than the approach that is in the original amendment. I would urge your support for this amendment. Thank you.
SPEAKER BAACK: Thank you, Senator Will. Senator Hillman, did you wish to address this?
SENATOR HILLMAN: I just have a question for Senator Will.
SPEAKER BAACK: Senator Will, would you respond, please.
SENATOR WILL: Certainly.
SENATOR HILLMAN: What would be the difference in the fiscal impact with this change? You have a certain amount projected here, as it stands, would it lower it, raise it?
SENATOR WILL: As I understand the way the amendment's been drafted it would be a wash, because while the total amount of property that's being depreciated, that amount would increase, we're decreasing the rate from 1.75 percent to 1.60 percent. And, if my understanding is correct, that would be a net wash, it would not change the fiscal impact.
SENATOR HILLMAN: Okay, thank you.
SPEAKER BAACK: Thank you, Senator Hillman. Seeing no other lights, Senator Hall, do you wish to close?
SENATOR HALL: Yes, thank you, Mr. Speaker, members. Again, I'd echo Senator Will's comments with regard to responding to the question of Senator Hillman. It is a reduction in terms of the rate, that there is no increase in terms of the amount of
revenue. That's ... we're able... that's...actually it's... the nice thing about this approach it is clearly the fairest approach, and yet we're able to reduce the overall rate and still raise the same amount of revenue by doing that. I would urge adoption of the amendment to the amendment.
SPEAKER BAACK: Thank you, Senator Hall. You've heard the closing on the amendment offered by Senator Hall. We will now vote on that amendment. All those in favor vote aye, opposed vote no. Have you all voted? Have you all voted? Record, Mr. Clerk.
CLERK: 16 ayes, 3 nays, Mr. President, on adoption of Senator Hall and Will's amendment.
SPEAKER BAACK: The amendment is adopted.
CLERK: Mr. President, Senator Lamb would move to amend the Hall-Withem amendment. Senator ... or Hall-Will amendment, excuse me. Senator, I have your AM1821. (Lamb amendment appears on page 2138 of the Legislative Journal.)
SPEAKER BAACK: Senator Lamb.
SENATOR LAMB: Thank you, Mr. Speaker and members. I would like to substitute, and the reason I'd like to substitute another amendment for that is that the Hall amendment this morning, that took motor vehicles off, changes the whole... the picture somewhat. And, if I could... it's very similar, but the amendment I previously had would have the depreciation surcharge at 1.5, and now I'm going up to 2 percent. I would ask unanimous consent to substitute AM1831.
SPEAKER BAACK: Any objections? No objections, so ordered.
CLERK: Senator, your... just so I'm in sync with you, you're offering 1831 now, is that correct?
SENATOR LAMB: That's correct.
CLERK: All right. And may I ask you then, you have one, 1821, is that one intended to stay?
SENATOR LAMB: Oh, wait a minute, that was the first one.
CLERK: Yes, air, it was.
SENATOR LAMB: Okay, if I could ... how do I back up here? I would like to take that one, and then substitute this one. Is that right? I would ask unanimous consent to consider the original ...
SPEAKER BAACK: Any objections for Senator Lamb to back up? (Laughter.) So ordered.
CLERK: I have, Senator, 1831 in front of me.
SENATOR LAMB: 177...
SPEAKER BAACK: Senator Lamb, if I understood you, you wanted to do 1821 , is that the one you want to do, or...
SENATOR LAMB: Okay, 1821, that's the one which says, on page 68, line 22,...
CLERK: Yes, air.
SENATOR LAMB: ... strike ... okay.
SPEAKER BAACK: Senator Lamb.
SENATOR LAMB: 1821, 1821.
SPEAKER BAACK: Senator Lamb, you may proceed.
SENATOR LAMB: Thank you, and I'm sorry about the confusion here. But this is a very simple amendment which merely removes the provision that, if nothing is done, everything goes back on the tax roll. That's all it does. Takes away that what some people call a hammer. I don't think that, as I mentioned yesterday I believe it was, on the floor of the Legislature, in regard to another bill, that sort of hammer is not necessary and should not be used to entice this body to pass legislation. So all it does is take away that provision that, if no bill ... if nothing is done, then everything would go back on the tax roll.
SPEAKER BAACK: Thank you, Senator Lamb. Next speaker is Senator Hall.
SENATOR HALL: Thank you, Mr. President, members. I rise in opposition to Senator Lamb's amendment. He's honest in that it is very simple. It just says it strikes, I think, if I'm looking at it right, three words and a date on line 22 of. page 68. And it just has all personal property tax staying exempted. It's really the... I would consider the first, well, probably the second complete policy question we have to answer today. The first was, I think, the amendment that failed to be adopted this morning. The other two that I've put in place, I think, were little twists on it, one being the motor vehicle, and the other being the issue that was just adopted in terms of the formula for determining depreciation. But this one is really the second clear, and probably the most important one we've dealt with so far in terms of how do we go about this process of determining what ultimately will be our tax policy. The question is real simple, it just is, do you want to put everything on, do you want to put everything off, or do you want to do a variation on the theme and leave, as Senator Warner I think offered this morning and tends to offer a little later, having everything come back to square one, where we're currently at right now, so that folks know just what to expect come January 1, 1992? It has been my intention from the very beginning, and I guess my argument is that if you adopt Senator Lamb's amendment, what will happen is that you will, in essence, give the enemies who are out behind the glass the opportunity to drag their heels, sit on their hands and not become a part of any long-term process that, hopefully, will be developed this summer over the interim, and then addressed by this full Legislature next year. I know Senator Schmit feels that that's something that is only within the auspices of the Legislature. But the fact of the matter is that public interest groups are a real player in this area, I mean, tax issues are probably some of the issues that you weed more people out of the woodwork, I guess, than any other issue that comes before the Legislature as a whole. They aren't the most palatable, and they ... but they do tend to fill up the Rotunda. I'd just as soon .... I heard a great expression, and it's not original with me, Senator Schmit, but I would just as soon keep this in place, because I want those folks to be as nervous as a longtailed cat in a room full of rocking chairs over the interim, because if you don't keep this proposal in place in terms of having all those exemptions go off, what you allow them to do is simply this, you allow them to play defense. They can sit back and argue why this proposal is no good, why that proposal is no good, and why every other
proposal is no good. And a microcosm of that is really just the committee hearings, three that we've had on these issues, this session alone. When you start talking about the entire tax code, you're going to see them come up with every excuse from, you know, my daughter's sick, to that's going to cost my grandmother her exemption. I mean, everything under the sun will surface, and more than that will surface as to why we can't make these changes, because they are not going to have any threat out there, and it has to be a threat. Senator Schmit, more than any, I think, probably has been here long enough to know that you can't get their attention by loving them to death, it just doesn't happen. And to adopt Senator Lamb's amendment, which lets everybody out of the barn, and then you close the door, to steal a line from somebody I knew once, what you do, what you do is take all the incentive for them to ever come to the table. Now at a minimum, at a minimum what you ought to do is what I think Senator Warner is going to propose, which says, well, let's not create total chaos, Senator Hall, let ' s only create a little bit of chaos, where we can control it, where everybody understands it, chaos that we're familiar, and that's to have the system come back to the position where it currently is now. I could probably live with that. When that amendment comes up I may very likely support that amendment. But Senator Lamb's amendment, I think, is very detrimental to the overall process of saying...
SPEAKER BAACK: One minute.
SENATOR HALL: ... we're just going to let the exemptions go. Just like the argument that I've heard so many times this morning that a temporary tax plan always seems to become a permanent tax plan, a temporary exemption, clearly, more so than a temporarily tax, always happens to stay on the books. They're much easier to give back than they are to take away. I mean, there Is just no way else to put it. If you support Senator Lamb's amendment, plan on having sales and income and real estate taxes go up for the people in the State of Nebraska, because business will do their best, and they'll be very successful. An example of that is a simple amendment this morning dealing with the personal property tax under the 775 provisions, very simple amendment, should have been adopted without any problem, did not threaten anyone, but business geared up and said, hey, we're going to protect our interests on an amendment that would have hurt no one, would have hurt no one, and...
SPEAKER BAACK: Time.
SENATOR HALL: ... clearly would not have impugned 775 as a program. But yet they were able to stop that in a couple of. short hours. what's going to happen when you take away the exemptions? Where else are you going to look for the revenue, if you wipe them out down the road? Are you going to raise the corporate income tax? They came in and testified yesterday, at the hearing, that we have the highest corporate income tax in the region. Are you going to raise personal income tax? They're going to argue that we can't do it, especially at the top level, because we're going to drive away any potential employees of all these companies who are...
SPEAKER BAACK: Time.
SENATOR HALL: ... going to move into the state. It's a very poor proposal. I would urge that you reject Senator Lamb's amendment.
SPEAKER BAACK: Thank you, Senator Hall. Next speaker is Senator Schmit.
SENATOR SCHMIT: Mr. President and members, as Senator Hall indicated, the amendment before lunch should have passed. But, once again, it was not possible to pass an amendment which would have been equitable with the retention of the language which Senator Hall wants to keep. Now if you have any strength about who runs this body, who has the greater influence, the farmers, of which we have 60 or 70 thousand, or half a dozen businessmen who own those gulf streams, and the Lears, and the mainframes, this ought to be a good test because I didn't even see it coming until a steamroller rolled right up Senator Hall's back, and I just assumed that absolutely, of course, if you're trying to put together her a constitutional bill, something which would pass the muster of the court, why would you have a red flag out there that says that Glenn Cluck and Chuck Sands, Navajo, has to pay personal tax because they're cattle feeders and hog producers, and the Excel Jet which processes the pork and the beef, doesn't have to pay personal tax. You know, they've both got fans on, one's got the turbine enclosed inside the pod, and and you can't see it; the other's got a windmill out front which pulls the craft through the air. Is that the only difference? That really is, turbine aircraft, no personal tax. That reminds me
back in 1976 when Mr. Peters and I decided that an airplane with a 600-gallon hopper on it is a piece of farm equipment, and we exempted it. Helicopters that carried the same kind of equipment were called farm equipment. Kind of liberal interpretation of the rule, but Bill agreed, and I was writing the bill, so it went along all right, and nobody challenged it. Some of my colleagues didn't even know their ag aircraft were exempt for two or three years, they kept on paying; we were, you know, the most informed folks. But, anyway, here we have a. situation where we're saying, well, we were successful in bringing about the reimposition of the tax upon the turbine aircraft and the mainframe computers. But, by golly, we're going to be partly successful, we're going to hold this hammer, hold this hammer over the heads of those farmers and bring them to the bargaining table. I wish that Senator Baack would bring the hammer down on the block up there, because I get more feedback, back here, than I get from up front. But the facts are these, if we're going to use a hammer, the hammer ought to be used on my friends in the Omaha business community, and the Lincoln business community just as much as it is used on my farmers and cattle feeders. If you're not going to crack the knuckles of the one, then don't crack the knuckles of the other, because there is going to be a complete lack of interest, Senator Hall, on the part of your constituents up there in Omaha relative to coming to the bargaining table, because they already got all their chips. And so what you're going to do is bring those farm groups that really are not the most...
SPEAKER BAACK: Senator Schmit.
SENATOR SCHMIT: ... dynamic lobbying group in the...
SPEAKER BAACK: Senator Schmit, just a second.
SENATOR SCHMIT: Yes.
SPEAKER BAACK: (Gavel.) Could we kind of hold the conversations down. Senator Schmit is having a hard time. Thank you.
SENATOR SCHMIT: Thank you, Senator Baack, you've earned my undying appreciation. (Laughter.)
SENATOR MOORE: Smokeless tobacco.
SENATOR SCHMIT: At least for the next two minutes. But anyway, what we're saying is this, that already the bill has begun to come apart. We're not going to have the kind of clean bill to send to the court that we wanted. And I'll make a little wager with ... now I'm a little bit depressed actually, Senator Hall,. that Governor Nelson, in his sincerity and his good intentions, did not take care of that little problem you tried to address this morning. Kind of interesting, he tiptoed around that. Now he's willing to use a hammer on those farmers, most of whom supported him, but he doesn't want to use the hammer on the big jets and the mainframes. Now I'm sure that it was not any intent on his part to be discriminatory toward agriculture, just a fact that if you go out there and check the ag lobbyists, the whole bunch of them couldn't muster 15 people in that Rotunda if they had 30 days notice. But I'll tell you one thing....
SPEAKER BAACK: One minute.
SENATOR SCHMIT: ... you can get 30 people down here from the business community in Omaha, and the phone lines will be hot. What I'm saying is that once, as Senator Hall said, he was honest, once you didn't adopt his amendment then you have no consistent alternative except to vote for Senator Lamb's honest, straightforward amendment. And then, of course, the whole 829 is in the ash can, and we go back to ground zero, and once again Senator Carson's brilliance comes to the fore, and his amendment is going to sound better and better as time goes by. Going to take a while, 20, 30, 40 days, but that's all right. It's much better than to impose an arbitrary, unfair system, which we're going to get in 829.
SPEAKER BAACK: Time. Thank you, Senator Schmit. Before we go any further, I would like to introduce some guests of Senator Schellpeper. They are under the north balcony. They are Helen Schulz, Hazel Schellpeper, Veryl Jackson, Virgie Ferichs, and Maxine Schulz. Would you folks please stand and be welcomed by the Legislature. Thank you for being with us. Next speaker is Senator Moore.
SENATOR MOORE: If Senator Lamb would yield to a question.
SENATOR LAMB: Yes.
SPEAKER BAACK: Senator Lamb.
SENATOR MOORE: Senator Lamb, is it your intention, I know in your opening you talked about taking the hammer out. That's what your intention is to do. You're talking about, I think most people in this body perceive the hammer to be reinstating personal property taxes on farm machinery, livestock, grain inventory, business inventory. Is that true, Senator Lamb?
SENATOR LAMB: I think it also has to include business equipment, because the court has said that that's in the same class with those other things.
SENATOR MOORE: Okay, well, Senator Lamb, understand ... my-my-the answer to my ... your definition of the hammer includes that then?
SENATOR LAMB: Yes, it would, under this amendment, uh-huh.
SENATOR MOORE: Okay. I just wanted everybody to understand that at least that's where Senator Lamb and I differ, I guess, because my definition of the hammer is returning things to the tax rolls which now are not. And I am supportive of taking that portion out of the bill, and Senator Hall and I may disagree on that, I imagine. But I think that Senator Lamb's amendment, I always am amazed at how the rural senators do the work for some of the more urban areas here. But, regardless of that ... because what Senator Lamb's amendment does is it gives the remaining 8 percent property tax, remaining... it's now on the tax rolls, the centrally assessed, the business equipment, it's now on the tax rolls. Senator Lamb's amendment grants that an exemption on into perpetuity which is much more than the status quo. Now I think it's proper for this body, if you don't want the hammer in there, and your definition of the hammer is what mine is, is just putting things back on the tax roll, I would support an amendment like that. But with Senator Lamb's amendment you go a lot further than that. You're saying, court, we're going to roll over, we're going to exempt this personal property forever, or until the 25 votes attacks it again. And, unfortunately, in this body it's a lot easier to keep 25 votes from taxing something than it is to get 25 votes to take something out. And I think... I mean, all I would argue... I'm going to oppose Senator Lamb's amendment, because I think it goes a step further than many in this body want to do, you need to understand that. Because what you're doing is you're exempting all personal property forever. And I think a good judgment of what's going to happen when that happens next year, when it comes down to
whatever... if, indeed, the 3-R Committee actually does come up with something, I mean, I can just see the lobby getting cut loose, and it's going to be awful hard to ever put anything back on the tax rolls. I think what I strongly encourage the body to do is to oppose Senator Lamb's amendment. I know there is an. amendment coming up somewhere that is going to... try and return the status quo in '92. And the status quo taxes centrally assessed business property, taxes business equipment. The status quo does not tax livestock, grain inventory, business inventory, and farm machinery. That's what status quo is. That's what... if your argument is take out the hammer, then do that. I fully support that, particularly, I think it's imperative to take that out after the action of this body this morning when they rolled over and said all taxpayers are created equal, but some of them are more equal than others, by refusing Senator Hall's amendment. Now I support that. But Senator Lamb's amendment takes it a step a lot further than that, because Senator Lamb's amendment will exempt all personal property forever, and gets a little bit further than we need to go. I think, in adherence to the court, we could do it for one year in tax year '91, but we don't need to do it in '92 and beyond until we look at the whole mix. And so I just think Senator Lamb's amendment goes too far, for that reason, I oppose it and will support amendments later on that will return the status quo in '92, if the attitude is you shouldn't have a hammer.
SPEAKER BAACK: Thank you, Senator Moore. Senator Withem.
SENATOR WITHEM: Yes, Mr. Speaker, members of the body. I'm in opposition to Senator Lamb's amendment. There are really, in my case, two particular watershed issues on this measure. I'm supportive of the Governor's plan, as I understand it to date. There may be some tweaking around, around the edges, making some adjustments, and those will be fine. But there are really two lines in the sand, as far as I'm concerned. Those are, first of all, if we're going to temporarily take everything off the tax rolls, who's going to pay for. that? And I think the answer has to be as close as this body can fashion a plan that as those people, who benefit by a temporary solution of taking everything off, then would receive the burden of paying for that. I'm going to support that, if it gets to the point where the general populace has to pay for taking everything off the tax rolls, then I'm going to be in opposition, that's point number one. Point number two, is this particular line in the sand right
here. And that is, are we fashioning a temporary solution to get us through one year only, and then are we going to deal with everything in our tax structure to try to come up with a fair tax structure, or is this going to become the permanent solution? And if this is going to become the permanent solution then I'm not supportive of it, and I'm going to do all that I can to convince other people that this should not be the permanent solution. We cannot blissfully come in, and without any more thought than we've given into it, take all personal property tax off the tax rolls, and then fashion some sort of proposal that puts the cost of paying for that back on the backs of the average taxpayer. I'm afraid that if we adopt Senator Lamb's amendment then we no longer have a temporary solution, we have a permanent solution. Frankly, I've heard that argument given from the other side, that if the hammer, that is in the bill now, the way it's fashioned now passes, there will be some of us that say, well, that's fine, that's the permanent solution. And I'm aware of that solu ... of that concern. And I've heard Senator Moore and Senator Warner and others talk about that. And I'm willing to consider other proposals to deal with a temporary ... with the sunset, the hammer, so that it is not one that favors one side over the other. But unless we have an assurance that this is only a temporary solution, and not a permanent solution, folks, it will become the permanent solution. We've seen how groups, any group, I'm not going to bash any particular individual, or any particular group, but any group that has a narrow focus, that favors a particular position that is going to benefit them, has an obscene advantage over those that are trying to fashion something for the general public good, because the general public good does not have folks out in the Rotunda lobbying on their behalf. What we need to do is make sure that anything we pass this session leaves things in a state of limbo, if we are, in fact, serious that we're going to look for some other solution other than the one that is currently involved in amendment 1772, because if we pass something in the guise of LB 829 that can stand as a permanent solution, it's likely to become that permanent solution, whether we want it to be one or not. So, for that reason, we need to leave something. I'm willing to consider what Senator Warner is talking about. I may not like it as well as what's currently in the...
SPEAKER BAACK: One minute.
SENATOR WITHEM: ... the Hall amendment, but I'm willing to
consider that. But we need to have something, some assurance for me to end up supporting this measure, some assurance that this is only a temporary solution, some sort of message to those of us that are working on the 3-R Committee that we have to look seriously at our overall tax structure. If you adopt the Lamb. amendment, you're sending a message you really don't have to do that, in my mind. Therefore, I'm not supporting the Lamb amendment.
SPEAKER BAACK: Thank you, Senator Withem. Next speaker is Senator Wehrbein.
SENATOR WEHRBEIN: Mr. Speaker and members, I'd like to ask Senator Lamb a question, and you may take some time, if you need to, Senator Lamb.
SENATOR LAMB: Yes.
SENATOR WEHRBEIN: But what are you... really figure that you're going to accomplish here as to Senator Moore spoke about the business inventory? Would you clarify that issue?
SPEAKER BAACK: Senator Lamb, would you respond, please.
SENATOR LAMB: Yes, yes. See, my... let me tell you what my fear is, that if there is no action by the 3-R Committee, or even if there is action by the 3-R Committee and there's no action by this Legislature, then automatically everything goes back on the tax rolls. See, and I say that is not the way to operate. I do not think that everything should go back on the tax rolls, unless there is overt action by this body. Now Senator Moore says I'm also going to keep business equipment off. But, yes, certainly, the Supreme Court said that's what we had to do. I mean, we cannot have a different system for business inventories, farm equipment and livestock than we do for business equipment. So I'm leaving that just as the Supreme Court has ruled. And so, very simply, what I'm trying to do is remove the provision that says, if we do nothing, everything goes back on. Now it's easy to stall, it's easy to stall. if you want everything to go back on, it's a lot easier to stall than it is to do something positive to make that happen. And I don't want to be in the position, I don't want this state to be in the position of having something that we don't want to happen, happen automatically without overt action by this Legislature. And I don't think that's too much to ask. See, so
if we do nothing, if we do nothing, everything comes back on. What I say is we have to do something to make everything come back on, as that's the way it should be, and that's all I can say about it. That explains it.
SENATOR WEHRBEIN: Can I have my time ... how much time do I have?
SPEAKER BAACK: You've about two and a half minutes yet, Senator Wehrbein.
SENATOR WEHRBEIN: Two and a half, oh, that's more than I need. I support Senator Lamb's amendment, the reason is, if I understand this correctly, go back to January 1 of '92, we have hearings, let's say there's a proposal comes in, it could be into March or later before we could have a solution to this. And here the assessors are sitting out there, obligated by present state law, of putting everything on, if I understand it correctly, and I ... and even with the distinct or remote, whichever, possibility that all personal property could go back on. So I support Senator Lamb's amendment. I don't think that we need a so-called hammer, or even a sledge hammer to bring people together to talk about this. I'm also going to assume, and will publicly state I think that everyone is going to have to work in good faith and look for the solution to this. And we're going to have some areas that are going to be unhappy. We're going to have some areas that are going to be happy with what, probably mostly all will be unhappy, with what we're going to do. And I guess perhaps we're putting a lot of stock in the 3-R Committee and what they have to accomplish in the next few months, because if it hasn't been done in the last 20, 1 don't that they can do it in the next 20 weeks. Hasn't been done in the last 20 years. But I support Senator Lamb's amendment, and I would, with the implication that there is going to have to be good faith offers of support....
SPEAKER BAACK: One minute.
SENATOR WEHRBEIN: ... broadly, for the money that's going to replace this personal property tax, wherever it may come from. And 1. therefore, support Senator Lamb's amendment.
SPEAKER BAACK: Thank you, Senator Wehrbein. Next speaker is Senator Hall.
SENATOR HALL: Thank you, Mr. President and members. Again, I
rise in opposition to Senator Lamb's amendment. The issue is clear, it's who do you want to hurt, who do you want to hurt, and how do you want to, I guess, cripple the process. You could argue that it's an issue of it's easier to stall over here, but I'll tell you what, ladies and gentlemen, it's much easier to. delay, to stall, to prevent when you're not paying any tax. It's very cost-effective to do it that way, to make sure that once the exemption is given it never goes away. We've seen time and time again...I've been criticized in the short tenure I've had as Chairman of the Revenue Committee, of being the nonrevenue Revenue Committee by various members of this body, whose names shall go unmentioned, Senator Schmit, but my predecessor was even better at it, and that's because exemptions, nobody wants to take away. We want to give them all the time, and I'm as guilty as anybody of that, depending on what the exemption might be. You go about it in the Lamb version, and what you do is you hurt subdivisions of government, and you hurt the local taxpayers, that's who you hurt. Now you may well say that local subdivisions of government deserve to be hurt to a certain degree, and I might agree to that, but not in this fashion. You know, we talk about allowing them the opportunity to develop budgets, giving them some stability, somewhat, and always being able to be assured that the long arm of the state is going to be there to help them out in tax policy. Ladies and gentlemen, if you adopt Senator Lamb's amendment, that's not guaranteed at all. And the only thing that you can count on, the only thing that you can guarantee is that property taxes are going to go up, because not only will you be getting pressure from those who get the exemptions extended to keep those exemptions, you're then going to see subdivisions come in and say, hey, now wait a minute, you put the lid in place, the lid has to go away; or you're going to have a lid proposal that three-fifths majority, super majority, whatever that amounts to at the local subdivision, is going to mean nothing, it's going to be an automatic. They're going to time and time again go ahead and say, look, you took away our base, we can't do anything else, you've left us no alternative, by not replacing the revenue,, except to raise real estate taxes, homeowner taxes, agricultural taxes on their land. That's what you're going to do, if you adopt Senator Lamb's amendment. And that's, in essence, the ultimate effect, because the exemption is going to be that much harder to repeal as it currently exists, under this amendment, than if you take what I guess has become a compromise proposal on the part of Senator Warner. I prefer the way the bill is currently drafted, but I'm going to
listen, and probably at this point support a middle of the road approach that he's going to offer, that he's got up on the desk already. But I cannot tell you how difficult the environment will be to operate in terms of creating tax policy into the future when there's no incentive whatsoever for business to sit there at the table and say, well, we don't want that exemption to go away. I mean, you don't have to go back in time, but three hours, to this morning, on the little provision that was before-us before. It's that simple, it's just a foreshadowing of what's to come, if you adopt Senator Lamb's amendment. I would urge you to think it through. You ought to be hearing from the subdivisions of government, because I'll tell you, ladies and gentlemen, they're the ones that ought to be the long-tailed cat in the room full of rocking chairs, right now, with this amendment on the board, because it has a tremendous detrimental impact...
SPEAKER BAACK: One minute.
SENATOR HALL: ... to budgeting with any kind of stability into the future for them. At least, under Senator Warner's proposal, there is the ability for whether we question what the courts may or may not do. The way the bill currently exists one would argue, I guess, in opposition to that, that there are no guarantees. Well, the only guarantee you have, under Senator Lamb's proposal, is that you're going to have an unwilling participant, probably a nonexistent participant once they've got that exemption. They'll put it in their pocket, they'll run back to the corporate board room, the business office, wherever it might be, and they'll laugh all the way to the bank. Your homeowners, your small farmers, those people who don't have the ability to find themselves in a business setting, they're the ones that are going to pick up the bill for this one. I would urge you to reject Senator Lamb's amendment.
SPEAKER BAACK: Thank you, Senator Hall. Senator Will.
SENATOR WILL: Thank you, Mr. Speaker, members of the body. I rise in strenuous opposition to the Lamb amendment, for most of the reasons that Senator Hall just cited. I mean the fact of the matter is I introduced LB 829, as I explained this morning, in response to what I knew was going to be a decision, or I suspected was going to be a decision that the Supreme Court came down with striking much of our personal property tax. And, frankly, we're at a point right now in the debate on this bill
that, as Senator Withem explained earlier, we've got to decide if this is a temporary solution, or if this is a permanent solution. And the reality is that if we adopt the Lamb amendment, and if we don't say, at some point, we're going to have some property go back on the tax rolls without action by this'- Legislature, we are, in effect, adopting a permanent solution. And, I mean, I don't think that there is any way we could reasonably expect people to sit down and bargain on this issue, if they aren't in a position where something is going to happen otherwise. It's just a reality of the way the Legislature has worked in the tax area over the years. We exempt property, we talk about putting it back on the rolls, we exempt things from sales tax, we talk about coming back and taxing them. And, for the most part, it just doesn't happen. I think it's essential that we have the provision in this bill that Senator Lamb is attempting to take out. I think the other thing you need to realize, in very real terms that everyone can understand, is, if we adopt this provision, and we put it in the bill, and we pass this bill, I don't know, I haven't talked to the Governor about what he's going to do, but I think we ought to start thinking about what we're going to do with our summer, because if this bill hit my desk and I was wanting a temporary solution and not a permanent one, the Legislature might have it right back in their laps, because this simply is not what the Governor has got in mind. What the Governor's got in mind, what we should have in mind, is working through an examination of our tax system, coming back with a bill, or a variety of bills next year that attempt to implement something that is constitutional, that's workable, and that's fair. And I think adopting the Lamb amendment sends all the people involved the worst sign possible, it sends them the signal that says, you know, this is a temporary solution, but, wink, wink, it might stick around for a while. And I don't think that's the message we want to send. If we actually go ahead and adopt the Lamb amendment, you might be better off voting down the Governor's amendment and passing LB 829 as it was introduced, and go on from there. Thank you.
SPEAKER BAACK: Thank you, Senator Will. Before I go to the next speaker, I would like to introduce some guests of Senator Lynch. Under the north balcony, we have Percy Young, from Spruce Head, Maine, and he's here today with his son, Dick, and his wife, Pat Young, from Lincoln. Would you folks please stand and be welcomed by the Legislature. Thank you for being with US. And also under the south balcony we have some guests of Senator Owen Elmer. They are Bob and Selma Rains from Crete,
and Karen Campbell, and Wava Case, and she's here from California. Would you folks please stand and be welcomed by the Legislature. Thank you for being with us. Senator Hefner.
SENATOR HEFNER: Mr. President and members of the body, I rise to support the Lamb amendment. I had one that was drawn just about like it, and that would come up in a little while. But I don't want to... I don't think we ought to have a hammer in this bill. I think you can trust us. I think we're sincere when we say we want to find a long-term solution. But the way Senator Hall's amendment says, that puts all personal property tax back on the tax rolls. And I don't want...I don't think we want to do that. I don't think we want to threaten these groups. Like I said before, I believe that everybody is willing to come to the table and try to find the long-term solution. This is my 15th year in here, and it seems like every year we're talking about taxes, whether it be personal property tax, whether it be income tax, or whether it be sales tax. Last year was the year for education, LB 1059, in which we increased sales and income tax and tried to relieve property tax, and we did in most instances. Okay. What happens if we don't do anything? Then we would operate still on the short-term solution that will pass. And this short-term solution may not be perfect, but I don't think we'll ever find a perfect solution. And same way the long-term solution, I don't think we'll ever find a perfect solution, but we'll keep trying. And, not only that, but as new members come into this body, and as new Governors are elected, and as Supreme Court judges are changed, everybody has a different idea. And so our tax policies are going to change over the years, and I don't think that's all bad. I know some of the other states surrounding us are a little concerned. A lot of their central assessed property now... issues have gone to the courts, and we don't know what's going to happen with them, but they're going to have to find a solution, too. But I just don't want to put everything back on the tax rolls come January 1, 1992. 1 think that that could cause a severe recession in our state. Also, come January 1, 1992, if everything goes back on, county assessors will have to beef up their staff because all this property will have to be assessed. And remember, folks, we don't come back until the first week or second week in January. And so they'll have to assemble their staff and start doing this work. How about the businesses and farmers that have inventory? Is our inventory date going to be on January 1, 1992? So we have problems if we automatically put it back on. So I would say support the Lamb amendment and then
go on from there. Somebody talked about, well, the Governor would probably veto this bill. Well, we don't know what the Governor is going to do. He might think it's a wonderful thing, just like when we struck the vehicle fee this morning. Is he going to veto the bill because we struck that where he had it in, his proposal? I don't think so. I think, if we're sincere in what we're doing here, I think the Governor will go along with US.
SPEAKER BAACK; One minute.
SENATOR HEFNER: And I think that he would go along with this bill, if Senator Lamb's amendment is adopted. And so I would encourage you to support this amendment.
SPEAKER BAACK: Thank you, Senator Hefner. Next speaker is Senator Warner.
SENATOR WARNER: Mr. President, members of the Legislature, I'd rise to oppose the amendment that is being proposed. What we're really talking about is it's easier to get 25 votes to take something off than it is to get 25 votes to put something on a year from now, that's the issue. But there are some other things we ought to think about. It's a shame that we can't take up the order of amendments in some fashion other than the way they are filed. I rather suspect that some of you who are arguing strongly for taking everything off, and leaving it off, .in the event that a half cent sales tax doesn't go and we end up funding this with the energy tax and with the surcharge on depreciation, then a one-year solution to the ... what is going to be exempt will change dramatically because there's a lot of folks who might accept that sense of funding for 12 months, but they're not going to accept it permanently, and you have that potential. Or if you take everything off, a year from now, I don't know what the funding source will be, but it could be, well, something else that you wouldn't like. I also notice the bill has the emergency clause, which takes 33 votes. I don't know if it's necessary to have 33. And even those of us who are concerned about how the assessors, if you left the bill as it is, are concerned about how the assessors are going to assess property next year, there will have to be a bill passed to do that. I'm not aware of anything in the statute that tells the assessor how to assess farm equipment. Do they use depreciated value? Do we go back to the old system? You're going to have to have 33 votes even the way the bill is to implement the
taxation on personal property that is currently exempt. My position is that...is to adopt the amendment that several have been talking about, which seems to me to be the most level field. And I ask that we just simply amend this bill in such a fashion as the amendment does, which puts everything back like it is today. As of January 1, 1992, business equipment would be taxed, farm equipment would be exempt, livestock would be exempt, all things that we know we may have a problem with would be right back there. And that certainly then says what we're passing today is a temporary solution, it's not even a solution, it's to get us temporarily through until next session in order for the 3-R Committee and the Revenue Committee and others who will be working on this to come up with a single system. But it makes more sense to me to try that kind of a route. By the way, we keep talking all the time that the courts have declared the personal property tax unconstitutional. You know, as a matter of fact, that's not what has happened yet. The only thing that's happened so far is that the Supreme Court ruled that LB 7, which put rolling stock on railroads over as an exemption, was unconstitutional, because that class was too narrow. And I don 't know ... we had several judges that suggested, in their individual opinions, as to what they might do. But we really don't know that all this is unconstitutional, although we suspect it is. But if you really look at the opinion, that is not, in fact, what was done by all of the judges, and which they all agreed to. So a little time for... some of the cases are still pending, may not be all bad. Maybe we really only want a temporary solution. And under the proposal I am suggesting a little later, whenever it comes up, it makes it very clear...
SPEAKER BAACK: One minute.
SENATOR WARNER: ...that it's a temporary solution. Let's think this through for a few months, until a plan can be brought back to us in 1992. And I feel that the suggestion of taking everything off, at this point, does leave an advantage that I'm not comfortable about, but I also am not comfortable about what the funding source is going to be to take its place. And I think the more prudent thing to do is to stay with the amendment that will come up a little bit later, which still keeps everybody's interest, we all know we've got to make a change then, and no one has any particular favorable position staked out for their interests.
SPEAKER BAACK: Thank you, Senator Warner. Next up is Senator
SENATOR SCHELLPEPER: Thank you, Mr. Speaker and members. I guess, the way I look at this, I shouldn't say compromise, because it isn't a compromise, but Senator Lamb is trying to. make sure that nothing goes back on. Senator Warner is saying that we should put back on what's on right now. I have a hard time putting agriculture back on, when we're not on right now. It seems like agriculture is going to end up picking up most of the Supreme Court's ruling, if we don't put something in there that says that agriculture is not going to pick up everything. It just doesn't seem fair that agriculture is going to have to pick up one-third. If you have a home and you have a salary, the Supreme Court ruling means nothing to you at the present time. If you have a farm, and you don't make a very good income from the farm, the Supreme Court ruling is going to make a big difference because with the proposal you're going to pick up about one-third of the $90 million. Now that doesn't make sense. It seems like what we should be doing is going to a sales or income tax where the whole state helps with the problem, helps solve this problem that we have, rather than going to certain industries and trying to pick it up. It isn't any certain segment's problem, it's the whole state's problem. So the whole state should have to help solve this problem. And that's why I think we need to go to an income, maybe on the top brackets. And I have that amendment coming up on the top two brackets, and I have a half-cent sales tax. I think maybe that's one way we could look at. Whatever we do here, I think we're putting too much emphasis on this 3-R Committee. I think we think they're going to solve everything, that they're God almighty, and they're not going to be. They're only going to do whatever the lobbyists will let them do. They're going to be controlled, just like they are back here right now. we're trying to control what happens. And I think we need to look at it and say this is something that is fair, that the whole state needs to share in solving this here problem, because it's a State problem. So, with that, I think I'll support Senator Lamb's amendment, although the Warner amendment is better than nothing. Thank you.
SPEAKER BAACK: Thank you, Senator Schellpeper. Senator Wesely.
SENATOR WESELY: Thank you, Mr. Speaker, members. I rise in opposition to the Lamb amendment. I think a lesson has taught us time and again here, the history of this Legislature, any
Legislature, is once an exemption is given, can you ever get it back? Once you provide a tax break, can you ever return that to the tax rolls? I just wonder if anybody can name, I know there are a few examples, but I wonder how many can name actual tax exemptions that were ever returned to the tax rolls. It doesn't happen. And so if you take the Lamb approach, you take everybody off through this legislation. You just might as well forget about getting them back on. The other way, the idea of having them all on, there we can talk about structuring a tax response and an ultimate solution to the problem, although you'll never ultimately solve the tax problem. It will always be here, every year, year in and year out. But, nevertheless, there at least is the more likely prospect of having a solution that would reduce back down and provide those exemptions and, I think, deal with the problem. That's easier to do than putting an exempt category back on the tax rolls. It doesn't happen, we know that, let's not fool ourselves. So my own personal opinion is I plan on supporting the bill. But, if the Lamb amendment is adopted, I don't know, I don't know what I'm going to do, and I don't know what I'd tell the Governor to do. As Senator Will talked about, I don't know if he shouldn't just veto it, because if you go to the route of exempting everybody, you can just pretty well forget about the idea of coming back and doing any more than that in the future. And I don't think that's a solution to the problem, because I think what you get to is the concern over the years about further exemptions for some, and shifting the burden to others, that people are tired of the idea that some get tax breaks and others get tax increases. They don't like that because it's the feeling, again, going back the last few years, LB 775, LB 773, they saw some people getting tax breaks, other people getting tax increases, they didn't like it, they didn't like the motor vehicle fees and what happened with that, we took that off, they're not liking it with this bill and with this question of further exemptions in our personal property tax, because they see somebody is getting off with paying taxes, who is going to pay those taxes, who's going to make up the difference, it's going to be me. And I'm not going to be getting any of those breaks, but I'm going to be getting stuck with the bill. People are tired of that, they're not going to want to pay higher sales tax, Senator Schellpeper, they're not going to want to be paying higher income tax, they're not going to be wanting to pay to make up for what other people are able to do in terms of reducing their tax burden while the general public has to pay an increase in taxes. That's not what they want, that's not what they've had any
interest in having further than what they've already gotten in the last few years, they're tired of it. So what we need to do again is go back to the folks behind the glass, who I think, in some cases, have been quite irresponsible. As they push for the Lamb amendment, what they're saying is we don't want our exemptions taken away, we don't want to pay other taxes to make up the difference by having those exemptions, we just don't want to pay taxes, want somebody else to pay taxes. Well, those somebody else's out there are tired of it, they don't want to have the shift in taxes that we've had continue once again, as they're saying, here we go again. All right, who's not going to be paying taxes, and who is going to be paying higher taxes? Here we go again. I think it's about time to say no more to that. What we need to do is go forward with the bill as envisioned at this point, work on, again, in my view, the fundamental philosophy on taxes, a broader tax base is a better tax base, by and large. Some incentives are appropriate, some adjustments need to be made, but the narrowing of the tax base usually means, again, the idea that some are paying more taxes, while others are paying less or no taxes. Not a concept in the public interest. In addition, a more progressive tax is preferable to a more regressive tax, with flexibility to pay. And we've got to recognize impacts on that with the tax shifts that we're talking about. I'm not sure we know exactly how the tax burden shifts in terms of categories, in terms of ability to pay. A lot of study has to go into this...
SPEAKER BAACK: One minute.
SENATOR WESELY: ... issue. A short-term solution is the answer, not a long-term solution fashioned without knowledge and facts, which is where we're at right now with this legislation. So, once again, I urge you to understand the feeling of the many people out there that are unhappy with the tax picture that we've faced in the last few years. Don't want to see the -tax picture clouded any further, and do not want to see the sort of changes that Senator Lamb is talking about here with the exemptions staying on and no prospect of them being brought back into the tax picture. With that, again, I'd urge opposition to the Lamb amendment.
SPEAKER BAACK: Thank you, Senator Wesely. Senator Lamb.
SENATOR LAMB: Thank you, Mr. Speaker and members. I was going to pass on this turn to speak, but I need to respond to Senator
Wesely's assertion that we don't want to pay taxes, we're not willing to pay our own fair share, and that there is not a proposal to provide for reimbursement for those lost taxes. My next amendment provides that. And so there is a part of it that I don't like that is in the Governor's proposal, and that is the energy tax. But I do have a depreciation surcharge in that amendment, which I also do not like but am willing to accept. And so the charge that I'm trying to... I am one of those people who may not want to pay their own fair share, I believe, is unfounded. In regard to the amendment, though, the thing that disturbs me is that if nothing is done, then everything comes back on, we don't have control of that. So I don't believe that is the way to operate. So what I'm trying to do is remove that provision so it does take action by this Legislature to put those things back on. Now the people that I hear arguing against my amendment basically, at my understanding, would like to put everything back on and get into this property tax situation deeper than we have been in the past. And it's my philosophical belief that property taxes are outmoded, that we need to look at other forms of taxation to raise the needed fees, and that's what we're struggling to do.
SPEAKER BAACK: Thank you, Senator Lamb. Before we go to the next speaker, I would like to introduce some guests of Senator Robinson. There are 55 fourth graders from Arbor Park Middle School in Blair, Nebraska and their teachers. They are in the south balcony. Would you folks please stand and be welcomed by the Legislature. Thank you for being with us. Senator Schmit. Senator Kristensen.
SENATOR KRISTENSEN: Thank you, Mr. Speaker, members of the body. I have several things and I guess it's our turn, whenever you get your chance to speak today, to try to talk about this system a little bit. One of the things I wanted to talk with Senator Hall, and I don't want to catch Senator Hall off guard, so I'll ask him a question, if I have some time towards the end. If you find your section of the Constitution, I want to talk to you about Section 1 a little bit. One of the things that, from my experience as a county attorney, has been the personal property tax system is a flawed system. And so many things in here this 'afternoon that have been talked about is that the system... it's an option. Well, I'll tell you the personal property tax system is not a good option. Whether you want to put it all back on, so you can tax other people, the system of taxing personal property itself is not good. And it's not good
for several reasons. One is that, by and large, most of it, outside of motor vehicles, outside of motor vehicles, is self-assessed. And we had so many people come in with personal property tax statements, when they would have a sale of a business, I can remember one business, where we were trying to, collect the personal property tax from them, that for years had been declaring their personal property, oh, at about $150,000. When they went to sell their business they sold the personal property for almost $4 million, wildly undervalued. And what does that do? That undermines the integrity of the system. Other people who are out there declaring everything they have said, well, that's not fair, I mean, who's out there to police and monitor those people. You don't have a good system to collect personal property tax because you don't have a good system for self-assessment. It doesn't work. And some where along the line we got the attitude in this country, it's okay if I undervalue and cheat the government, because those guys are always picking on us poor guys, here's our way of getting back, and it became acceptable not to report as much. And you've heard people talk about it being the liar's tax, maybe to a certain degree, but those people don't honestly think they're lying, it's a matter of their right, because it says self-assessed. I just don't put as much down. The other problem with the personal property tax system is that it's so prone to exemptions. We all complain about the lobby that comes out there, and that's probably right. But each one of those people out there are for a reason. They have their own little narrow interest. Well, that's what this is all about. Government is about people coming to us with their interests. Now you can't blame them for coming for their own selfish interests. The key is we have to sit in here and balance those interests and decide if we're going to buy some of them, or try to mesh them together, but it's inherently worse with the personal property tax system. The other problem that we have is in the collection area. The collection of personal property becomes increasingly more difficult. And I think if you talk with any of your county officials who have tried to collect personal property tax, it's almost impossible. But the worst end of it has got to be the self-assessed part of it. And so throughout today, and I guess, Senator Lamb, your amendment is not one I'm particularly wild about, other than it fits in with a philosophic problem I have with personal property tax altogether, and that somehow, Senator Wesely, I think is right, you have to look for broader bases. Personal property has been narrowed so far that it is no longer a broad based tax. And I
think, in reality, you're going to have to do away with it, not only because of tax policy, but out of necessity for assessment. Senator Hall, that was my little sermon on personal property that I don't like. This is not a set up question, this is a legitimate question that I have and have had for some time in dealing with tax cases, particularly when you go to court with them. One of the arguments that I've been faced with, in the second paragraph of Section I of Article VIII, in the revenue, it says, taxes shall be levied. And then it goes on, by valuation, uniform and proportionate, upon all tangible property. Do you know that there are people out here who believe that that mandates that we must tax personal property...
SPEAKER BAACK: One minute.
SENATOR KRISTENSEN: ... and they read that literally as a mandatory directive that taxes shall be levied upon all tangible property and franchises? Throughout the hearings, has that ever been presented, and I'd be interested in, obviously, you haven't had time to prepare that, but that that is a very directive in the Constitution, taxes shall be levied on tangible personal property. Do you think that that is a constitutional mandate that we must tax personal property?
SENATOR HALL: Senator Kristensen, the first question that you asked, has it ever been raised in committee. That specifically, the question of the tax being mandatory, in terms of personal property, no, not to my ... not to the best of my recollection has that come up. Now the issue of taxes shall be levied by valuation...
SPEAKER BAACK: Time.
SENATOR HALL: ... uniform.... I'll answer another time.
SENATOR KRISTENSEN: Thank you.
SPEAKER BAACK: Thank you, Senator Hall. Senator Schmit. Is Senator Schmit here yet? Senator Moore. Senator Lynch.
SENATOR LYNCH: Mr. Speaker and members, so far I haven't said much, but as I sit here and listen to all of this, it reminds me that we are trying to find ways around the problem in such a way that we complicate it even more, I'm just going to throw this out to you, I don't have the amendment before you now, but I
will. I would agree with something Senator Lamb said, that we must find some permanent solution, but I think we can do it very quickly. I would support putting everything back on the tax rolls, with-the exception of intangibles, household goods, and inventory. In all three of those categories, we can find legal. grounds for doing that. That's the easy way to do this. And then, if all the special interests that everybody seems to be referring to want to exempt out some ag land things, whatever it might be, or some railroad things, or some pipeline' things, or some inventory things, or other kinds of things, that's easy to do, because then they would have to stand on their own and it would have to fly in the face of equity and either survive or not. We would, by doing this, create, I think, a pool of money that would far exceed the $1.2 billion we need to offset what local jurisdictions need to meet their obligations. Caps would probably be necessary only because there would be more potential for income there than is needed. But if you would be paying no tax at all, if you...say you have 100 percent of value and, in fact, paying tax on that, you could probably be paying 70, 60 percent of what you were paying on that property or personal property. if you're paying no tax, you would pay 60 or 70 percent. if you're a farmer, you'd be paying 60 or 70 percent, and that seems to me, if I can count right, better than 80 percent, like we're talking about in whatever it is, 320 or 830. But it seems to me that what we're doing now is a very difficult thing, it's a complicated thing. Sometimes I might even think it's intended to be that way to keep us from doing the right thing. Some of us are involved with a lawsuit because, just as Senator Lamb pointed out, we don't want some people to get stuck temporarily or permanently with their unfair share or burden. Ladies and gentlemen, I think we're just trying to do this the hard way. We probably intentionally, in some cases, are doing it that way on purpose. But I'd suggest the simple way is the best, and will offer that opportunity at a later time on the debate on this bill. And, for what it's worth, I would oppose, because of that, the Lamb amendment.
SPEAKER BAACK: Thank you, Senator Lynch. I don't see Senator Schmit or Senator Moore yet. We will go to Senator Wehrbein.
SENATOR WEHRBEIN: Question.
SPEAKER BAACK: The question has been called. Do I see five hands? I do. We will now vote on ceasing debate. All those in favor vote aye, opposed vote no. Senator Wehrbein.
SENATOR WEHRBEIN: Mr. Speaker, could I have a call of the house, please.
SPEAKER BAACK; We have a request for the house to go under call. All those in favor vote aye, opposed vote no. Record, Mr. Clerk.
CLERK: 10 ayes, 0 nays to go under call.
SPEAKER BAACK: The house is under call. All members, please report to the Chamber and record your presence. The house is under call. We are voting on ceasing debate. Call in votes have been authorized. The house is under call. All members, please report to the Chamber and record your presence. Call in votes have been authorized.
CLERK: Senator Morrissey voting yes. Senator Byars voting yes. Senator Abboud voting yes. Senator Cudaback voting yes. Senator Nelson voting yes. Senator Wickersham voting yes.
SPEAKER BAACK: The house is under call. All members, please report to the Chamber and record your presence. The house is under call. The house is under call. All members, please report to the Chamber and record your presence. Call in votes have been authorized. We're voting on ceasing debate.
CLERK: Senator Landis voting yes.
SPEAKER BAACK: Senator Landis, would you please record your presence.
CLERK: Senator Schmit voting yes.
SPEAKER BAACK; Senator Schmit, record your presence. Record, Mr. Clerk.
CLERK: 25 ayes, 0 nays to cease debate, Mr. President.
SPEAKER BAACK: Debate has ceased. The house is still under call. I'm going to leave it under call while we do the closing, so that we can vote on the amendment at that time. So, members, please continue to report to the Chamber. Senator Lamb.
SENATOR LAMB: Thank you, Mr. President, members. Well, this
has been a good discussion and I'm not sure that I can add anything more, except I don't think we should do something without overt action in this body. I don't think everything should come back on the tax rolls, unless this body votes to do that, specifically votes to do that. The way the bill is at. this point, with all amendments, if there's no action, if there's complete stalling, if there's filibuster, if there's an earthquake, or whatever, then automatically everything comes back on. And that's just not the way to legislate, so I would ask that the amendment be adopted.
SPEAKER BAACK: Yes, we need to get everyone here before we vote. Members, please record your presence. Looking for Senators Peterson, Robinson, and Dierks, Horgan, and Lowell Johnson. Senator Rogers.
SENATOR ROGERS: Mr. President, members, I've got another announcement to make today. I want to let everyone know that I found the tickets to the Rotunda ball, the ones I lost yesterday. Now that's just the first half. The other half of the announcement is there's some of you have not bought tickets yet, so I'd kind of like to see you before you go home tonight. Thank you.
SPEAKER BAACK: Thank you, Senator Rogers. We're looking for Senators Dierks and Robinson. Senator Lamb, they can't locate Senator Dierks, and Senator Robinson is testifying, I think, right now. Go ahead? Okay. We will proceed now with a machine vote on the amendment by Senator Lamb. All those in favor vote aye, opposed vote no. Have you all voted? Record, Mr. Clerk.
CLERK: 16 ayes, 21 nays, Mr. President, on adoption of the amendment.
SPEAKER BAACK: The amendment fails. The call is raised. Mr. Clerk, next item.
CLERK: Mr. President, the next amendment I have is by Senators Schellpeper, Rogers and Lamb. Senator, I have AM1822 in front of me.
SPEAKER BAACK: Senator Lamb.
SENATOR LAMB: Mr. Speaker and members, I would ask unanimous consent to substitute 1831 for 1822, primarily because of things
that have happened on the floor here. It's essentially the same, but it does increase the surcharge because the motor vehicles were taken out of the bill.
SPEAKER BAACK: Is there any objection? If not, so ordered. Senator Lamb.
SENATOR LAMB: Thank you, Mr. Speaker. This amendment ... you have ... you have...on your desk, you have an explanation of this amendment. If you would care to look at the explanation on your desk, it tells what this amendment does. The main thing it does here is remove the tax on energy. This is the most objectionable part of the amendment by Senator Hall, in my opinion. It removes the tax on energy, and it increases the depreciation surcharge, and then you will see there are some other methods of raising funds included there. It retains the retail collection fee in the Governor's proposal, $7 million. It would reinstitute the sales tax on access charges to long distance telephone carriers, which would raise about $6.1 million, expand the definition of telecommunication services to include data and one-way, $1.5 million; remove the sales tax exemption for repair parts on common contract carriers, 12.5 million. And then this is not in the amendment, but some people have estimated that there would be somewhere between 2 and 4 million dollars generated by the fact that businesses would not be able to deduct their property tax on business equipment. So they would be paying more income tax. So. if you add all those up, you get 87.1 million. Now, you know, I don't know if you like that list, if you have a better list, I'd certainly be willing to talk about it, but the main purpose of this is to find some manner in which we can remove the sales tax on energy, and the big number there that we are using, the 56 million, comes from the depreciation surcharge. Now I also. have problems with that, but I am willing, I am willing to accept that 2 percent depreciation surcharge if we can get rid of the energy tax. And those other things that are in there, you know, I don't have a strong feeling one way or the other about them except I was looking for a method of coming up with the money we need. So that is the purpose of the amendment. I feel very strongly about removing the sales tax on energy because that would increase cost of agriculture and industry dramatically. I don't think it is... also, agriculture picks up more than its fair share of that energy cost or that tax on energy. So that is why I feel very strongly about it. Now the motion that was just defeated, I will be supportive of
Senator Warner's motion when it comes up, which would go back to our present system, our present unconstitutional system, and I am going to agree with him that it puts the hammer equally on both sides. Both of those people that would like to put everything back on and those of us who would like to have. everything taken off, we will both be under the gun with that proposal in that we would have before us, we would be operating under an unconstitutional provision so we would then have to do both things, and his amendment, frankly, maybe was better than mine because it does put the hammer on both sides. But my amendment before-you at this point, the primary purpose of it is to get rid of the sales tax on energy, and I'd hope you would support it.
SPEAKER BAACK: Before I go to the next speaker, I would like to let the Clerk read some items into the record.
CLERK: Thank you, Mr. President. Very quickly, new A bill, LB 719A by Senator Withem. (Read for the first time by title. See page 2139 of the Legislative Journal.)
Mr. President, Select File reports, LE 849 reported to Select File, as is LB 256, LB 256A, LB 72, LB 167. (See pages 2139-45 of the Legislative Journal.)
Mr. President, amendments to be printed to LB 652 by Senator Coordsen; Senator Lynch to LB 719, and Senator Hall to LB 577, (See pages 2148-51 of the Legislative Journal.) And a hearing notice from General Affairs on gubernatorial appointments. That is all that I have, Mr. President.
SPEAKER BAACK: Thank you, Mr. Clerk. Is Senator Schmit here yet? I don't see him. Senator Moore, do you wish to speak to this amendment.
SENATOR MOORE: Mr. Speaker, if Senator Lamb would yield to a few questions.
SPEAKER BAACK: Senator Lamb, would you respond, please?
SENATOR LAMB: Yes.
SENATOR MOORE: A couple of ques ... we are talking about AM7 ... this amendment explained on this one-page sheet, correct,
SENATOR LAMB: Yes.
SENATOR MOORE: Well, to begin with, do you have an idea where the other $10 million is supposed to come from, or that is our problem?
SENATOR LAMB: That is negotiable,
SENATOR MOORE: You are open to that.
SENATOR LAMB: I am open.
SENATOR MOORE: Then, secondly, the income tax generated, that $4 million, I mean, I am reminded of the old adage you don't count your chickens before they are hatched. It is not one of those things where it is $4 million you say is going to come in because we repeal the personal property tax?
SENATOR LAMB: Yes, the thinking is that when you repeal the personal property tax on business equipment, then those people with that equipment will not be able to deduct that property tax from their income tax statement and will be paying more income tax.
SENATOR MOORE: Okay, and the retail collection fee, is that 1.5 they still get to keep?
SENATOR LAMB: That is the same as the Governor's proposal. There is no change in that.
SENATOR MOORE: Now the sales tax on access charges.
SENATOR LAMB: That is new.
SENATOR MOORE: That is new, and telecommunication data?
SENATOR LAMB: That is new.
SENATOR MOORE: And the exemption for repair parts on common carriers, is that... ?
SENATOR LAMB: That is new.
SENATOR MOORE: Okay. 'Are these supposed to be temporary taxes or permanent taxes?
SENATOR LAMB: Well, I guess they will be whatever this body decides. I have faith that the 3R Committee will make those determinations, and this body may go along or may not go along with what the committee says.
SENATOR MOORE: I appreciate the confidence in the 3-R Committee. What does Senator Lamb want them to be?
SENATOR LAMB: Pardon?
SENATOR MOORE: What does Senator Lamb want them to be, permanent or temporary?
SENATOR LAMB: You see, as far as I am concerned, I would accept all of those. I do not like the 2 percent depreciation surcharge, but I am willing to accept that. Those others are okay as far as I am concerned, and there may be others that I haven't thought of that you may know about.
SENATOR MOORE: Well, thank you, Senator Lamb. I guess I am sharing Senator Lamb's opinion. The energy tax is one that I would like to somehow find another way to raise the money from. So I guess I would agree with him on that point. As to whether or not I can support this amendment, I will simply have to listen to the wisdom of the body in further debate, I guess.
SPEAKER BAACK: Senator Hall, you are next.
SENATOR HALL: Thank you, Mr. President and members. I rise in opposition to Senator Lamb's proposal. What we have come to now is, it appears, basically an auction on how we are going to raise the money, which idea is the best idea. There is probably about I think five more of these proposals that deal with different methods, income tax, sales tax, a variation on all kinds of themes that we are going to look at in terms of raising that approximately $95 million that we need to pay for this. Really, what I am hearing is this. I am hearing that although we don't like the depreciation surcharge, that it is probably better than some other options; that a retail collection fee is not a problem. Senator Lamb includes both of those, one to a greater extent than the present proposal. Where the rub is and where the rubber hits the road is on the utilities tax. That is
the one that I am hearing, correct me if I am wrong, but that is the one that appears to be having the most problems, has the most, I guess, bad taste for members of the body, and I don't know what to tell you except that what you are looking at here, in terms of the proposal that Senator Lamb has in front of you, to pick that up are proposals that tend to be industry specific. One of the things that the committee, through the amendments that we sent out on LB 829, discussed time and time again in terms of how do we pay for this is as broad an approach to revenue as we could that affected all business types of entities, not just one entity, although, yes, surcharge on depreciation affected agricultural interests. It also affected business. Yes, the utilities affected agricultural but it also affected business. The sales tax collection reduction in the fee affects the retailers. That is the way we looked at it. How could we have the broadest based approach and do the collection of the amount of money, raise the amount of money necessary to cover the reimbursement to the locals for the loss of the personal property tax base? We chose, basically, these vehicles, very similar to what the Governor had in his plan, and advanced that to the floor. Now we have before us the Governor's proposal that we, frankly, changed with the adoption of my first amendment this afternoon back very much similar to what the Revenue Committee advanced out. You move away from that and what you do by adopting Senator Lamb's proposal, when you attack, basically, the telecommunications industry and the trucks and the roads, is that you give them the ammunition now to go about saying, hey, look, we, too, think that you are making us carry too great a burden for the cost of this proposal. Frankly, I am willing to look at the utilities tax between now and Select File. I'd be willing to sit down and say, is there a fairer way to collect that revenue, that portion of the revenue package, between now and Select File. That, for me, is not locked in stone. Now the Governor may not like that, but the bill is out here in front of the Legislature at this point in time and, as Senator Schmit said, we determine what the tax policy is. But by adopting Senator Lamb's proposal, what you do ultimately, probably, will be, you know, you get divided and you get conquered because you will see folks who then say, okay, well, we were able to lay off utilities expense, the sales tax there, so now let's go after the surcharge on the depreciation, so we don't have to pay that as well. And then you are going to have the roads and the phone companies beat on you for the amendment that is before you in Senator Lamb's, should it be adopted, and you are going to end up with nothing.
You are going to end up with nothing. Nobody is going to want to pay the cost of this and no tax is going to be acceptable to anyone.
SPEAKER BAACK: One minute.
SENATOR HALL: Remember this, I mean, we are left with, what, 14, 15 days left in the session. We have got an issue before us that, again, I started out by saying there is a couple of different ways you can deal with it. One is address it like we are, walk through the amendments, and I have no problem doing that. The other is to do nothing and to allow real estate taxes to go up, allow local subdivisions to tighten their belts. We are moving closer and closer to that alternative, if we adopt Senator Lamb's amendment, because the house of cards will begin to fall.
SPEAKER BAACK: Time. Thank you, Senator Hall. The next speaker is Senator Hefner.
SENATOR HEFNER: Mr. President and members of the body, I support Senator Lamb's amendment because I feel that when we have a surtax on depreciation and also a sales tax on energy, some of these people are getting a double whammy, like agriculture, business, and industries. And I know it is hard to find a solution to this problem, but I think we need to work away at these amendments and try to find a solution. Let me just talk about agriculture a little while, about the cost of diesel fuel. You folks know that I sell diesel fuel, sell a lot of diesel fuel to farmers, and as that price goes up, which it has this last year, as the price goes up, well, the sales tax on it goes up, too. The state sales tax is 5 percent. I believe it was just a year ago we was selling diesel fuel for 60 or 70 cents, or maybe 75, but this year it is quite a little higher because it has gone up and it hasn't come down as much as it has gone up. So we need to consider that, and some of these small farmers, it seems like, are just barely making it. I know in my district we have had several that have declared bankruptcy in the last six months or a year. Also we do a lot of irrigating in my area and especially if you have a dry year, and it looks like this year may be a little better, but last year was a very dry year and they used a lot of diesel fuel or electricity or propane or natural gas to irrigate, and adding another 5 percent onto that cost is just about going to be prohibitive, especially with the price of corn decreasing. So I just want to tell you
about these things, and tell you the hardship that we are going to put on these people. And I know Senator Hall doesn't represent an agriculture district, so 'he probably doesn't realize some of these things. Also, I want to talk to you just a little bit about some industries in Nebraska. We had a "dehy" alfalfa plant person testify yesterday at the hearing, and he was telling us how much the energy cost to run that "dehy" plant, and that is where they dry the alfalfa and then pellet it and sell it for animal feed. The "dehy" industry has had a rough 10 years. The last 10 years were rough years on the "dehy" industry. In fact, when you drive along the Platte Valley on 1-80 or Highway 30, you will notice that a lot of these "dehy" plants have closed, and the reason they have closed is because energy costs have gone up so much. But now if we put another ... now if we put sales tax on energy, well, that is just about going to finish the last ones off that are out there. And so I want to call your attention to these things. I don't think that we can put a surcharge on depreciation plus a 5 percent sales tax on energy to agriculture and industries. I just think that it will create such a hardship that many of them will just go broke. What is the answer? I don't know. I have an amendment coming up a little later...
SPEAKER BAACK: One minute.
SENATOR HEFNER: ... that tries to address that, and maybe we just need to increase the sales and income tax a little bit to take care of this. Thank you.
SPEAKER BAACK: Senator Beyer.
SENATOR BEYER: Well, Mr. Speaker and colleagues, I rise to oppose Senator Lamb's amendment. Senator Hefner talks about a double whammy that farmers and that will get. Well, under the same principle here the trucking industry would get that in the fact that we get caught on the depreciation surcharge. Also then we would get caught on the sales tax exemption for repair parts. Senator Lamb has on here that it would be... raise about 12.5 million, but there is an awful lot of our trucking companies that have operations all over the United States that can have their trucks repaired in other locations, which would cut down on that amount of money. Basically, they could move the biggest share of their operations out of the state, and it would put...then would saddle the very ones that we want to keep in business, our local carriers, our livestock carriers, and
everything. The same livestock carriers that Senator Lamb has to use would then be carrying the largest burden in the area. Everybody says, well, let them move. Okay, there is no problem with that. We lose jobs. We lose payroll. We have lost some of our bigger carriers already because of deregulation. So the carriers that are in the state now are very few, and the bigger ones could very easily move out and cut down on that. I am like Senator Hefner, I'd almost say that we are better off if we'd be honest and go up front and put it on sales and income, because that is where the money is spent. If you make it, then you can pay tax on that money if you make it. But the more we try to raise charges or raise the fees on the other end, we are gouging somebody else, and, I mean, every industry is going to be in here fighting it. So, with that, I would oppose Senator Lamb's amendment.
SPEAKER BAACK: Thank you, Senator Beyer. The next speaker is Senator Will.
SENATOR WILL: Thank you, Mr. Speaker, members of the body. I rise also in opposition to Senator Lamb's amendment, although not nearly as vigorous opposition as to the last Lamb amendment. I think we are in a situation with this bill where it is the absolute reverse of what we are with the lottery. With the lottery, we know exactly where the money is coming from, and we have a host of amendments suggesting where to spend it. This is a situation on this bill where we know absolutely what we have to spend the money for and we are going to have a host of suggestions as to how to raise it. And I think probably the major reason for my opposition to the Lamb amendment is not... looking at the list of taxable items in isolation, you could probably make a good rationale for any given item on that list, and, again, in isolation, I don't have a lot of problem with it. However, when you return to the rationale that was used by the Revenue Committee and by the Governor in establishing the current, what is currently contained in the amendment as revenue raising options, I think the Lamb list departs from that somewhat. The rationale was that the two types of property that benefited from the exemptions that are being carved out statutorily and by the courts are agricultural property and business property. And when we looked-for a revenue source to replace that on the state level, the theory was let's look at those two types of property and let's try and strike some balance between the two types of property. And I think with the combination of the depreciation surcharge, the
retail collection fee, and the sales tax on manufacturing and agricultural energy use, we have struck that balance. I think that if you look at the Lamb amendment, it departs somewhat from that balance perhaps to the detriment of business and the benefit of agriculture. And I just think, as we are looking at revenue sources that we need to use to raise the money to do what we have to do with respect to the personal property tax situation, we are better off sticking with the original plan contained in the amendment. So I would urge your rejection of the Lamb amendment and, with that, I would give any remaining time I have to Senator Hall.
SPEAKER BAACK: Thank you, Senator Will. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members. Thank you, Senator Will. The...again, the issue of being industry specific in terms of the approach is ... you know, it flies in the face of some of the arguments I am hearing about sales and income tax as the appropriate vehicles because they are spread across the board, but yet the same individuals are, in some cases, speaking on behalf of the Lamb amendment, that, again, it runs counter to the whole idea of trying to place back on the industries that will receive the benefit of the personal property tax being exempted and not as evenly as I would like, but clearly as evenly as appropriate, I mean, as we have been able to do to date. It is not an exact science. It clearly is an extremely difficult process when you remove the tax in one area and try to place it back in some other area and make it all come out in the wash because it just doesn't happen. What we have to do here is address the personal property tax problem in what I would hope would be the best fashion possible under the circumstances, which aren't all that great, let me tell you. We have revenue problems of our own as a state. What we are doing here is trying to solve revenue problems that are at the local level. It is not easy to do, when we are not...
SPEAKER BAACK: One minute.
SENATOR HALL: ... going to have the ability to send those dollars. What you have here is a situation where we have crafted, I think, and I would actually say the proposal is the Revenue Committee's and the Legislature's at this point, probably much more than the Governor's, with the changes that have been made, but the fact of the matter is is that it is as fair a policy change that you can make in terms of the tax shift
that we create when you exempt personal property. Nobody wants to put the personal property tax all back on. If they did, you'd defeat all these amendments and take LB 829 straight up as it was introduced by Senator Will. I don't hear much clamoring for that, but the ideas that surround what form we use to raise, those revenues, and the arguments against it, are always somebody else has to pay it, and you are going to continue to see those ...
SPEAKER BAACK: Time.
SENATOR HALL: ...arguments unless you, I think, go with the package as it has been put together to try to spread that cost to as many individuals who were paying the personal property tax prior to its repeal.
SPEAKER BAACK: Thank you, Senator Hall. Senator Wehrbein.
SENATOR WEHRBEIN: Yes, Mr. President and members, well, I admit I am in a dilemma. I guess I much prefer sales and income tax or perhaps a tax on intangibles, which I have an amendment up there to do in due time. It kind of bothers me, -as we talk about this morning and this afternoon, what has been said about what we are going to tax, and we have left out a lot of other potentials, in my opinion; there, for example, a sales tax on legal services, $21 million. There is all kinds, advertising, software development, research management, the service industry, $63 million we could raise, and here we end up going back to a few specifics that in this case Senator Lamb's amendment that we are talking about. I am going to support Senator Lamb's at this point, although it is not my preference, and that is I think the dilemma many of us are going to have here today as we vote on these, do we go for this one, or do we go for the first one in line, and do we wait, or do we wait for one that is later, which we may never get to, or will we strike later on and insert a new one, in this case, which would be my preference and some that others have said is sales and income tax. Now I'm ... will be determined to discuss the intangible issue at that time because I think that ought to be considered with everything else. It has bothered me no end, especially in the case of intangible tax, that everyone assumes automatically that it should not be on the table, and I don't know why not. If we are automatically going to put business inventory, machinery, livestock, whatever, back on the rolls next January, why don't we broaden that and include everybody? Why is it that we are still picking on
personal property, specifically tangible, in this case, and not intangible? I fail to understand why, if we are going to consider everything, that don't ... we say we are going to consider everything, why we don't consider everything. I don't think the surcharge on depreciation is particularly favorable either. At first I didn't mind it, my concern is that at 2 percent raising 56, there is going to be a real interest in that to go to 4 percent in time. I am also concerned that it may become easily permanent next January, and I guess I, would like to hear some comments for those that are on the committee as to if...what their thoughts are, if they'd care to share them with us, as to whether these temporary that we put on for a year could, in fact, become permanent. I wonder if that may not be the easy way out, come November, when there is going to be a tough time to get an agreement, they will simply say, let's go with what we have got, and we are going to be stuck with perhaps the utility tax, which I consider very unfair to certain manufacturers. The surcharge, as I said, I can live with, but I am not very happy about it. As we look to try to do these things fairly, I think the committee, the 3-R Committee is going to have a huge challenge, and I have to wish them well. At this point, I am going to support Senator Lamb's, as I said, thinking that it probably is going to have a tough time. We have several coming up that are going to do with sales tax increase, income tax increase, corporate tax, some of which are more of my preference. The question is, will we all get a chance to vote on those? And that is the dilemma that I know many of us are facing but, at this point, I think I will vote for Senator Lamb's amendment.
SPEAKER BAACK: Thank you, Senator Wehrbein. Senator Lamb.
SENATOR LAMB: Question.
SPEAKER BAACK: The question has been called. Do I see five hands? I do. We will now proceed to vote on ceasing debate. All those in favor vote aye, opposed vote no. Senator Lamb.
SENATOR LAMB: I'd ask for a call of the house, please.
SPEAKER BAACK: We have a request for the house to go under call. All those in favor vote aye, opposed vote no. Record, Mr. Clerk.
CLERK: 6 ayes, 0 nays to go under call, Mr. President.
SPEAKER BAACK: The house is under call. All members please report to the Chamber and record your presence, the house is under call. Can we accept call in votes, Senator Lamb? We are voting on ceasing debate and call in votes have been authorized..
CLERK: Senator Morrissey voting yes. Senator Moore voting yes.
SPEAKER BAACK: The house is under call. All members please report to the Chamber and record your presence, the house is under call. The house is under call. All members please report to the Chamber and record your presence. Call in votes have been authorized. We are voting on ceasing debate.
CLERK: Senator Rogers voting yes. Senator Dierks voting yes. Senator Horgan voting yes. Senator Cudaback voting yes.
SPEAKER BAACK: We are voting on ceasing debate. The house is under call, and call in votes have been authorized.
CLERK: Senator Wesely voting yes. Senator Lynch voting yes.
SPEAKER BAACK: Record, Mr. Clerk.
CLERK: 26 ayes, 0 nays to cease debate.
SPEAKER BAACK: Debate has ceased. I am not going to raise the call yet, though. I am going to keep the house under call, so all members please continue to report to the Chamber and record your presence. Senator Lamb, you may begin your closing.
SENATOR LAMB: Thank you, Mr. Speaker and members of the Legislature, this is my attempt at a compromise, This is an attempt at a compromise because that energy or that surcharge on depreciation hits agriculture fairly hard. Now there are a lot of people in here that don't like that energy tax and I am one of them, and I feel very strongly about it. Now there are other amendments that are coming along that will put it all on sales and income tax. I have no problem with that, but I didn't think that there was the strength in this body to pass that. Maybe I am wrong. Maybe I am wrong. I will be supporting substituting sales and income tax for raising the money rather than the depreciation surcharge, rather than the tax on energy. That would be better. I'd like it better, but I didn't think it had a chance. Maybe it does, but this is my attempt to have a
compromise here which does make agriculture pay a considerable amount, which does hit the industries who are getting some benefits. Okay, we have got the telephone, the telephone companies we know are getting benefits out of this whole property tax problem. Common carriers are getting a benefit. There is no doubt about that. So this is an attempt at a compromise to do what some members here have said, to put the load primarily on those that benefit, but as far as I am concerned, the original proposal with that sales tax on energy is not fair and equitable, not fair and equitable because 19 million out of that $43 million falls directly on agriculture, and that is almost half. That is too big a percentage on there, and if this amendment does not get on, if the other amendments which would put it on sales and income tax don't get on, my next amendment, and will be the last amendment, as far as I know, will be to bracket this until August 1st. We can do that, we can bracket this till August 1st, let the 3-R Committee do its work, come back in here early in September, pass ... maybe there will be a consensus by then. But I will be adamantly opposed to the sales tax on energy and I was hoping that this was a compromise that people could accept because it does hit those people that I think that are benefiting, but I tried to structure it so that it hit them fairly. So I'd hope that you would adopt the amendment. Even though there are only 39 people here, I decided not to move to adjourn, and we will run it.
SPEAKER BAACK: Thank you. You have heard Senator Lamb's closing. We will now make sure that all members are here because the house is under call. I got your message, Senator Hall, we will make sure that they are all here. All members please return to your seats, we are under call. We are looking for Senators Ashford, Lindsay, Schrock, and Smith. Members, please take your seats and record your presence, please. We are under call. We are still looking for Senator Smith. Senator Lamb said we could go ahead and proceed with the vote on the Lamb amendment. All those in favor vote aye, opposed vote no. We have a request for a roll call vote. Mr. Clerk, call the roll.
CLERK: (Roll call vote taken. See page 2152 of the Legislative Journal.) 20 ayes, 19 nays, Mr. President, on adoption of the amendment.
SPEAKER BAACK: The amendment is adopted. Next item, Mr. Clerk.
CLERK: Mr. President, the.
SPEAKER BAACK: The call is raised.
CLERK: The next amendment, Mr. President, is by Senator Conway. Senator, I have a note, the amendment you gave me, Senator, was the one that was filed last night, I understand you want to withdraw that and substitute AM1803, is that correct?
SENATOR CONWAY: Yes, I would like unanimous consent to substitute AM1803 for what was filed last night,
SPEAKER BAACK: Any objection? No objection, so ordered. Senator Conway,
SENATOR CONWAY: Thank you, Mr. Speaker and members. AM1803 is co-introduced by Senator Warner and embodies much of the concept of a simpler attempt to address where we go at the end of the period. I am going to, by virtue of my responsibilities downstairs with the Government hearing that we are conducting right now, turn the activity over to, and the rest of my opening, as well as additional time, to Senator Warner to address that particular amendment. So if Senator Warner will respond, I will go back downstairs and relinquish the rest of even my opening to Senator Warner.
SPEAKER BAACK: Senator Warner.
SENATOR WARNER: Mr. President, members of the Legislature, this is the amendment talked about from time to time, which would strike the portion of placing all the currently exempt property on the tax rolls as of January 1 and would amend the bill in order that it would remain ... by January of 1972 (sic), everything would be back to just where it is now, give us the concept of a level playing field. Then I had copies made, I should point out, as drafted, it still dealt with the motor vehicles fees, which has been stricken, of course, this morning by the amendment, I believe, discussed with E & R that, essentially, because of the striking of the motor vehicle fee, that that portion become an E & R amendment. In the event that there is something more substantive that they cannot do, why it can be changed on E & R. But the concept and the provisions which I have been talking about, which would return the situation for January 1, 1972 (sic) to be the same as we are in
today, the more level playing field, if that is the right term, could be accomplished. And I would move the adoption of the amendment.
SPEAKER BAACK: Thank you, Senator Warner. Discussion on the amendment by Senators Conway and Warner. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members. I apologize to Senator Warner. Would he respond to a question?
SPEAKER BAACK: Senator Warner, would you respond, please?
SENATOR WARNER: Sure.
SENATOR HALL: Senator Warner, is this amendment the same amendment that you talked about earlier?
SENATOR WARNER: Yes.
SENATOR HALL: That I talked about?
SENATOR WARNER: Senator Conway had an amendment that actually was similar to the one that Senator Lamb had that took everything off, and he substituted the amendment that I was going to offer for that one. And so this is the same amendment. It does, as I indicated to you before, still included reference to motor vehicles prior to your adoption this morning. I believe, if you check with E & R, that that primarily will come out as an E & R amendment, but it may need another something, but...
SENATOR HALL: So in other words, the only change in this amendment would be the change regarding what personal property tax would come back on the rolls, is that right?
SENATOR WARNER: What the effect of this amendment would be that that personal property that is currently exempt by statute would continue to be, and that personal property that is taxed, as it currently is taxed, would remain taxed as of January 1, 1992.
SENATOR HALL: Thank you very much. Mr. Speaker, members, I would rise in support of this amendment. I don't think that, frankly, the issue of all the personal property tax coming back on is going to sell. From that last vote on the Lamb amendment, it appears that, if from what I have heard on the floor, that
the body is not willing to, I guess, deal from a position of strength. They would prefer to be tugged and pulled like a piece of taffy, and that is exactly what will happen when we come back January 1. That probably would happen under any scenario, so that's a bit of a lukewarm analogy, I guess, but it is clearly one where we will not have the same under the Warner amendment or under Senator Lamb's amendment, which was defeated, would not have the same position of strength that I, frankly, think we need. It is, as you can see as the afternoon wears on and the day wears on, a very difficult subject matter, and I know there are other things going on this afternoon in terms of committee hearings, and I understand that, but this is a very important issue that needs to be addressed, hopefully, will be addressed for the next day or two as amendments continue to pile on. But be that as it may, I will I think support Senator Warner's attempt at this point to, basically, bring us back to where we are January 1 of 1992. 1 am not so sure that, frankly, it is all that different from the proposal as it is spelled out in the bill, but I will ... I will live with that because I think the body's inclination is to support this amendment, and I prefer to get back on the winning side of an amendment for awhile.
SPEAKER BAACK: Thank you, Senator Hall. Senator Schmit. Senator Kristensen, did you wish to address this amendment by Senator Warner and Conway? Senator Hall, your name is up again. Senator Moore, did you wish to address this amendment?
SENATOR MOORE: No.
SPEAKER BAACK: Senator Hefner.
SENATOR HEFNER: Mr. President and members, I have a question of Senator Warner.
SPEAKER BAACK: Senator Warner, would you respond, please.
SENATOR WARNER: Yes, sir.
SENATOR HEFNER: Senator Warner, I didn't quite understand, do we have a copy of your amendment on our desk?
SENATOR WARNER: No.
SENATOR HEFNER: Is there a copy printed in the Journal?
SENATOR WARNER: No.
SENATOR HEFNER: Okay. Can you explain to me just exactly what it does?
SENATOR WARNER: Yes. Senator Hefner, I have not made a copy because it was the last one in the pile and I didn't know what was going to happen, and I was just going to save a tree in case I didn't need to make copies. But what it does is it will, on January 1, 1992, it will put all of the taxation laws covering personal property exactly where they are today; that is farm equipment and livestock would be exempt, inventory would be exempt, business equipment would be taxed, on down the line. The problems that we know that exist in the pipelines and the railroads would still be there, but it is to provide an opportunity for the 3-R Committee and the Revenue Committee and others who are working on a permanent solution to do so, and this gets us through these few months. If the bill is enacted in some form, it will get us through until those studies are completed.
SENATOR HEFNER: Okay. Thank you, Senator Warner. I was up looking at the amendment and I saw a January 1, 1993 date on it. Now what is that January 1, 1993 date?
SENATOR WARNER: As I explained, Senator Hefner, this amendment was adopted to... that dealt with motor vehicles. If you looked at the amendment, it was drafted to the amendment as it was introduced this morning. Once Senator Hall's amendment was adopted that retained the valuation for automobiles as it currently is, that part of the amendment became obsolete. I did not go and have it redrafted. E & R tells me that virtually because of the adoption of the Hall amendments this morning that E & R can revise this to be consistent with that, and there might be something beyond E & R that we can make the correction on Select File, but I think that, by and large, it's all right.
SENATOR HEFNER: Okay, thank you, Senator Warner. In 'other words, the correct date that we are talking about, that would be January 1st, 1992, to put all the personal property tax that is on the ... put it back on the tax rolls that is on the rolls now?
SENATOR WARNER: That is correct, that is on now. What is off now stays off.
SENATOR HEFNER: okay. Okay, thank you. I believe I can support this amendment because I had an amendment that would take everything off, and Senator Lamb had that amendment and it was defeated. So I believe this will be the second best way to90. Thank you.
SPEAKER BAACK: Thank you, Senator Hefner. Senator Wesely, did you wish to discuss this amendment?
SENATOR WESELY: Yes, Mr. Speaker, members. I would oppose the Warner amendment, not because it is unreasonable because it is, in fact, reasonable, but it does, as Senator Hall said, weaken our hand as we move forward to try and find a solution to the problem. Obviously, you would have more individuals concerned about the issue and trying to find a re solution to the issue, if you had more people with the potential of being taxed and wanting to not have that occur. But, at the same time, if we are talking about a short-term solution to the problem, I can understand we will definitely be short term because the Warner amendment would cause us to be in exactly the same position we are in right now a year from now, with an unconstitutional situation in which we have to try and find some solution on. So if the idea is to go from one set of circumstances that are chaotic to another, we will do that and out of that process, hopefully, we will find next session a longer term solution, where this session we are trying to find a short-term solution. So it is not totally inappropriate. It certainly is better than the Lamb amendment, which had us in the situation where nobody had any particular interest in moving forward with a long-term solution. Nevertheless, again, you provide greater exemptions, granted exemptions that currently exist that will be hard to get those people interested in coming back forward with some further refinements to the tax structure if they feel pretty secure in the fact that those exemptions will continue on into the future. So for that reason, I'd oppose the Warner amendment. Let me also note, a number of people have been concerned about my not voting on the last vote. For the record, I didn't vote because there was a provision of that proposal that affected the sales tax on longdistance telephone, and as a telephone employee, I didn't vote on it. You know, it would be nice if more people that had direct conflict of interest on some of these issues would similarly not take occasion to vote on some of these issues. I find it ironic that I didn't vote on that and, as a result of that, the amendment passed, while others who are
directly affected and benefited from the amendment chose to do SO. But that is neither here nor there. It is just unfortunate that that occurred.
SPEAKER BAACK: Senator Schmit.
SENATOR SCHMIT: Well, Mr. President and members, I am sorry, once again, this proves the wisdom of listening to the debate because it wasn't until Senator Wesely explained that his integrity that kept him from voting on that amendment allowed it to pass that it caught my attention, and I wish I ... I ought to read the transcript, I guess, to find just what it was all about. I just want to say that I do not know, I will probably support this amendment, but I really do not know what is going to happen when we place in the statute language which has been certified as unconstitutional. It looks, again, like the more we go around and around, the deeper we dig ourselves into the hole, and once again we are going to have to come back to some sort of a situation where we recognize that this Legislature needs to become more familiar with every single aspect of what we are doing. We are voting on amendments here, which none of us know the impact of, which no one can tell us the impact of because it changes with each additional impact. The- amendment we just adopted changes the entire face, of course, of 829. It is an expression of exasperation by many of us because of the lack of the successful vote on Senator Hall's amendment this morning. If we attach this amendment to the bill, I would guess that the Revisor's office are going to have real work, but I really don't know how much longer we need to continue to circle wagons here before we recognize that we are not going anywhere. And we are not going to go anywhere, and I would expect that the only kind of bill that can get 25 votes at this time is not going to be signed by the Governor. And I repeat once again that I think when it looks like ... it looks like this bill is going to be a typical committee-type bill, which will be totally unworkable, and will draw the Governor's veto. And it looks like then after the sine die party, we will be back in here again doing that which is our responsibility, this time, hopefully, in a more sane and sober manner.
SPEAKER BAACK: Thank you, Senator Schmit. Senator Crosby.
SENATOR CROSBY: Thank you, Mr. Speaker and members. I've sat here all day and listened to all of you, and I have done -my voting and tried to appreciate what each one of you is trying to
do. I will probably support this amendment, although I have to say, Senator Warner, I think we are back at square one. I agree with Senator Schmit. I voted against the last amendment, particularly because I recalled LB 209 two years ago, when we voted to take off the sales tax on the access charges for, long-distance telephone carriers. And so there is a perfect example of what we have been doing today, take one off, put one on. We have 13 days left after today, and it does seem strange to me, with all the conversations and meetings and hearings since the beginning of the session that we haven't come up with a plan yet. We have had so many different plans, and here we are on the floor trying all those plans out. And right now we are trying to look busy because the boss is coming, and the boss is the taxpayer, and that is who I get my letters and my phone calls from, the average taxpayer. And when Senator Kristensen talked earlier about the personal property, that is the worst thing to put taxes on is personal property. And I will go back to "Operation Honesty", and a lot of people tease me, kid my husband about Operation Honesty in the fifties, but, my friends, this was what it was all about is that people were not declaring personal property. The assessor came into the house, somebody may be sitting there playing the piano right in front of him, and he would say, you don't have a piano, do you? No, we don't have a piano. They didn't declare the piano. That is for the individual, that multiplies when you get into the larger ownership of larger items. So I do think that the personal property tax is really mixed up, and here we are trying to set policy and budget. We have got a budget to set and we have got to figure out how to get the money to pay for that budget. I am interested in Senator Schellpeper's amendment which is upcoming, either today or tomorrow, going into sales and income tax. Because when it comes right down to it, the sales tax, in. particular, is the most equitable because everybody pays it. But no one really wants to raise the sales tax, and I am sure the individual taxpayer would not like that. One thing I would like to remind people, who are paying attention to this debate, I don't mean people on this floor, I mean people who are watching on EduCable and people who listen and pay attention to what happens, to remind them that the State of Nebraska does not levy a property tax on homes. That is in the Constitution. When we took our income tax and sales tax on, that was part of the deal that the State of Nebraska could not levy a property tax. And the reason I mention that is, again, is because I get calls from people saying that we raised their property tax. Well, in effect, we do because we don't set the proper tax base
and then it filters down to the subdivisions. Here in Lincoln we are in trouble, again, because we cannot get anything done about 1059, which didn't help Lincoln property taxpayers at all. It raised their taxes. When it came right down to it, it raised their taxes, and people who own homes, and have worked all their lives, and live in those homes feel that they are paying a disproportionate amount of taxes because those taxes keep going up every year to support the city, the school, the Lower Platte South, the resource districts, the community colleges.
SPEAKER BAACK: One minute.
SENATOR CROSBY: They go up every year. So I am going to support this amendment. I am not sure where it leaves us and I am sure we will have some more things, but I think we had better get down to business and do something. If you want to come back in September and try to do something again, I am happy to come down here again and work with you, but I do think that we ought to be intelligent enough and not spend days on end on other issues which don't mean ... which we aren't going to settle anyway, and not settle the budget, and taxes, and redistricting, and those things that we really need to do and finish before June 5th. Thank you.
SPEAKER BAACK: Senator Moore.
SENATOR MOORE: Question.
SPEAKER BAACK: That won't be necessary. Yours is the last light on, so, Senator Warner, do you wish to close?
SENATOR WARNER: Yeah, Mr. President, just a word. When I came in this morning, I was looking for a way that we wouldn't be amending a major tax bill with a simple majority of those voting because it is very hazardous. We have had one amendment attached with less than a majority voting, and I don't know what the impact is going to be. I did not like the energy tax either, but neither did I vote for an amendment which was going to be adopted by a simple majority of those voting because I realized that that creates real problems in the long run. This amendment, what it does, again, is it returns the current statutes just as they are on January 1, 1992. 1 have indicated it does still include the reference to the motor vehicles as this amendment was originally, and I have been assured by E & R that that portion will be... can be corrected there by virtue of
the action of the Legislature this morning, so it is a clean amendment, as a practical matter. But I think it accomplishes the goal that was of concern for the way the bill was drafted originally, which I also was in support of, and that is that it keeps the situation such that we do, in fact, have to take action the next time we meet. I think I maybe will not talk about the next '92 session, just think in terms of the next time we meet, which may be sooner. But it takes away the arguments that we have had on the advantage or disadvantage that different interest groups may have and I would hope that the amendment would be adopted.
SPEAKER BAACK: You have heard Senator Warner's closing on his amendment. We will now vote on the amendment. All those in favor vote aye, opposed vote no. Have you all voted? Record, Mr. Clerk.
CLERK: 17 ayes, 0 nays, Mr. President, on the adoption of Senator Warner's and Conway's amendment to Senator Hall's amendment.
SPEAKER BAACK: The amendment is adopted.
CLERK: Mr. President, the next amendment I have drafted is proposed by Senator Hefner- Senator, this is the one that...
SENATOR HEFNER: Withdraw it.
SPEAKER BAACK: It is withdrawn.
CLERK: Mr. President, Senator Schellpeper would move to amend. Senator, I have AM1843 in front of me.
SPEAKER BAACK: Senator Schellpeper.
SENATOR SCHELLPEPER: I would like to substitute AM1772 because of the sales tax on ... or the exemption on the motor vehicles.
CLERK: Which AM do you want, Senator?
SENATOR SCHELLPEPER: Number 1772 is the one I want. Oh, 1843, you are right.
CLERK: Okay, that is what I have. (See pages 2156-58 of the Legislative Journal.)
SENATOR SCHELLPEPER: I have too many numbers here that I am working with.
SPEAKER BAACK: Any objections to the substitution? Seeing none, so ordered. Senator Schellpeper.,
SENATOR SCHELLPEPER: Thank you, Mr. Speaker and members. This amendment is kind of after the fact at the present time because it would strike the language of the Lamb amendment and also of the Governor's proposal, but I think I will still run the amendment because we have been talking about sales and income tax here most of the afternoon as a way that we should make up the difference. I passed around a sheet that you will see what I am attempting to do, and what this will do, this will raise the top bracket for anyone that is filing jointly of $90,000 income or more by 1.5 percent, and that will raise approximately $18 million. The next bracket, it will raise the income for anyone that has filed jointly with income of $45,000 or more by .8 percent. This will raise about $7 million. And then the sales tax will increase by one-half cent. That will raise $58 million. And then I also will put in a half percent depreciation surcharge which will raise $14 million. This will raise $97 million, which is what the Revenue Department is saying that we have to raise. The reason that I am going to a sales and income is because I think it puts it over the whole state evenly. We are not trying to target any one industry; we are not really trying to target any one individual, but we are trying to get at the people that are able to pay the tax more than just any certain industry or any certain segment of our population. I think when you look at the sales... the sales tax, you get a tax that some people, it is the only tax that they pay, and I think it is only fair that they also help solve the problem that is a state problem. It isn't just an individual segment of our economy's problem. When you look at the income tax, we are getting at some people that are able to pay. We are not getting at the working class of people. We are talking about people that are mainly in the $90,000 bracket and over. So we are getting at the people that will pay the $18 million of the 97. 1 think we have discussed it quite a bit this afternoon, so more than to get into all that, I am willing to answer any questions, but, with that, I just would approve this. Thank you.
SPEAKER BAACK: Thank you, Senator Schellpeper. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker and members. No mas, no mas, no mas, no more, that is enough, we have I think amended the proposal to the point where we have really taken care of all the considerations that everybody has raised in terms of saying,. hey, look, there are parts that we don't like, we can live with this. We did the utility tax. We have taken away the hammer provision as it has become, but we have gone from the sublime to the ridiculous with the amendment that Senator Schellpeper offers in terms of sales and income tax. Senator Lamb, I am ready to co-sponsor the bracket motion. Frankly, I raised the issue when we had the first, first committee hearing on this issue about whether we needed to do anything or not. And what you are getting into now is the amendments that say we really don't want to do anything. We really don't care, we really are going to let the homeowner, the regular taxpayer, the guy who brings home, you know, the minimum wage, pick up the tab again and again and again. And, frankly, I am not going to do that. I am not going to be a part of that in terms of sales and income tax because that is who is going to pick up the tab. You can argue that ultimately they will pick it up anyway, but, you know, at least when we do it through business, we put it in a disguise and we given them their medicine in their ice cream, and we don't necessarily beat them over the head with it, but this is a beat them over the head amendment. It says, look, you know, we don't care if business ever has to pay any taxes. We're not worried about whether the homeowner pays sales tax on their utilities. We don't want business to ever have to do it, and, as a matter of fact, we prefer that it come out of sales and income tax. We just want to pick your pocket one more time. Well, ladies and gentlemen, I think that is totally irresponsible. The personal property tax has been paid by business. For a number of reasons, it is no longer available to be a source of revenue. You don't go back and say now we are going to pick it up on sales and income under the guise that, well, everybody ought to be responsible for this problem. That is ridiculous and so is this amendment.
SPEAKER BAACK: Thank you, Senator Hall. Next speaker, Senator Will.
SENATOR WILL: Thank you, Mr. Speaker, members of the body. if it weren't so serious, I'd call this amendment a joke. This is just not an acceptable response to the situation that we find ourselves in at this point. As Senator Hall indicated, this is
a problem that arose from exemptions that we have had over the years for business property, for agricultural property, and to suggest that the average citizen in the State of Nebraska ought to pick this up through his or her property... or sales taxes and his or her income taxes is simply we are not being responsible legislators if we adopt this approach. I would urge your opposition to the Schellpeper amendment.
SPEAKER BAACK: Thank you, Senator Will. Senator Hefner.
SENATOR HEFNER: I will pass.
SPEAKER BAACK: Senator Crosby, did you wish to address this amendment?
SENATOR CROSBY: Thank you, Mr. Speaker. Yes, I do because I mentioned a few minutes ago that no one wanted to talk about the income tax and sales tax. The sales tax, in particular, I still think is more equitable because more people pay it, but I understand what Senator Hall is saying. I am not against business paying taxes. They do pay taxes right now, but when you look at a business, a business is there and works at trying to make a profit. So if you continue to add the taxes to business, then that hurts the person that is working for the business and it hurts the business that is trying to make the profit. That is a fairly simple way of explaining how I feel about business. We like to bash business. We like to make it look like a big ogre, but whom do you go to first when you need a donation? You go to business. Whom do you go to first when you need some help in trying to promote some project? Even in government, quite often you organize business leaders to help you do that. So I think I'd like to get it on a different plane of conversation today or discussion and get away from that feeling that business is the big bad villain all the time. I don't feel that way at all, but on this particular amendment, the one thing I don't like is that $45,000 bracket. These days, $45,000 for a married couple is not very much money, especially if you have a child or two or three or even more, because rent, house payment, whatever you call it, food, quite often people call their house payment rent, so food, clothing, -transportation, in Nebraska, you know, almost everyone, families, the average family has two cars. It is almost impossible to get there from here in Nebraska except in a car. We don't have that much public transportation, even in Lincoln and Omaha. You have to have a certain schedule that you are on
everyday to get back and forth to work on a bus, and you have to stick to that schedule. You cannot digress or you won't get home maybe for hours after you planned to. So from that point of view, the one thing I don't like about this amendment is the $45,000 bracket. I think that... and I don't know where to start on that particular thing, because it just, people who work, who have the husband and wife who work in the family, and try to keep things going, that income tax hurts them and it hurts them badly when you raise the rate. So at the moment, I will probably not vote for this amendment, but I am glad it came up at least because I think we needed to talk about sales and income tax today. Thank you.
SPEAKER BAACK: Thank you, Senator Crosby. Senator Schmit.
SENATOR SCHMIT: Thank you, Mr. President and members. I appreciate the remarks by Senator Crosby. I think that it is important that we remember that we do not try to blame each other. It is awfully easy to say, well, certain segments were paying this tax, therefore, they should continue to pay it. Does it ever occur to anyone that at one point in time it was determined that those businesses, those farmers, and those entities that were paying the personal tax were paying an unjust, unfair tax, were being taxed? I had a young man stand at one of my tax meetings and I won't use his name right now because he works for the University of Nebraska, and he said, you know, I think maybe what we ought to do is put a value upon my college education. He said, I use my college education as a source of income. He said my cowherd also brings in income, so you want to tax my cowherd, and you want to tax the income I make off of the cowherd. If you are going to do that, he said, let's put a tax on college education. So I suggested 40 grand on a bachelor's, about 75 or 80 on a master's and 150 on a Phd., and probably 300,000 on an MD., would be a good start. I doubt that that amendment would go very far, but the point is this. Everything we do generates income of one. type or another. Senator Crosby is right, 45,000 is not a lot of money. I would suggest it is probably two times or maybe two and a half times what the average income is in rural Nebraska, among not farmers necessarily, but among the many people who live in the small communities in my state, in my area. That is not much money but they get by, and I am like the rest of you. I do not like to burden those persons with an unfair portion of the tax, but the many kinds of meetings that I have had in the past months, I have received two recommendations from my constituents. They
said put it on the sales tax and the income tax, because when you do that, we know what you are doing, and if we don't like the sales tax, we are going to vote against you, we are going to send you back to the farm. If the income tax rate gets too high, we will do the same thing. And then the other recommendation that came across loud and clear was watch what you spend your money for and do without some things, and do without some of those expenditures. The average person who earns 45,000 doesn't buy everything the family wants. The average person who earns 20,000 doesn't spend all of the income that they would like to spend on certain items. So the point I want to make is this, in our personal lives, we take the income we have and allocate it to the necessary expenditures, food, clothing, shelter, and housing, et cetera, and then we have a little left over maybe for a beer once in awhile. In government, we take all the wants we have and say we need to raise this much money. Maybe there ought to be some recognition of whether or not all of those wants are actual necessities, and I think you know, as well as I do, that we could cut out some spending both at the state level and at the local subdivisions. In my local subdivisions who say, oh, you have got to return that money, I can tell you that I have been there many times and I know that there are ways that they can economize in some of those local subdivisions, and we ought to encourage them to do so. I am going to support the Schellpeper amendment. I am coming back to what I said earlier, by the time this bill gets across the board, it is going to be such an unrecognizable piece of equipment that Senator Will is going to take his name off of it, and ask that it be killed, and if he doesn't, the Governor will do so, and, hopefully, it will die a merciful death before that time. I said it before, and I have spoken to most of you, one on one, about this issue...
SPEAKER BAACK: One minute.
SENATOR SCHMIT: ... but I am encouraged that more of you tonight than this morning when we began are recognizing the fact that you cannot build a temporary program on this floor in one or two days. It is not going to be possible. We ought to take ... back up, take a deep breath, and say we are going to take the time that is necessary and we are going to craft a permanent solution. And it wouldn't hurt this body to sit back and have a little seminar, have some of the former tax commissioners, Peters, Fred Herrington, Murrell McNeil come in and give us a little bit of a background on taxes and how they work and what
is going on. I have been here longer than most of you. I could benefit from it, I am sure you will all agree. Maybe some of the rest of you could also. I support the Schellpeper amendment and let's go.
SPEAKER BAACK: Thank you, Senator Schmit. Senator Abboud.
SENATOR ABBOUD: Mr. President, colleagues, this particular amendment, I think, more or less kills the bill, and I suppose people that would just as soon have this proposal die should vote for this amendment. I feel that putting these problems on the back of the individual taxpayers through sales and income tax is probably the last place that this problem should go. We pumped the well for income tax and sales tax last year, and there is no money in these two Areas, I feel, at least for a couple more years, maybe three years, maybe four years, certainly not the next year. I oppose the amendment, and if there is any hope of getting a bill passed this session to deal with this problem of personal property tax, it should come from a different source of revenue than the sales and income.
SPEAKER BAACK; Thank you, Senator Abboud. Next speaker, Senator Landis.
SENATOR LANDIS: I call the question.
SPEAKER BAACK: Do I see five hands? I do. We will now vote on ceasing debate. All those in favor vote aye, opposed vote no. We are voting on ceasing debate, have you all voted? Record, Mr. Clerk.
CLERK: 15 ayes, 7 nays to cease debate, Mr. President.
SPEAKER BAACK: Debate does not cease. Next speaker is Senator Robinson.
SENATOR ROBINSON: Mr. President and members of the body, I couldn't help but notice the, oh, I wouldn't say it was anger in Senator Hall and Senator Will's voice, but I think one of them used the word "absurd". Anyone that would be for this bill is absurd. I would like to take them up to the 16th Legislative District. I can introduce them to a lot of absurd people because my people like the sales and income tax. Now if you would like to go up there, I will introduce you to a lot of them. Senator Abboud said the bill would die. It is just for a
year, Chris. I don't think the income tax level that Senator Schellpeper referred to would really hurt anyone. Now maybe the half cent sales tax is a little high, maybe we should have only 25..one-quarter instead of one-half percent there. Now, I don't know where... I noticed Senator Schmit said we ought to tax master's degrees and doctor's degrees, I hope he is not talking about retired people. I wouldn't be for that, but I want you to know I think that is a pretty good idea because all lawyers have a doctorate, see, and I think that would be a good source of revenue. And I would like to ask... is Senator Hall here? I would like to ask a question.
SPEAKER BAACK: Senator Hall, would you respond, please.
SENATOR ROBINSON: I want to make one comment. I think it was a good comment by, before I ask you this question, Senator Hall, a good comment by Senator Schmit. He talked about an unjust tax, and up in my neck of the woods, I think rural people are getting taxed too much. Now a question for you, Senator Hall, under senator... or under the Governor's plan, how much would you pay, personally?
SENATOR HALL: I haven't figured it out.
SENATOR ROBINSON: I wouldn't pay anything. And I wanted to ask Senator Will, Senator Will, could I ask you that question? How much would you pay under the Governor's plan?
SPEAKER BAACK; Senator Will, would you respond?
SENATOR WILL: I haven't calculated it.
SENATOR ROBINSON: Well, what is there, three taxes? You'd pay a little on the sales tax in there that the retail merchant sent back, that is in there.
SENATOR WILL: To the extent the retailers increase their prices.
SENATOR ROBINSON: Yeah, would it cost you anything on a depreciation surcharge?
SENATOR WILL: No, I don't depreciate.
SENATOR ROBINSON: That wouldn't cost me anything either. How
about that fuel tax on businesses, would that cost you anything?
SENATOR WILL: No, I don't own a business or an agriculture (interruption).
SENATOR ROBINSON: That is the way with me, it wouldn't cost me anything either, and I am not sure that is right, people. I think maybe all of us ought to just share just a little on this. I'd just like to close, I think the Schellpeper plan is probably the best plan we've talked to today, if we'd lower the sales tax one-fourth. When we start talking about picking on one or two areas, I think we ought to spread it out some. I think we are making a mistake. Maybe the bill will die. Thank you.
SPEAKER BAACK: Senator Moore.
SENATOR MOORE: Mr. Speaker, I rise to oppose Senator Schellpeper's amendment. It is one of these things, as the old adage goes, people should never watch laws and sausage being made is certainly true today. The only good thing is that whenever we adjourn we all go play on the same team sometime tonight, and, hopefully, we will, and back in the lobby, we will beat you when it is all said and done. But, nevertheless, Senator Lamb's amendment that we adopted was a bad amendment, and I don't like to make... I have a real problem with voting for bad amendments. Time will tell that many of the things you had in Senator Lamb's amendment, Mr. Preston is going to come with you and say, well, the truckers can't be taxed. The telephone industry is going to say, why, they can relocate things. The railroad is going to come back and say, well, you can't do those things. So I mean, probably the one thing in there that maybe all 20 of the people that voted for that, maybe they can agree on, maybe it is the depreciation tax. There is 20 people that voted for that knowing full well what you were voting for there, and people are going to complain about that, too. And, obviously, the ongoing search in this body that's going to be on General File and Select is to tax somebody else. And I can certainly understand while my rural constituents say, you know, why don't you put it on sales and income tax? Yeah, that is the ticket. Yeah, put it on sales and I don't pay as much of that. If you do it on depreciation, do it on energy, I have to pay too much. So tack it on somebody else. The thing about it is with Senator Schellpeper's amendment, I mean, he may get enough votes to do it, and I am sure Senator Hall is going to come out of his chair, as is Senator Will, as is many other people, and we will
soon generate into a real contest in here that none of us want to get into. And if Senator Schellpeper's amendment... it is the easiest thing to do from my point of view. I, in some ways, would like to support it, but, on the other hand, we have to try and build a consensus that we can all live with, and probably have to build a consensus at some point in time that at least gets 25 votes to override the Governor's veto. And Senator Schellpeper's amendment, as you can tell, strikes a raw nerve. I think what we have done to date, we have backed down one of the more onerous portions of the Governor's plan, certainly in my opinion, and that is we got rid of the energy tax. That is why I switched my vote and voted for that because we got rid of the energy tax. But if you think for a moment there is going to be a way where you can get somebody else to pay the taxes that we are going to now exempt, you are whistling Dixie, and we have to try and find a way we can all work together. Now Senator Schellpeper may have enough votes to do his amendment. I am not going to vote for it because I think we have to try and find ... craft something in here that we can always go home and live with, and I don't think Senator Schellpeper's is it. Senator Lamb's, you know, started down a path to some degree but, unfortunately, Senator Lamb's proposal, a couple of those things will never last past Select File and, secondly, it never did, to begin with, it never collected enough money to pay off the debt that you incur when you exempt all personal property. So I rise to oppose Senator Schellpeper's amendment. And, eventually, we will make some sausage in here. I don't know how we are going to get to that point, but I think maybe with Senator Lamb's amendment, we finally did say that, yes, the depreciation tax, though we don't like it, it certainly is something you can live with over and above the energy tax, and so I would hope the body would live by that and we can move ahead and start from that point.
SPEAKER BAACK: Thank you, Senator Moore. Senator Wehrbein.
SENATOR WEHRBEIN: Yes, Mr. Speaker and members, I, too, have to talk on this. I hadn't talked so much about this over the last month, but everywhere I went in the district, much like Senator Robinson, I heard the answer in most people's minds was the sales and income tax. So, therefore, I not only had introduced one, but I am going to support Senator Schellpeper's. I don't particularly care for all that he has got, which is typical of what most amendments are, but I am going to ask Senator Will or Senator Hall to answer a question. I don't know whether it will
be on my time or not because I want to say some more, and my question is going to be, since you are adamantly opposed to sales and income tax, and, evidently, consider that totally unfair, I'd like the answer to the reverse side of that question, is why is the personal property tax, and I consider. the depreciation, the surcharge on depreciation schedule, by the way, about the same as the personal property tax, it hits many of the same people with the same type of property. In essence, it is a sales... it is going to be a personal property tax, why is that fair? And that really is the question that I would ask you, if a sales and income tax is not fair, then why, on the other side, is personal property tax or, in this case, a surcharge on depreciation schedules fair? Simply having ownership of material and equipment you have to have to make a living, why is that necessarily more fair than taxing, using the sales and income tax, which everyone, 100 percent of, pays, regardless of where you are at. Every individual pays. it doesn't pick on any one particular person. Admittedly, it hits some a little harder than others as a percentage of their total income, I can't argue that. But in the same token, if you don't buy, you don't pay. If you don't earn, you don't pay. In contrast to any property tax, that is simply an additional charge to anything that you have to own for the purpose of earning a living. And as I come back to that, that is, basically, why I have come back to this issue is that for a year it ought not to be unfair to share this burden throughout the whole state. I do that knowing that this is a temporary tax. I accept that on a temporary basis, perhaps going to a sales and income tax on a permanent basis isn't fair. On the other hand, I would submit it might be fair, and I think a large amount of people, I won't necessarily say a majority, but a large amount of people that I have talked to in several districts with other senators across the districts and across the state agree with that. That is what they come forward with, and as I see the other taxes proposed, the utility tax, and those, I don't consider those any more fair than this sales and income tax is unfair. So if I have ... how much time do I have left? I would give up... two minutes. Perhaps one of you would like to answer in two minutes, if you don't mind being put on the spot.
SPEAKER BAACK: Senator Hall.
SENATOR HALL: Yeah, thank you, Mr. Speaker. Senator Wehrbein, I don't consider being put on the spot at all. The issue of whether sales or income tax is any fairer, I guess would not be
much of an issue for me, if it was paid, I guess, equitably in terms of who pays it. The fact of the matter is the average wage earner, whether they work for you or they work for me, pays a greater proportion, a disproportion amount of sales and income tax in relation to other entities, entities such as business, such as agriculture. Our sales tax statutes are littered with exemptions, not the least of which happen to be seed, feed, livestock, sales tax on gasoline for purposes of agricultural interest. Sure, if we want to put it on and we repeal all those exemptions in that area, I will support it, but the fact of the matter is what you do is when you bring in the sales tax, and you increase it, and you increase it in a system that it already is skewered out of proportion in terms of who pays it, so, in other words, you penalize the little guy who the only exemption they have is on food, and on any services, and services they can't afford, so they don't get that benefit, they don't get that break. And then, you know, I think one of the amendments up...
SPEAKER BAACK: One minute.
SENATOR HALL: ... there is on food, as well, to put sales tax there, what you do is you just throw the system that much farther out of whack, you make it that much more regressive, especially on the lower end. The lower you get, the more regressive it becomes. Anybody who with an amendment such as the one that Senator Schellpeper offers who is in that, even if you go as high as the $45,000 bracket that he would affect through his income tax portion of his amendment, on down, they are going to bear the brunt of this increase, and they are going to, frankly, pay literally 100 percent of it in that category. The guy at the top end is going to pay very little, very little in proportion to their income and in proportion to their spending, and we are going to say the sales tax exemptions for agriculture that we have out there are just wonderful, not to mention the fact that we have got another little bill on Select File that says agriculture only wants to pay 80 percent of the market value of their property. You know, we want to make sure that that gets taken care of, that the homeowner picks up the balance of that at the local level for the goods and services that are provided disproportionate, and then we are going to tie that into sales and income tax increases that they pay disproportionate because of the benefits that are derived through the exemptions in the sales tax code, and we are going to say that is fair. That is fair and equitable. We want to do
SPEAKER BAACK: Thank you, Senator Hall. The next speaker is Senator Wesely.
SENATOR WESELY: Question.
SPEAKER BAACK: The question has been called. Do I see five hands? I do. We will now vote on ceasing debate. All those in favor vote aye, opposed vote no. We are voting on ceasing debate, have you all voted? We are voting on ceasing debate, have you all ... Senator Wesely.
SENATOR WESELY: Yeah, I would like to have a call of the house.
SPEAKER BAACK: A call of the house has been requested. All those in favor vote aye, opposed vote no. Record, Mr. Clerk.
CLERK: 14 ayes, 0 nays to go under call.
SPEAKER BAACK: The house is under call. All members please report to the Chamber and record your presence, the house is under call. We are voting on ceasing debate. Will you take call in votes, Senator Wesely. Call in votes have been authorized.
CLERK: Senator Schmit voting yes. Senator Byars voting yes. Senator Elmer voting yes.
SPEAKER BAACK: The house is under call. All members please report to the Chamber and record your presence, the house is under call. We are voting on ceasing debate and call in votes have been authorized. The house is under call. All members please report to the Chamber and record your presence. We are voting on ceasing debate and call in votes have been authorized. The house is under call, all members please report to the Chamber and record your presence. We are voting on ceasing debate and call in votes have. been authorized. Looking for Senator Schrock, Withem, Kristensen, and Lindsay. We are voting on ceasing debate and call in votes have been authorized.
CLERK: Senator Lynch voting yes. Senator Dierks changing from no to yes.
SPEAKER BAACK: We are looking for Senators Schrock, Lindsay,
Withem, and Kristensen. We are voting on ceasing debate and call in votes have been authorized.
CLERK: Senator Rasmussen voting yes. Senator Hall voting yes.
SPEAKER BAACK: Record, Mr. Clerk.
CLERK: 25 ayes, 5 nays to cease debate, Mr. President.
SPEAKER BAACK: Debate has ceased. I am not going to raise the call, so the call is still on. The senators need to continue to report to the Chamber. Senator Schellpeper, you may start your closing.
SENATOR SCHELLPEPER: Okay, thank you. Senator Dierks wants a little bit of my time. I will give some to him first.
SPEAKER BAACK: Senator Dierks.
SENATOR DIERKS: Mr. Speaker and members of the body, I guess I am just a little bit disappointed because we have been on this piece of legislation all day, and the amendments we addressed early on were amendments that were brought by the introducers of the bill, and we spent a lot of time, and we have been very patient, and we have talked about all these things without any chastisement. Yet when Senator Schellpeper brings an amendment that doesn't particularly fit the program, all of a sudden he is chastised, and I don't think that is really fair. I think that he brought an amendment that I appreciate, the people that I represent like, and a number of people here do appreciate. So I really think that he deserves a little bit more than relegation to second class citizen status on this particular amendment. And I'd just like to stand here in support of what he has done. He has brought an amendment to us that meets all the requirements of constitutionality. He has spent a lot of time on this and a lot of effort on it, and he has, as Senator Moore said earlier on, that we are all looking for some way to tax someone else. This particular amendment doesn't do that. it taxes everybody, and I think that is about as fair as we can get. I certainly have no problem with this amendment and I am going to support it. Thank you.
SENATOR SCHELLPEPER: Thank you, Senator Dierks. I think the body needs to realize that we are not hitting the working class people. We are targeting the upper income people of Nebraska,
the people who can afford to pay. These large companies that are run by individuals, they pay salaries, so we are taxing those salaries. So, in essence, we are taxing these corporations. We are getting at the people that work for these large corporations. Senator Hall has no problem if he wants to. tax farmers, but don't tax my people in Omaha. I don't think that is really fair. I think it is a Nebraska problem that needs to be solved by the people of the whole state. They have to realize that farmers also pay sales and income tax, maybe not every year if we don't make anything, but at least we pay sales and income tax whenever they make money, and, hopefully, we make money every year. I think the Governor needs to consider a sales and income tax along with his other solutions that he has. I just think it needs to be a part of the overall solution that he is trying to put out for the people of this state. If you want to consider a fair tax for everyone, I think this is probably the fairest tax that is being considered. The Lamb amendment is going to be reconsidered. There has been a reconsideration filed, so I think this is another way that we can come in and say that at least we are attempting to solve the problem that we have here now. Senator Robinson, you wanted a minute or so, I will give it to him.
SENATOR ROBINSON: Mr. President and members of the body, I had my aide check with the Department of Revenue, check Washington County and Burt County today on property tax. In Burt County, the city people pay $2 million, the rural people pay 5.4 million. Washington County, the city pays 4.6, the rural people pay 6.6. 1 thought that would be good information you'd like to know, Senator Hall. I am a good example why this is a good bill, because I am like the people behind the glass, I am like state employees that are sitting around here, I am like a lot of people that are sitting here in the Chamber, they get in their car, they go to work in the morning, they come home. It is a yuppie ... yuppies are sort of like that. I used to know the definition of a yuppie, but, you know, their cost of doing business, there isn't any. You jump in the car, you go, pay a little sales, pay a little income tax.
SPEAKER BAACK; One minute.
SENATOR ROBINSON: If you are running a small business, I will tell you one thing, you pay a lot of ... you pay...your cost of doing business is high, just like any farmer in here. I think this tax should be spread around and I think Senator
Schellpeper's bill would do it with a little less sales tax, and I don't think we are hurting the people with the income tax. So I would urge you to support Senator Schellpeper's amendment.
SENATOR SCHELLPEPER: Thank you, Senator Robinson. I want to just remind you, again, none of us like to raise any tax. It is not popular to raise anybody's taxes, but we have to do something this year. We have $90 million we have to make up some way. This is one solution. So I would ask for your support.
SPEAKER BAACK: Senator Schellpeper.
SENATOR SCHELLPEPER: I would ask for a roll call in regular order.
SPEAKER BAACK: We will go ahead and close the board and then reopen again and have everyone check in to make sure they are all here. Everyone please check in. Senator Ashford, would you please record your presence. Senator Chambers, please record your presence. Senator Hillman, please record your presence. Senator Wesely, record your presence, please. We are still looking for Senator Withem and we haven't been able to locate him. He said to go ahead and call the roll. Mr. Clerk, roll call in regular order.
CLERK: (Roll call vote taken. See pages 2158-59 of the Legislative Journal.) 18 ayes, 17 nays, Mr. President.
SPEAKER BAACK: The motion is adopted. Mr. Clerk, do you have items for the record?
CLERK: I do, Mr. President. Mr. President, Enrollment and Review reports LB 836 as correctly engrossed, and LB 836A as correctly engrossed. (See page 2159 of the Legislative Journal.)
A new study resolution by Senator Haberman will be referred to the Executive Board. (See LR 89 on page 2160 of the Legislative Journal.)
Amendments to be printed to LB 754 by Senator Coordsen; and, Mr. President, Senator Schimek would move to reconsider the adoption of the Lamb amendment to LB 829. That is all that I have, Mr. President. (See pages 2160-61 of the Legislative