LB 829 (1991)
May 15, 1991
SPEAKER BAACK: We will now proceed to LB 829.
CLERK: Mr. President, LB 829 was discussed yesterday. It is a bill introduced by Senator Will. A series of amendments were adopted to the bill. The first amendment I have pending today is that offered by Senator Schimek. The motion she offers is to reconsider the vote on adoption of Senator Lamb's amendment, specifically AM1852. That vote was taken yesterday.
SPEAKER BAACK: Senator Schimek.
SENATOR SCHIMEK: Yes, Mr. President, I would like to withdraw that motion.
SPEAKER BAACK: It is withdrawn.
CLERK: Mr. President, Senator Withem would move to reconsider the adoption of Senator Schellpeper's amendment, AM1843.
SPEAKER BAACK: Senator Withem.
SENATOR WITHEM: Yes, Mr. Speaker and members of the body, there was an amendment adopted yesterday that I, personally, think does injustice to this particular proposal. A number of us were gone, and I was at a Government Committee meeting that was scheduled at the same time. An amendment was adopted that, as I understand it, raises the sales tax and the income tax to fund the shortfall that will exist for taking personal property off the tax rolls. It is my opinion that that probably is the one worst thing that we could do, and that would be to react to the Supreme Court decisions that have been coming down in the last several years that should be giving this Legislature a very clear direction that the trend that the state has had of having fewer and fewer taxpayers pay more and more of our taxes is wrong; that the trend that we have had of allowing I can't think of a better term than special interest, and I don't mean that in a derogatory sense, but interests that have a single point of view in mind of getting out of paying their fair share of taxes, and placing it back on the body that doesn't have... that doesn't belong to a special interest group and does not employ lobbyists. And I predicted back home that that certainly won't happen again, that this Legislature certainly will not, certainly will get the message that we need to fix our tax problems and won't just use this as another excuse to shift more
and more of the tax burden onto the average citizen in the state, whether that average citizen is a wage earner or a retired person or however you define that average citizen. Yet yesterday this body did, in fact, adopt an amendment which would say we will relieve the remaining people that are paying. personal property tax from paying that personal property tax, get those remaining corporations and those remaining groups that are paying personal property tax, relieve them of their personal property tax, and we will simply shift that over onto the shopper, when that shopper goes to buy an item, pay a higher sales tax, and I think that is wrong. I think that is improper. Hopefully, if this were a bill that was coming in, had that been an amendment that would have had a 25 vote burden to get adopted, it would not have been adopted. We* are now placed, because of our rules, in a situation in order to reconsider the Schellpeper amendment, we have to get a 25 vote adoption to reconsider that amendment. That is what I am offering. I hope that you are supportive of it. Senator Chambers visited with me this morning and he wanted to co-sign this amendment, although the rules do not allow us to do so because he did not vote with the ... he was neither absent nor did he vote with the prevailing side, so he cannot co-sponsor the amendment or offer the amendment, but he feels very strongly about this and I had indicated I would give him some of my time. I think I indicated I would give you some of my, time here, so I would like to yield the remainder of my time to Senator Chambers.
SPEAKER BAACK: Senator Chambers.
SENATOR CHAMBERS: Mr. Speaker, how many minutes do I have left?
SPEAKER BAACK: Six and a half.
SENATOR CHAMBERS: Thank you, and I like the anticipation in your voice when you said that. Mr. Speaker and members of the Legislature, I do feel very strongly about any effort made to raise the sales tax. I heard Senator Crosby make a comment, I heard Senator Robinson make a comment, and I think Senator Schrock about people loving to pay sales tax, loving to pay sales tax and income tax. Farmers don't pay income tax, so naturally they want the taxes raised high, and when over 50 percent of the income of the farmers is from direct government subsidies, you can understand their position of saying, shift it to the wage earners in the cities. All the people in the cities have from which to derive money is their
labor. The workplace is like Mephistopheles. The labor is like the soul of the working person. I am going to take a percentage of your soul in exchange for a minimum wage. Mephistopheles, Senator Schrock, made promises to old Faustus, he said I will grant you any wish that you want for a period of 25 years, but at the end, I want your soul. Well, a soul didn't mean anything to Faustus, so he said, fine, but here is where Mephistopheles was more honest than a lot of people on this floor. Every promise that was made by Mephistopheles was kept, and Mephistopheles was the agent of the devil, not the devil, himself, and he was authorized by his boss to deliver on the promises made. If we could establish on the floor of the Legislature the principles of Satan or Lucifer, as you will, and Mephistopheles, his agent, the only one we know from history who has dealt directly with human beings and negotiated to a mutual agreement, we would be much better off because the promises made would be kept. What we are doing when these kinds of amendments are adopted, such as the one yesterday, especially, with smaller than a majority of the legislators, is to put an unconscionable burden on those who least can afford it. I know, and we all know, that the poor will always be with us, but they don't have to be made more impoverished by the things that we do on this floor. Sometimes people make comments about the homeless as though we really care about their plight and would like to do something to relieve it, but those are empty words we speak because practically speaking nothing is going to be done by this Legislature for that purpose. But we do know that there are poor people who are working, who are living from hand to mouth, may not know that what they start the morning with will be enough to provide them nourishment and their family for that entire day. Certainly starting at the front of the month, they don't know if they will have enough to eat until the back of the month. So when you levy a tax on them, which is the same as that which would be levied on the wealthiest person in this society, it is wrong. It is wrong, and the reason it is done is not because people like it but because the people who are hurt by it most are given the least consideration on the floor of this Legislature. If a rich person in Omaha, Senator Schrock, spent 7 percent in addition to whatever is purchased as a tax, and the poor person spends 7 percent on what is purchased as a tax, proportionately speaking, the poor person has spent far more of his or her income or assets than the rich person. We all know that. The reason David was condemned so much in the Bible, Senator Schrock, was because he took the one ewe lamb from the man who only had the one, when he had thousands, and he
was strongly condemned because he took the little that that man, who was considered unimportant, possessed. There was an example in the New Testament of this widow. Everybody was putting money into the offering plate. Senator Schrock walks up and with great ostentation drops a $1,000 note into the plate and. everybody claps and the trumpets blare. Then here comes Baron Hefner, who, until you came, Senator Schrock, was top dog here, he comes in and he says now it is going to pinch me a little bit, but to uphold my reputation, I will give more, he drops a $1,000 bill on the plate plus a dollar. Then we have the others who would like to be where Baron Schrock and Baron Hefner are, Senator Lamb comes up and he drops $100, Scotty Moore, $100, and on around. Then here comes a poor little widow, has next to nothing. She is embarrassed and ashamed because everybody has given so much and gotten credit for it, and she puts in what was called her "widow's mite", a tiny bit, and when the one who was supposed to judge the hearts of human beings looked at what was given, based on what they had to give, said that the widow in giving her mite gave more...
SPEAKER BAACK: One minute.
SENATOR CHAMBERS: ... than all the rest. So in the same way that giving of your little constitutes more, when they take from you by the power of the state what little that you have, they are taking. more. The Legislature committed a wrongful act yesterday. Fortunately, by it not being a majority that did it, it was not the act of the Legislature strictly speaking. So by a majority vote, we can undo what that shameless minority did yesterday; minority in terms of numbers on the floor of the Legislature. I hope we will vote in favor of Senator Withem's reconsideration motion. Then I hope we will vote to strip that amendment from the bill, and all of that failing, when it is vetoed, we won't rally 30 votes to override anyway. So we can save all of that by doing the righteous deed today, which should have, been done yesterday. Senator Schrock is gesturing to me, and I don't know what he wants. I don't know if he is threatening me or complimenting me, but he can turn...
SPEAKER BAACK: Time.
SENATOR CHAMBERS: ... on his button and then we will know.
SPEAKER BAACK: Before I go to the next speaker, I would like to introduce some guests of the Legislature today. They are guests
of Senator Cudaback, and they are 45 eighth graders from Wood River Junior High 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 Hall.
SENATOR HALL: Thank you, Mr. Speaker and members. I rise in support of Senator Withem's motion, Senator Withem's and Chambers' motion to reconsider the Schellpeper amendment. The amendment, in itself, was flawed in its application, it was just a simple drafting error because it left part of, frankly, the Lamb amendment in place. So there is a portion of the funding source that Senator Lamb has put into place when his amendment was adopted that was not stricken by the Schellpeper amendment. In other words, there is the funding of the sales and income that Senator Schellpeper's amendment put in, plus a portion of the funding source that Senator Lamb used, which brings probably about... the total I think is approximately $140 million that is currently in the bill for a $95 million problem. So, in addition to just the issue of whether or not it is an appropriate funding source, which I do not believe it is, there is a problem in terms of how it affected the previous Lamb amendment, and, frankly, that is one of the reasons I asked Senator Schimek to withdraw her reconsideration motion on Senator Lamb's amendment because, frankly, there is only part of the Lamb amendment that exists in the bill. It is clear as mud, I am sure. Anyway, part of my reason for standing up here is just to kind of give you an update of where we are at. We currently have before us the amendment that I offered yesterday. It has been amended about six different times . The funding source now includes a half cent sales tax and an increase in the two upper income brackets. We are on the reconsideration motion by Withem and Chambers, Next we have an amendment by Schimek and Rasmussen to deal with the lid on tech colleges. There is an amendment following that by Senator Hefner to put the sales tax on food with a credit. There is following that two amendments by Senator Wehrbein, one dealing with the one cent sales tax, and following that and income and sales tax approach. Senator Moore, then, has an amendment dealing with a 1059 lid proposal. Senator Dierks has-corporate income tax. Senator Wehrbein has intangibles. Senator Moore has sales tax. Senator Moore has income tax, and Senator Rogers and Smith have school funding, intangibles, put all the personal property tax back on, strike three and you are out. The list is long and very complicated. But I would, I would propose a compromise. It is going to depend on what I think happens on this reconsideration
motion. The fact that it was adopted, as stated earlier, by less than a majority is, I think, one of the clear reasons it should be reconsidered. I don't think we should effect tax policy changes without having a full complement to vote on the amendment. Whether it be up or down, I don't believe that should happen. I would like to see us strip the Schellpeper amendment from the proposal. I listened yesterday for approximately seven hours to the debate, participated in much of that, and what I heard taking place there was that on the funding side, after we did some of the other technical amendments, the funding issue was really the crux to the issue that was left. We had the surcharge that, as amended by Senator Lamb, sits before us with the 2 percent based on the property schedule. The, excuse me, the retailers fee, one half of that is out, and then the issue really boiled down to the sales tax on utilities. Was that exemption for ag and industrial and commercial one that should be borne by those companies who would also have to be bearing the surcharge on depreciation? I said yesterday and I will say again today that I would be supportive of this proposal,...
SPEAKER BAACK: One minute.
SENATOR HALL: ... advancing it over to Select File with the Lamb proposal in place, which, basically, shifted the sales tax away from utilities. Now I don't like the $40 million, $42 million proposal that Senator Lamb has in there, but I think between now and Select File, we can work on what is the best way in which to raise that money. I think Senator Lamb offered his proposal to say, look, let's find ... here's a way to do it, here is one way; let's sit down and take a look at it. If we can't do that today, we will just, I guess, proceed to walk through the 12 amendments that are before us, and I have no problem doing that. We will have to vote each one of them up and down. I think some of them have merit. I think others will be a little redundant, but this will be the key vote on the Schellpeper amendment. I would hope there is much debate on this issue because I think it is a critical point in this overall ...
SPEAKER BAACK: Time.
SENATOR HALL: ... discussion of the personal property tax problem that I firmly believe we need to address before the end of the session. Thank you, Mr. Speaker.
SPEAKER BAACK: Thank you, Senator Hall. The next speaker is Senator Chambers.
SENATOR CHAMBERS: Mr. Speaker, members of the Legislature, I would like to ask Senator Schrock a question, if he will promise not to take all my time in answering it.
SPEAKER BAACK: Senator Schrock, would you respond, please?
SENATOR CHAMBERS: Senator Schrock, since I made reference to you, and you were trying to signal something to me while I was speaking, on my time this time, without taking it all, could you either ask me the question or respond to what it was that I was saying that you would have liked to have had the opportunity to respond to.
SENATOR SCHROCK: Well, you make farming sound so lucrative, I know of a good farm for sale in Phelps County, and I would like to invite you to come out and maybe make a down payment on it, and take advantage of some of those federal subsidies, I would also remind you, Senator Chambers, that in 1980, the State of Nebraska had 65,000 farms, farmers. In 1990, we have 57,000 farmers, so we have lost 8,000 along the way that didn't find it so lucrative. So just a brief response, and thank you for your remarks.
SENATOR CHAMBERS: Oh, thank you, Senator Schrock, and the reason I am glad he gave those statistics because I am the one, who on this floor more than anybody else, has constantly talked about the reduction in the number of farmers and have said that every year there will be fewer, and fewer, and fewer. That is what I have always said since I have been here because I studied what was happening. The so-called family farm is a thing of the past. It is gone, doesn't exist. It cannot exist, not only as a money-making or economic entity that is viable, but even from the standpoint of subsistence where using that alone, considering the cost of production, a person can operate it. if you want to run a farm and you are not in those upper regions, where a couple of our colleagues find themselves, you have got to have a job to keep a farm, and then you may not keep it forever. So, Senator Schrock, I have to turn down your offer unless you are going to sell me your farm. He said he would sell me mine, if I can get a loan from Senator Hefner. (Laughter) But he asked how much I need, and he might have it in his watch pocket. Senator Hefner, we will talk about that
after this because I may seriously consider it and show what can be done with enough property to be used for a farm. Senator Hefner just held up a fistful of money. Senator Hefner has so much money, even when it is paper, that he doesn't count it. He weighs it, Senator Hillman, he weighs his paper money. But_ anyway, we are talking today about an amendment that hurts the people who don't have money to weigh. We are talking about the very poor people for whom a 7 percent sales tax is totally unreasonable and unfair. With all of the comments that I have made that could have been taken in a lighthearted vein and were intended to be so, with a very serious underlying purpose, I doubt that there is anybody in here who would want to see a 7 percent sales tax levied on the poor. So we are in a set of circumstances, as a Legislature, where money is needed and the argument is made constantly that the money is not there. So you have to decide from whence you will draw that money. And I say it should not be drawn from the pockets of the poor. Sometimes a person can have so little that people with a great amount will say, well, why don't you go on and take that, too. What difference does it make. He or she is starving anyway- They will just check out quicker. I don't feel that way . I think that those of us in this Legislature who, through the power of our vote and our ability to establish policy, when we come to a situation where something, which would not even rise to the level of compassion....
SPEAKER BAACK: One minute.
SENATOR CHAMBERS: ... can be shown, we ought to show it. It is not... it should not take compassion to not place an additional burden on those who are already overburdened. I hear some people, such as Senator Crosby, who is very sympathetic and compassionate, making pleas for business. Business persons are not as snowed under as these poor people. Even if they lost their business, they have not lost the ability to purchase food and other essentials. As Senator Crosby talked about cutting into their profit margin, not even them losing their businesses, at least they have got something. We are talking about people who even before this unconscionable tax may not have enough to survive. So it is my fervent hope that enough of us will vote to reconsider Senator Schellpeper's amendment. And, Senator Schellpeper, we might can change that name to "Honeycup". Pepper we know has a bite to it. We know that you put pepper in something that you don't want to taste good. People are not responsible for the name that they have, but they don't have to
live up to it.
SPEAKER BAACK: Time. Thank you, Senator Chambers. Senator Schellpeper.
SENATOR SCHELLPEPER: Thank you, Mr. Speaker and members. I rise to oppose this reconsideration. I guess I think that maybe yesterday we probably did something that this body had to do sometime with this problem we are having with our personal property taxes. Whether we did it yesterday or whether we do it in one of our final days this session, or a special session, it is something that eventually we are going to have to do. Now I realize the income tax is probably a little more viable than the sales tax. The sales tax probably is going to have to be replaced with something else, eventually. I think there is some plans being presented out here that can replace the sales tax. But I think the income tax and the rest of the amendment need to stay. We can change, just take the sales tax out of it, maybe, if there is objections, which there probably are. But we need to go with a plan like that that is fair to agriculture and fair to rural Nebraska. The sales tax, statewide, would be 5 1,12 percent with this amendment, except in Omaha, which it would be 7. But, otherwise, statewide, it would be 5 1/2 percent. I realize that is high for some people, but we need to make up this $95 million, and that is our problem is making up how we are going to get this $95 million. Now I think by having the income tax, the top two brackets which we did yesterday, is not going to be a hardship on most people. We have to hit about the same people that we are hitting... that are going to be losing off of the corporation tax or the personal property tax. Now we can probably use some corporation tax. We can probably use some other methods of taxation to make up for the sales tax, but the amendment, itself, with the rest the way that it is put together, I think, needs to probably stay. We had the amendment yesterday drafted before the Lamb amendment was adopted, and that is why we have them both on. We didn't catch it until after they were both adopted. Otherwise, we wouldn't have had this problem. We would have had the amendment on. But I think if you'll look at the support for doing something like this, it has to be considered in the solution to our personal property taxes. You can't look at just raising the energy tax, and you can't look at raising just the surtax on depreciation, you have to consider everything. And I think everything is... also has to include sales and income taxes. So let's not take this amendment off. Let's leave this amendment
on and then just work to find a solution, but use this amendment as part of that solution. So I oppose the reconsideration. Thank you.
SPEAKER BAACK: Thank you, Senator Schellpeper. Senator Smith,. you are next.
SENATOR SMITH: Thank you, Mr. Speaker, members of the body. I stand to strongly support the reconsideration motion being offered by Senator Withem and Senator Chambers. I was one of the people that was absent from the Chamber when that was voted on yesterday because the Government Committee was meeting dealing with reapportionment issues. I sat and listened, though, when I was on the floor yesterday until I left a little after three o'clock yesterday afternoon, and I heard the arguments that went on all day long about this issue, and more and more, I was hearing arguments that were divisive. Talking about the rural versus the urban, and I don't think we should start doing that. I don't think we should be pounding on the farmers, the poor farmers, versus those businesses and those city dwellers that have everything. We are going down a road, if we do that, Senator Schellpeper, to certain inability to solve this problem as a group, if we continue that tack. I want to ask a couple of questions to all the members of this body. First of all, I want you to ask yourself, how did we get in this position in the first place? Everyone of us in here know how we got in this position, because we allowed exemptions. Who received the exemptions? I am not going to answer that but I will bet you all know who received the exemptions. Now what I am going to ask you is, are you saying that those people that received the exemptions should not have to help solve the problem right now? What are you saying? You are saying by this amendment that those, again, that can least afford it, who have been asked over and over in the last years to bear the burden of the cost of government for services and programs and exemptions for other groups, you are asking those who are wage earners, those, people that many of us in here represent, and we forget about that, who come home with a paycheck at the end of the week, and we all know what the average income of most Nebraskans is here in this state, they pull their check out, they give the money to the family and they don't have any exemptions. The government, state, federal, have decided for them what is going to come out of that paycheck before they ever got home. And when they figure their income at the end of the year, they don't have any ways for making deductions before they are taxed again.
And so what you are saying to us now, Stan, often you and I are in agreement, but on this, we are in total disagreement, because this makes me really angry that here we are again standing here trying to justify a sales and income tax by saying the citizens of the state always say that they would prefer a sales tax increase. That is what I say a lot, but I say it if we have to give a tax increase to everyone. This issue was brought to us because it was considered to be unconstitutional, what we have done in the past was unconstitutional, and we are told you now have to come up with a fair system. Here we are, right now when we are trying to solve the problem, we are being unfair again. It is our task to solve this problem. We can't do it if we continue down this road. Those people, I have to say, I don't know how much of Senator Lamb's amendment is still in the bill. All of it is still in the bill. I am glad to see that, Senator Lamb, because at least in here what you are saying, in effect, is, sure, it is not good and they don't want it, but business, my husband has a business. Businesses and farm groups have received exemptions, so they are going to help pick up the difference until we can solve this problem. It is that simple for me, and I hope that the rest of this body will see their way through amendment to see that we have to take this off and get back to looking at this whole issue and saying, okay, for the time being, the exemptions that we have given have been given to those two main groups, they have got to help pay for picking it back up again until we can get the whole thing solved. I strongly support the Withem and Chambers amendment, and I hope the rest of you will, as well. Now I shouldn't say amendment, it is an amendment, but the amendment for reconsideration, and I ask you to do the same. Thank you.
SPEAKER BAACK: Thank you, Senator Smith. Senator Crosby.
SENATOR CROSBY: Thank you, Mr. Speaker and members. Senator Chambers, I did not say yesterday that I thought people like to pay sales tax. I did not say that, and I do not appreciate your quoting me like that at all, and I have had with you. You stand up here and talk about nobody works as hard as you do, nobody understands anything, nobody does anything in here except you, and I resent that because I spent all day yesterday listening, and I have spent four hours again here today listening to issues that we shouldn't even be talking about, and that was what I was talking about yesterday, and you didn't pay any attention. So I will probably vote to reconsider. What I did say yesterday was that I am getting calls from people, people who do not have high
incomes, middle income people who think that pales tax is the most equitable. That is what I said, and they get to the point where they think that all of what... that what happens here is whatever we do it comes back to the homeowner, who has worked ... most of them have worked all their lives to buy a home,. and every year that goes up, especially here in Lincoln, because 1059 did not do us any good. It hurt us as far as homeowners are concerned. So I will probably vote for reconsideration. I don't know how I will vote on the amendment. I voted for the Lamb amendment yesterday but we shouldn't even be talking about anything else right now except taxes, redistricting, and the budget, and we have got to get rid of all of those other issues that we spent half the day on again today. So I would appreciate very much your not misquoting me and saying that I say that people like to pay sales tax. Nobody likes to pay any kind of tax, and when I speak to... I spoke to a group last Sunday, and I said, we will tax everybody except you. And they all laugh and say, yeah, she tells everybody that. Of course, I do because that is what people want. They want you to pay the tax and they don't want to pay it themselves, and everybody knows that is not going to happen. But we have got to do something here before the end of this session. Now we have got twelve and a quarter days left. We are getting nowhere. So, thank you.
SENATOR MORRISSEY PRESIDING
SENATOR MORRISSEY: Thank you, Senator Crosby. The next speaker is Senator Rogers.
SENATOR ROGERS: Mr. Clerk and members, Senator Chambers, I either want to ask you a question or make a comment. No, I want to ask you a question, first of all. Do you still have the silk purse made out of the sow's ear that I gave you a few years ago?
SENATOR CHAMBERS: Yes, I do, Senator Rogers.
SENATOR ROGERS: Well, in that case, if you wanted some more, my hog farm is for sale, also. So that way you could have a new one. To get down to something more serious, you kind of lost me, Senator Chambers, on your first speech on your poetry and your history, but after that, I think I can follow you pretty well. When you talk about sales and income tax, maybe it does hit some of the poorer class a little hard, but I think you shouldn't overlook the fact, and you mentioned there is no
family farm, they are all big farms now, we spend a whale of a lot for sales tax every year, Senator Chambers. At least, we hope we can because if we make money, the farmer does not keep it. They buy something. Usually they buy something before they got the money, and I think everyone in the state benefits from our state taxes, even the poor people I have in my community. They get something from them taxes, for programs, for whatever. If they are low income, they need food, or housing, some of that money goes there. When you talk about the taxes for the poor, that is why you should look real hard at Senator Schmit's and my amendment because we are going to try to change that rate. I got a table the other day and it showed, and we checked with the Revenue Department, and they said this chart was fairly accurate, but first they start with the lowest 20 percent of income, talking about income of $11,000. Those people's total taxes, income and sales, spend 16.9 percent of their income. You get up to the top 4 percent where they make $143,000, they only spend 9.3 percent of their income, and I think that is unjustly fair, too, but I believe that a table can be worked out, Senator Chambers, and I think everyone should pay a few taxes. Thank you.
SENATOR MORRISSEY: Thank you, Senator. Next speaker is Senator Moore.
SENATOR MOORE: Thank you, Mr. President. Members of the body, you know, there is a couple of things you have to understand. Now the first thing is... Senator Hall, I don't like his ... I don't think he explained it totally. The way we stand right now, we 'have both the Schellpeper amendment and the Lamb amendment in their entirety in this bill, is that your understanding, Senator Hall?
SENATOR HALL: No, Senator Moore. The Schellpeper amendment stripped a portion of the Lamb amendment but it didn't strip all of the funding portion out of it, so there is still about...there is the entire Schellpeper amendment in there and then there is the collection fee... the collection fee is out, and so the utility, or, excuse me, the replacement amendment that took away the utility tax that Senator Lamb put in and the surcharge are still in there. So you are looking at about 180 to 185 million dollars that is in here instead of just the sales and income.
SENATOR MOORE: Ninety-seven.
SENATOR HALL: Right.
SENATOR MOORE: Well, obviously, if, indeed, the body were to reconsider the Schellpeper amendment, the Lamb amendment would. be in the bill in its entirety.
SENATOR HALL: No, the bill would be back in the form that it was prior to the Schellpeper amendment being adopted, which would be the 2 percent surcharge, the collection fee, and the various taxes that Senator Lamb...
SENATOR MOORE: Well, you know, Senator Lamb disagreed, but if we repeal the Schellpeper amendment, we are back to square one as if nothing happened and the total Lamb amendment is in the bill. Yeah, I guess I don't know who else to ask that question. Joanne Pepperl doesn't have a microphone or...
SENATOR HALL: No, what Senator Lamb was talking about was that the depreciation went from two to five, it is Still in there. The rate is just changed, but the money that it raises is still in there. So I mean, the only question is, is it 2 percent or is it 1.5. Irregardless, it is in there and raises approximately $40 million.
SENATOR MOORE: Okay.
SENATOR HALL: But that is over and above the sale and income, and in addition to that, you have the other portion of Howard's amendment that was adopted.
SENATOR MOORE: Although, I think that people need to understand that if you reconsider the Schellpeper amendment, you are still back to square one. Senator Lamb's amendment would...
SENATOR HALL: That is correct.
SENATOR MOORE: ... then be the bill.
SENATOR HALL: That is correct.
SENATOR MOORE: I think a lot of people ... obviously, there has been a lot of emotional speeches. I am sure there will be more as the day wears on. It is one of those things I think some of the advocates of the Schellpeper plan need to understand that it
is kind of like the day that Colorado beat Missouri on fifth down. I mean you got IS votes and you got it on, but people weren't entirely... think that was won fair and square. Yes, the vote was 18 to 17 but it certainly wasn't the 25 votes needed, not anything that wasn't in the rules, but there is a little frustration because of that, and we all know it is going to take 25 votes in the end. But I guess the more important thing is that, you know, I was the guy that switched my vote on the Lamb amendment and got it adopted in a 20 to 19 vote. The reason I did that is because the one important thing is that what I was hearing, primarily from the ag sector, from all above the ag sector, that all these taxes are bad but the worst one is the energy tax. And the reason I voted for the Lamb amendment is that laid out in stone the energy tax was no longer going to be any part of the plan, but it'd keep depreciation. And Senator Smith gives an excellent dissertation as to why it is imperative upon some of us, even as representatives of rural areas, to go up there and say, yes, we are part of the reason this happened. And there is good policy reason, and Senator Chambers may not agree with our policy reason in history, but, yes, there is a reason the ag sector shares responsibility in how we got to here. And I guess it is my attitude, at least, particularly after some of the votes we took yesterday on exemptions....
SENATOR MORRISSEY: One minute.
SENATOR MOORE: ... that we are not going to put things back on the tax rolls, and many things that we are talking about, it, unfortunately, is probably going to be closer to a permanent solution than a temporary one. And in someways, if you recognize the fact that the ag sector continues our exemptions on a variety of multibillion dollars items, and they do pay a portion of the depreciation tax, I think that is fair. I have some amendments filed that will keep the depreciation tax in, and collect some of the money from the income tax side, like the Schellpeper, and I am sure there is a variety of other things. But I think the wise thing to do now would be to repeal the Schellpeper amendment. And the reason I say that is the old adage LBJ said it better than anybody, Senator Schellpeper, and this is a direct quote, so I am going to use it as a direct quote, "If you are going to tell somebody to go to hell, you'd better make darn sure you make them go there." I don't think Senator Schellpeper can tell the rest of this body, the urban sector primarily, to kiss off, I got the votes, because I don't think he does.
SENATOR MORRISSEY: Time. Senator Abboud is next.
SENATOR ABBOUD: Question.
SENATOR MORRISSEY: Senator Abboud, I do not... the Chair does not feel there has been fair debate on this issue yet.
SENATOR ABBOUD: Okay.
SENATOR MORRISSEY: Senator Wehrbein.
SENATOR WEHRBEIN: Yes, Mr. Speaker and members, I appreciate the chance to talk. I thought I wasn't going to. I don't know quite where to start, but I guess maybe I will be corrected if some don't disagree, but one of the things that concerns me, I hate to see the rural-urban split, but I guess we have to be anxious...honest that that is part of what is coming out of this. But I have a strong perception in here as we go along that there is a feeling agriculture isn't paying its fair share. On the other hand, I don't really hear others saying that when we put on the sales and income tax that we are putting it on the sales and income tax because the average taxpayer isn't paying their fair share. In other words, I don't think you hear any interests, business, or agriculture, or otherwise, saying that the other, the individual taxpayer, isn't paying their fair share. That isn't the issue. But I do hear in reverse that agriculture, and perhaps business, is not paying their fair share. And that is one of the things that bothers me because I want to try to be fair, and I don't like being on the defensive for agriculture, in my case, which you, obviously, all know, but that is what the position I get put in many times because of some of the statements and so forth made on this. I have some figures, and I am not going to dwell on them, but they came straight from the Department of Revenue; 1989, farmers and ranchers paid an average of $701 in income tax, all others paid an average of $641. It is about a $60 difference; 1988, farmers and ranchers paid average of $630 in sales tax, others paid an average of $531. All that really shows is that farmers and ranchers, in this case, have paid slightly more in income tax, and in sales tax than others. Now one of these studies was in the Nebraska Taxpayer Profile Study that the Research Foundation put out. All I am saying is it doesn't indicate that they are not paying their fair share. Perhaps some think that they should pay more. I guess I am not going to go on and on, on
depreciation this, except I don't understand if, as we go back to the schedule, the surcharge, which I would reluctantly accept but I would accept if people feel that agriculture and business isn't paying their fair share on the personal property tax items, which, in my opinion, is the depreciation schedules, as I said yesterday, that why don't we talk also about intangibles, and which I have up there, spend more time talking on intangibles. As I have said many times to you, personally, and out everywhere, I don't see much difference between stocks and bonds, and cows and sows, and machinery, but we have made that distinction. We call one tangible and one intangible, So if we really want to be fair, and if it is really fair to tax personal property, that is depreciation schedule, the surcharge, then why is it not fair to consider the money-making schemes of others, via the intangibles, stocks, bonds, what have you? But we don't even mention that word. My only point is I consider both of those fair, but we talk about one, personal property, but we do not talk about intangibles at all. Therefore, I consider it unfair. Now I am not... I am a realist. I realize there is not a chance in 2 million or 200 million that we are going to put a tax on intangibles, although many other states do, by the way, and I have a list of those that do. But if we are talking about fairness, then why-is it fair to consider business equipment and inventory, depreciable items subject to a tax on one hand, and if agriculture doesn't want to pay it, we are trying to avoid our duty, via the exemptions, but it is fair then to exclude intangibles? I don't understand the distinction on that point, and that was the point I was trying to make yesterday. By the way, I really didn't think Senator Hall answered my question yesterday when I asked how do they consider a tax on intangibles fair?
SENATOR MORRISSEY: One minute.
SENATOR WEHRBEIN: It bothers me that we get into this urban-rural divisiveness and raise our voices at each other because I sincerely believe that... from my point of view on the sales and income tax, it is fair, that every segment of all society of the whole State of Nebraska does pay that. it doesn't exclude agriculture in that case when we put it on. The way I sense it in here, others say once we try to pass it to the sales and income, all we talk about is passing onto the wage earner and the homeowner. And I guess, see, I don't see it that way. Perhaps I am as one that Senator Chambers handed out this morning, I am ignorant and humble. And if that is the
definition, then I guess I am ignorant and humble, because I have been called ignorant on this floor before. And so I have a struggle with this, I am going to oppose the reconsideration of Senator Schellpeper's. It isn't that I won't compromise. If it fails, I certainly will look at others.
SENATOR MORRISSEY; Time.
SENATOR WEHRBEIN: But I am working hard at being fair and I don't like to be accused of otherwise.
SENATOR MORRISSEY: Senator Will is our next speaker.
SENATOR WILL: Thank you, Mr. President and members of the body. I rise in support of the motion to reconsider the Schellpeper amendment that we adopted yesterday. I don't want to go on at length about it because I think that we all understand the issues involved and we understand the ideas that are involved, and we might as well bring it to a vote before too long. I would like to mention a couple of things. The first is, we can tie general ... there has been some talk that has kind of touched on some general principles of taxation this afternoon, and I guess the one point I would like to make about the sales tax, specifically, is that in text after text and tax expert after tax expert that you talk to will tell you two things. They will tell you, number one, that the sales tax is perceived to be the least burdensome, in general, by members of the population, and the primary reason for that is that they pay it out a little at a time. Now they pay it out in, you know, a few cents on a very small purchase, a few dollars on a larger purchase. The only time people tend to notice the level of the sales tax is when they make a major purchase and they pay it, when they pay their sales tax when they are registering their car, when they buy that large piece of farm machinery, for example. The other thing that the tax experts will tell you about the sales tax is that without question it is one of the most, if not the most, regressive taxes that we have, and that any state has, simply because most people, who have small incomes, spend a great deal of that income on taxable items, and as income climbs, the proportion of income that is spent on taxable sales simply goes down. That is simply a fact of life that the studies have indicated, and for that reason, I don't think there is... if you could find me a tax document that indicates that the sales tax is something other than relatively regressive compared to other forms of taxation, I'd be willing to take a look at it, but I
think you will have a hard time finding it. There are two reasons why I think we ought to reconsider the Schellpeper amendment. The first is that the rationale, I spoke of this yesterday when we were debating the Schellpeper amendment, and the rationale behind the concepts in LB 829, as originally or in the amendment to it as originally introduced, are that there are tax exemptions that we have had on personal property over the years, that tax exemptions have affected mainly two sectors, that was mainly the agricultural sector and the business sector, and those have led to the problems that are the reason that we are here discussing LB 829 right now. And when we were looking for replacement revenue, the rationale was let's go to those same sectors for the replacement revenue. Hence, the proposals involving the depreciation surcharge and the tax on energy purchased by manufacturing and agriculture. I think to depart from that and take replacement revenue from general sales and income tax is a departure from the concept that we are going to confine the price for this to the same sector that has gotten the exemptions, and it is a departure that I don't think we ought to accept on the floor of the Legislature. I think those same entities that are getting exemptions ought to be picking up the tab for the things that we are having to do here in LB 829. The other reason, quite simply, is that we had a sales and income tax, what I would call a rather substantial one, last year, in LB 1059, that was a major shift in the way that we finance our schools. It was a structural change and, frankly, the benefits to that accrued to a lot of areas that have the agricultural property that we are talking about right now. And I don't think it is fair to come back with a general sales and income tax increase this year on this issue as an answer to this problem, when we made such a fundamental structural change last year that fell on the backs of the people that pay the sales and income tax. For those two reasons, I would urge your reconsideration of the Schellpeper amendment. Thank you.
SENATOR MORRISSEY: Thank you, Senator Will. Our next speaker is Senator Schmit, followed by Senators Hall, Lynch, Chizek, Chambers, Lamb, and Abboud.
SENATOR SCHMIT: Well, Mr. President and members, this morning we were tied up several times on a couple of issues that I was interested in. One of my concerns at the time was that I was . trying to get 25 votes out of 42 or three. That is pretty tough to do. On this floor from time to time, you win or you lose based upon the votes, and based upon the numbers. And it is
always sort of the luck of the draw when we have to try to decide an issue with, as happened yesterday, the Government Committee out of...off the floor and we recognize that it was a serious disadvantage for one side and an advantage for the other. The issue, whether you take a vote on Select File or. General File, and how you do it, and the mechanics, that is a part of the process. We recognize that. Senator Hall recognized that when he allowed 829 to be used as a vehicle. I am really seriously concerned. If it were not for the fact that the rural members of this body are rapidly becoming the endangered species of the Legislature, I'd probably almost be inclined, and I may yet be, I am not sure, to cast a vote to reconsider. I've just sat down and have gone over in some detail the vote on the motion on 850 this morning to pay the Commonwealth depositors, and it causes me serious anguish to realize that only two other rural legislators and myself cast a vote for that motion. And I would have to say this, that given the law of averages, given the law of averages, and throwing out every other consideration you can think about, we were not voting, ladies and gentlemen, on anything other than, does the state have liability when an employee of the state, someone who is responsible to the state, doesn't carry. out their responsibility, and, in fact, becomes a thief? Now when you count -those votes and you find 16 basically urban legislators and three rurals, and I have thrown in Senator Morrissey, and he is going to cringe a little bit, among the three voting the other way, the law of averages, ladies and gentlemen, don't argue very well for that.. Nothing happens perfectly in nature, and you'd have to find a different set of circumstances to argue that only three rural senators could find it in their heart to support such a motion. I couldn't help but think at the same time this morning as I was driving in, that we're talking about the need to reimburse the depositors or the Governor's fund, disaster fund, because of the problem out in western Nebraska. Well, the day will come, ladies and gentlemen, when the chances of getting funds for Crawford, Nebraska will be as rare as, well, I am not going to say, somebody voting for the lottery on this floor, because why should they? Why should you be concerned about a vote for someone as far west as Senator Wickersham's district? For all anyone knows, it is Wyoming. Most people in Nebraska will never see Crawford, Nebraska, and so who cares less. And the matter of equity isn't an issue here. The matter of equity wasn't considered on the Commonwealth vote this morning. It was, is it going to affect my reelection or not? That is a bunch of nonsense. I happen to
think that what we did yesterday, if you read my letter, and I don't suppose most of you did, but I wrote it down because I did...
SENATOR MORRISSEY: One minute.
SENATOR SCHMIT: ... not think I'd have time to give it to If you read my letter, you completed what we otherwise. did ... what we started to do more than 20 years ago, to take the tax off... to remove an unfair tax and return it to the sales and income taxes. We tried to do that. This completes it, but the facts are I don't like the way it was done. I don't think it was fair to Senator Hall, it wasn't fair to the urban people, and I am afraid they are going to probably shove it down our throats, and I don't want to be a participating legislator there because I have got 30,000 some constituents who are going to say, Schmit, you threw in the towel and then you went away. And you took a walk, and you went in with those urban guys. The facts are it ought to be done straight up, it ought to be done not on the basis of who has got the power. It ought to be done on the basis of what is equitable. Now I don't know that I can go to my urban friends and talk about equity if that gets back there. I am afraid they will say, aha, now we have the got the votes, Schmit, you are out of luck.
SPEAKER BAACK PRESIDING
SPEAKER BAACK: Time.
SENATOR SCHMIT: But I am telling you exactly what is the problem in the Legislature today and that is we don't look at it from the standpoint of what is right and what is wrong. We look at it from the standpoint of who has got the votes. In this case, my rural friends, I don't know if we have got the votes or not. Thank you.
SPEAKER BAACK: Thank you, Senator Schmit. Senator Hall, you are next.
SENATOR HALL: Thank you, Mr. Speaker, members. Again, I rise in support of the motion to reconsider Senator Schellpeper 's amendment. The issue is one of, again, funding, really what is the proper mechanism. I think that it has always been the intent of the Revenue Committee to deal with this from the same source where the personal property tax was derived to begin
with. We've tried to do that through amendments. I know that the, again, the discussion really centered around I think the whole issue of what is being called the urban and rural rift around the utilities tax. Should you reconsider and then have Senator Schellpeper's amendment in front of you and vote that. amendment down, we would have the bill with the surcharge in it. We would have the collection fee in it, and we would have Senator Lamb's amendment, which struck the sales tax on utilities or replaced it with some other taxes in the business :re:, Now I do not like Senator Lamb's choices that he used to raise that replacement revenue, if you will, to offset the utilities tax, but I do believe that it is a good faith effort on his part to say, look, we can't absorb this. I am willing to look at that. I really think that that... I heard that loud and clear yesterday. What I am hearing today, though, I think is something different, and I hope its... I begin to hear an echo again from yesterday because I think we can work this out. it is not that difficult. I hear people saying I can support the surcharge, the collection fee seems to be a given. The only rub in this whole process so far has been the sales tax on utilities. Let's go ahead and repeal the Schellpeper amendment, reconsider it, vote it down, advance the bill, and work on a funding formula other than the sales tax on utilities, one that isn't I guess onerous for agriculture or any other specific entity of business, and that is my objection to Senator Lamb's proposal. It is industry specific, and that it picks out three or four different area of business and targets in on them, and we will be back to the same battle, only instead of agricultural interests waging that battle, it will be telephone interest, or railroad interests, or trucking interests who are waging that war. So I don't like the Lamb amendment but I think it would be good faith on the part of those individuals who don't want sales and income tax to support LB 829 as amended over to Select File and then go about the process and working on raising that revenue in some form or fashion that is palatable to everybody and doesn't hurt any one interest more than another. That is what I would like to see us do. I mean we can stand here this afternoon, this evening, and tonight, and talk about food tax, food tax credits. We can talk about a penny sales tax. We can talk about income and sales tax, corporate income, intangibles, sales tax, income tax, and all those things, and I am willing to do that, and I don't have a problem doing that. But I think that we will be spinning our wheels and we will be hearing echoes from last night, and voices may get raised again as we continue to fight over one very small portion of this whole
package. Because I keep hearing over and over again that the vast majority...
SPEAKER BAACK: One minute.
SENATOR HALL: ... of this is agreeable to virtually everyone on the floor. I have no problem trying to correct that portion ion between now and Select File that appears to be the object of all this debate. I think leaving Senator Lamb's amendment on, which strips that portion out, and going about the process of looking for replacement revenue is the right way to deal with this, and then we can get on to some of the other issues that are before US. I would hope you would support the reconsideration.
SPEAKER BAACK: Thank you, Senator Hall. The next speaker is Senator Lynch. I don't see Senator Lynch. Senator Chizek.
SENATOR CHIZEK: Question.
SPEAKER BAACK: Do I see five hands? I certainly do. We will now vote on ceasing debate. All those in favor vote aye, opposed vote no. Record, Mr. Clerk.
CLERK: 10 ayes, 13 nays to cease debate, Mr. President.
SPEAKER BAACK; Debate does not cease. Senator Schellpeper, you are next.
SENATOR SCHELLPEPER: Thank you, Mr. Speaker and members. I would like to ask Senator Hall some questions, if I might.
SPEAKER BAACK: Senator Hall, would you respond, please.
SENATOR HALL: Yes.
SENATOR SCHELLPEPER: Senator Hall, if we are going to take the amendment off that we put on yesterday and consider the Lamb amendment, which now has a surcharge of 2 percent, would you be willing to accept the high income tax bracket to replace some of that surcharge?
SENATOR HALL: Senator Schellpeper, to replace the surcharge.
SENATOR SCHELLPEPER: Yes. Right now, as the amendment is, it is saying that it is at 2 percent, which is very high for most
agriculture and industry, and everybody else, but if we would raise the top income tax bracket only, that would be $18 million to come off of the surcharge, which would go to the top income tax bracket. I think we are talking about something that would be a lot more fair, a lot more palatable to the rural senators.
SENATOR HALL: Senator Schellpeper....
SENATOR SCHELLPEPER: It wouldn't take off the whole surcharge, only 18 million of it.
SENATOR HALL: Senator Schellpeper, I would take a-look at any proposal. I would not probably be willing to pull out half of the surcharge, because that is, excuse me, close to what it would represent, clearly more than a third. It would come close to. being half. I would be willing to look at a number of alternatives in terms of raising the needed revenue that the utilities sales tax represented. I think the depreciation surcharge has had pretty sound support here on the floor. Whether the rate should be two, whether it should be 1.75, as it was introduced by the Governor, or whether it should be 1.5 or 1.6 as my amendment had it prior to the Lamb amendment is clearly something that I would be willing to look at. I think what we need to do is get back to the point where we know what the numbers are we are dealing with, and I am afraid we are not, there right now.
SENATOR SCHELLPEPER: I guess what I am asking you, Senator Hall, is would you be willing to look at the top bracket because I think the top bracket needs to be part of the solution to our personal property taxes?
SENATOR HALL: Well, my only problem with it, Senator Schellpeper, is this, I have never been opposed to looking at a superbracket. I have introduced a bill at least on two different occasions, and the amendment a number of times when we were dealing with the change in the income tax in 1987, at least at every stage of debate. What my problem is, is that what you do then is you get away from the issue of trying to bring the replacement revenue for the personal property tax, you take it away from the business side of things to the personal or the individual side of the tax scale, and I would be philosophically opposed to that. Now if you ask me, would I be willing to take a look at it on the corporate income tax side of things, I'd probably say, yes. But I mean I'd sit down and talk about it.
I can't tell you right now for the record that, yes, I would be willing to take $18 million out of the surcharge and pile it up on a superbracket in the income tax. I would be willing to look at a number of alternatives, that would not be my first. And clearly, it is more on the side of, you know, the philosophical argument that I want to keep the tax in the corporate world a as opposed to the individual world. It is not that I am opposed to a superbracket at all.
SENATOR SCHELLPEPER: Thank you. Well, if we are going to take this off, like I said, we need to consider some type of the top income or corporation tax. It can't all be on the surcharge. I think that $55 million currently is way too high for the income tax... or the surcharge. We need to consider these other alternatives as part of the overall plan. I still like...
SPEAKER BAACK: One minute.
SENATOR SCHELLPEPER: ... having this amendment on, because I think it gives a bargaining tool, something that we can use to bargain with to try to get the administration and everybody else to come together. I think that the amendment yesterday that we put on did do that. I think it brought us something that had to be out there. We had to discuss it sometime, and we have, but I think it needs to be part of the overall picture when we are looking at solving this problem. It has to include maybe not sales, but it has to have the income tax in there someway, of some form, in that top bracket because you are talking about some people in that top bracket that are going to be ... that need to be paying some tax that won't be paying because of personal property tax. It is going to make them into a higher bracket, and there needs to be some tax generated there. With a surtax at 2 percent, like it is in the Lamb amendment, it is too high for rural Nebraska. It is putting too much of a burden on rural areas, on farmers, on small. business. We need to get more, to spread it out more, and that is why I was attempting to do this with the sales and the income tax.
SPEAKER BAACK; Time.
SENATOR SCHELLPEPER: So I think, if we are going to do that, let's try... let's either keep it on or, otherwise, consider these other alternatives. Thank you.
SPEAKER BAACK; Senator Lynch. I still don't see Senator Lynch.
SENATOR CHAMBERS: Mr. Chairman and members of the Legislature, and Senator Crosby, and Senator Crosby, first thing I have to do is say that accepting Senator Crosby's characterization of her. remarks exactly as she makes it today, I have to apologize for overstating what I claimed you said yesterday about people in your area loving to pay the sales tax. Now that is as much as I can do-. Okay. I still say that Senator Schrock and Senator Robinson indicated that the people in their areas love to pay the sales tax, and if you come up there, they will show you the people who say that. What Senator Crosby had said, and she can correct me on this, is that businesses are in business to make a profit, and you can cut too much into their profit. And I don't think so, when the alternative is to overburden the poor as this national study indicates is being done in Nebraska. Senator Carson Rogers gave me a copy, and doing the best I can without my glasses, I am going to try to read a couple of paragraphs, and this is under the heading of "Big Problem - Unfair Sales Tax". Nebraska sales and excise taxes (laughter) ... his glasses are a bit heavier than mine, I am not used to those being this heavy. Okay, I can see fairly well. I am going to show why I lift weights. I am going to hold these glasses up, and Senator Schrock is offering me a pair. Nebraska sales and excise taxes take 5.6 times as great a share of income from the poorest of Nebraska families as from the richest 1 percent, and 3.2 times as great a share from middle income families as from the rich, the study found; 5.6 times as great a share, thank you, Senator Rogers, as from the poorest. I am sure even Senator Hefner doesn't like that. I am sure that Senator Schrock does not like that. Senator Robinson does not like that. Nobody, in my opinion, who voted for that bad amendment yesterday likes that but the fact is a reality as unconscionable as this made no difference in the voting yesterday, knowing that you were going to require the poorest people in this state to pay more than 5 1/2 times more than the richest people is totally wrong. There are too many times that people in Nebraska love to laud this state and its people and its morals, talking about the work ethic, respect for family values, then you want to put 5 1/2 times the burden on the poorest as you put on the rich. This is why I often talk about the hypocrisy that I do. If we go by what people say they prefer and what they like, everybody is a good person, but when time comes to cast a vote which should reflect those principles that we so easily talk about, the votes come out saying that we are going to continue not only
placing 5.6 percent times the burden on the poor as on the rich, but we are going to make it even greater as a burden on the poor. So I hope we will vote to reconsider and then when the Schellpeper amendment is before us again, I hope that we will vote to take it off the bill.
SPEAKER BAACK: Thank you, Senator Chambers. Senator Lamb. I do not see Senator Lamb. Senator Abboud.
SENATOR ABBOUD: 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? Have you all voted? Record, Mr. Clerk.
CLERK: 26 ayes, I nay to cease debate, Mr. President.
SPEAKER BAACK: Debate has ceased and, Senator Withem, would you like to close?
SENATOR WITHEM: Very briefly, Senator Baack, members of the body. There has been a good debate on the Schellpeper amendment, whether it needs to be retained on the bill, or whether it doesn't. I really do think that this is probably going to be a pivotal vote on the course of whether this Legislature is going to deal with this problem this year, or whether we are going to immerse ourselves within the muck and mire of our procedures and not accomplish anything. And I seriously believe we are in danger of doing that. If the Schellpeper amendment stays on the bill, quite frankly, I think We will be in a position where our horns will be locked and you will not see LB 829, LB 320, or much of anything else in the tax arena done this session. I know we tend to overstate our positions on occasion, but I seriously believe that in this particular case. We have a tough, tough job in front of us and I have been concerned that, as a Legislature, we somehow haven't become quite aware of that, and this is for real. This is not spring training, and this is not all the other analogies that we can use, this is it. This is for real. We have to do something with our tax situation or the whole thing is likely to be thrown out. And this Legislature will go down in history as the Legislature that did nothing while that was happening. It is critical, I think, that we pass a fair, equitable, temporary
solution to our tax problems. First of all, I think it important... it is important that this become a temporary solution and that it does not become the permanent solution. it might be easy in some peoples' minds simply to say do away with personal property tax, up the sales tax, up the income tax., Those are not big deals, nobody will care. That is an easy way to got through with it. This Legislature, for the last 20 years, has looked for easy ways of dealing with tax problems. That is why we are in the situation we are in today. This needs to be a temporary solution. I think with the Schellpeper amendment on it will become... the temptation will be there to make it a permanent solution. Secondly, Senator Smith, I think, made some marvelous remarks a few moments ago, and one of the things that she said was that those folks that are receiving the benefit of the temporary repeal of personal property need to be those that bear the burden of the replacement as much as possible. The average sales taxpayer in this state is not receiving a benefit from the repeal of personal property tax, nowhere near the benefit that they would have to be making up in their additional cost. The third point I want you to remember, this has been a good healthy debate. You have heard from the Chair of the Revenue Committee on a number of occasions, but that Chair is not locked into any specific funding formula for funding what is...funding the amount of funds that will be lost by repeal of the personal, property tax. He talked about considerations of lowering the depreciation surcharge, of leaving the Lamb amendment on so that we are assured of looking at some other fundamentals. You have heard that today. The final thing I want you to consider is that the sales tax hits everyone in the state, which might be an okay argument if there were a benefit going to everyone in the state, but it is not the fault of the average citizen that pays the sales tax that we have a messed-up personal property tax situation. It is our fault, yours, mine, the people that sat in these chairs before us, it is our fault. It is not fair for us to make the average sales taxpayer in this state bear that burden. I would urge you to reconsider the Schellpeper amendment.
SPEAKER BAACK: One minute. You have heard Senator Withem's closing. We will now vote on the motion to reconsider the Schellpeper amendment. All those in favor vote aye, opposed vote no, Record, Mr, Clerk.
CLERK: 26 ayes, 13 nays, Mr. President, on the motion to reconsider.
SPEAKER BAACK: The motion carries. Technically now we are on the Schellpeper amendment because it is before us and technically we have not adopted it now that we have reconsidered the motion. So we are on the Schellpeper amendment. Senator Schellpeper.
SENATOR SCHELLPEPER: Mr. Speaker and members, due to the last vote, I will withdraw that amendment.
SPEAKER BAACK: The amendment is withdrawn. The next item on the bill, Mr. Clerk.
CLERK: Mr. President, the next amendment pending, again to refresh the members, Senator Hall and Will have an amendment pending, Mr. President, AM1772. The amendments discussed thus far have been amendments to that. The next amendment to the Hall-Will amendment is offered by Senators Schimek and Rasmussen, AM1805.
SPEAKER BAACK: Senator Schimek.
SENATOR SCHIMEK: Mr. President, would you pull that amendment, please.
SPEAKER BAACK: The amendment is withdrawn.
CLERK: Mr. President, the next amendment I have filed is by Senator Hefner. Senator, I have AM1813. I have a note here that you would like to withdraw it and substitute AM1874. Is that... am I ... ?
SENATOR HEFNER: Yes.
SPEAKER BAACK: Is there any objection? No objection, so ordered.
CLERK: Senator Hefner, I have AM1874 in front of me.
SPEAKER BAACK: Senator Hefner.
SENATOR HEFNER: Mr. President and members of the body, I appreciate you allowing me to substitute this because the original amendment that I had up there would not work into the Hall amendment as it was before. But this... let me explain what
this does. This would... this amendment exempts all personal property for one year and after one year put it back on as it is today, We keep the War ... we keep the Warner amendment in it. There is no change to motor vehicles. That was the Hall amendment adopted on I believe it was yesterday. The depreciation surcharge would be 1.75, that would raise 40 million; reduce the sales tax collection fee 2 percent on the first thousand and 1 percent thereafter. This is a Revenue Committee amendment to LB 829 and this would raise $7 million. The big part of this amendment is reinstating the sales tax on food with an income tax credit and it strikes the sales tax on energy to agriculture, business and industries. Let me explain the food sales tax and income credit details. The sales tax on food would go back on July 1, 1991. The income tax credit would be available next year when citizens file their income taxes for 1991. The food sales tax credit is $41 per person. The tax credit would be half of the $41 the first year because the sales tax would be on only a half a year. The sales tax on food will raise approximately $90 million. The total... the total cost of the tax credit rebate is $53.3 million. The amount left after the rebate is $42.7 million to be left to make up for the loss on the personal property tax. The food sales tax credit is increased proportionately for subdivisions with a sales tax on top of the state sales tax. The state then withholds an equal amount to the increased credit from the local sales tax. This amendment that I'm offering raises approximately $90 million. Twenty states now charge sales tax on food and with Nebraska that would be 21. The tax credit of $41 per person, how did I come up with that? Well, I figured what a person would spend for food each year and take, for instance, a family of four, this would be $164 credit. This would mean a total food purchase of approximately $3,300 a year. I have a provision in there to exempt food from city sales tax so cities would not receive a windfall like, I believe, Omaha and Lincoln has 1.5 percent sales tax, that would be ... they would receive a credit for that. Sales tax on food would start July 1, 1991 and this amendment has the emergency clause on. And if a person doesn't have to pay state income tax, he would still file the income tax form and receive a check. And this... I'm offering this because this is just one more plan to take the place of an energy tax. With the depreciation surcharge at 1.75, farmers, business me and industries would be paying this. But by putting sales tax on the energy, I feel the same entities would receive a double whammy. I feel that they would be picking up more than their proportioned share of the $90 million. Also, the retail
merchants are willing to give up part of their collection allowance. And the latest figures I received on that, they tell me that it costs about 3.40... just about 3.5 percent to collect this collection amount. I believe that this amendment is fair and reasonable. I'm not positive that $41 tax credit is the correct amount but I believe it's in that vicinity. If some of you think it should be a little more, we could raise it. if some of you think it should be a little less, we could drop it. But this amendment does provide the $90 million to local government so that they do not have to add it onto property tax. Another thing we could do, you know, folks, we could spend a little less money in government but it seems like nobody talks about that, like with our state budget, we're increasing that. Local governments are increasing their budgets. I know we've tried to put some lids on but they just don't seem to work. if you have any questions, I would be pleased to try to answer them.
SPEAKER BAACK: Thank you, Senator Hefner. Speaking order, I have, Senator Abboud.
SENATOR ABBOUD: Mr. President, I would like to give my time to Senator Hall.
SPEAKER BAACK: Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, and members, I appreciate the time, Senator Abboud. Just to update you where we're at since Senator Schellpeper agreed to withdraw his amendment, we currently have had the Schimek-Rasmussen amendment withdrawn. It's my understanding, from talking to the other introducers, Senator Wehrbein, who had three different amendments, Sena tor Moore, who had three different amendments, and Senator Dierks who had an amendment, that they would be willing to withdraw their amendments, take a look at what the replacement revenue would be to cover the utility sales tax that was replaced by the portion of the Lamb amendment and address those ... their concerns, possibly run those same amendments on Select File. They reserved those rights, but would agree to withdraw so that we could get to discussion of the packages that exist currently and, hopefully, advance this bill today so we can move on to other things. My concern for wanting to advance this bill is that I think that if we continue to look at these various options, we could spend a couple more days on that. We are going to be coming up again to Select File and the budget where
it's my understanding there's a number of amendments that we're going to be discussing. I can see us just hitting a log jam if we don't move this proposal, if not today, tomorrow at the latest so that we can begin to work on some of the other things that we have at hand. Senator Hefner is running his amendment,. the food tax amendment. He wanted to do that. And there is also the amendment by Senator Rogers and Senator Schmit that I think it's their intention to run. So that's currently the state of where we're at and I just wanted to let you know that. I do appreciate the willingness on the part of the members to expedite this process knowing full well that really there is no commitment on their part to not come back to these issues once the proposal that is in front of us should be adopted, first of all, and then, secondly, be advanced to Select File. With that, I appreciate everyone's participation and I rise in opposition to Senator Hefner's amendment. I just do not believe that tax on food is an appropriate tax. It is very much a necessity no matter where you happen to live. It is not an issue that can be labeled urban or rural. It is an issue that affects anyone and everyone and I think that it is probably the most regressive of taxes that are potentially out there. With that, I would urge the body to reject Senator Hefner's amendment. I appreciate the fact that he does have the credit in there but I do believe that, in any case, the food tax is the most regressive of taxes possible. I would urge that you would vote down this amendment. Thank you.
SPEAKER BAACK: Thank you, Senator Hall. Senator Will, you're next.
SENATOR WILL: Thank you, Mr. Speaker, and members of the body, I join Senator Hall in rising to oppose this amendment. Those of you who were not in the body in the early eighties, there was an ongoing battle from year to year regarding the repeal of the sales tax on food. What we used to do is we used to apply the sales tax to all purchases of food and then we would ... we gave a credit on the income tax. It was a little differently structured than the one that Senator Hefner has described, but it was a flat credit, if I recall correctly, and the upshot of the situation that we had in taxing food was that it basically amounted to a wash. We took in X million dollars because of the fact that we taxed sales of food and we gave out X million dollars in credits. So it really wasn't benefiting the state at all to have the situation that I just described. And eventually the sales tax on food was repealed. Incidentally, one of
the ... one of the reasons there was such a fight over the repeal of the sales tax on food was that when we gave the local option sales tax to cities, we didn't have a provision for cities to allow for a tax credit. So the cities very jealously protected that portion of their tax base and vigorously opposed any attempt to repeal the sales tax on food but ultimately it was accomplished. There are, nationwide, there are 27 states that exempt the sale of food from sales tax and 19 that tax the sale of food so the majority... the majority of states in the United States do not tax food. The reason that doesn't total 50, incidentally, is that there are some states that don't charge a sales tax. But, ultimately, I think we saw or the Legislature at that time saw it as a matter of fairness in that, as Senator Hall described, the taxation of food, particularly food purchased in grocery stores to take home and consume is one of the more regressive features of the sales tax. And while credits are good in alleviating some of the regressiveness, I don't know that you can structure a credit well enough to actually eliminate all the regressive effects of taxing food. I haven't seen the specifics of Senator Hefner's credit, but I just don't know that it's possible to do that. I have seen ... I have seen a lot of attempts to try that and they all had some sort of flaw in them. The other thing that is important to recognize is that we only exempt the sales of food that are for home consumption. We do... restaurant food is taxed. I guess that is a rational place to draw a line to make a distinction because the theory being that if you're out eating in a restaurant, if you have the luxury to pay what essentially are inflated prices for someone else to prepare the food and give it to you, then you can probably afford to pay the sales tax. That's never really been a point of contention. It's one of those things that I think even the restaurateurs... I guess, I should have... should defer to Senator Rasmussenbefore I make that statement but I think restaurateurs understand that they can charge the sales tax and not have it be overly burdensome. The final reason that I would oppose the reimposition of sales tax on food is the reason that you hear again and again during the session that this is a major... a major step in taxation. We've not had a public hearing on it. We've not... there was not a bill that, to my recollection this year, that proposed the wholesale reinstatement of the sales tax on food. And even... and we've been very careful as a committee to discuss the various proposals that have come along and also to allow a chance for public input that we had just a few days ago. And so, for those reasons, I would... and for the reasons that
Senator Hall ...
SPEAKER BAACK: One minute.
SENATOR WILL: ... indicated about the need to make sure that we. have a measure that's moving, that addresses the problems that we have, I would urge your opposition to the Hefner amendment.
SPEAKER BAACK: Thank you, Senator Will. The next speaker is Senator Chizek.
SENATOR CHIZEK: I rise to oppose Senator Hefner's amendment. I think about 80 percent of it goes back to where we've been. we've traveled this path before and it's not been a very successful path and it was probably something that was very distasteful and unpleasant to the people in this state. I think it's interesting even if you want to give a credit back on food, it borders on being ludicrou's that we'll tax the bread and the baby food that you put in somebody's mouth but you don't want to tax energy. That just simply amazes me. But then that's... that's a part of what we have been dealing with the last two days. I oppose this amendment vehemently.
SPEAKER BAACK: Thank you, Senator Chizek. Senator Schmit, on the Hefner amendment.
SENATOR SCHMIT: Mr. President and members, I also rise in opposition to the Hefner amendment. As it has been said, we've been that way before. Most of all, I do not believe you ought to tax food, an item that is necessary for existence. I think it's a very, very poor precedent. While I have the floor, I want to say also that I really want to congratulate my urban friends because they sort of snockered a bunch of people and they're pretty good at it. And, for my rural friends who voted for the reconsideration motion, I want to see how you explain your vote back home because that's going to be a real good exercise in eloquence and rhetoric and I may want to copy some of that rhetoric. The plain facts are we have talked about whether or not we ought to do this or ought to do that, had ought not to adopt this kind of amendment without a hearing. We are here today discussing a bill, the Governor's bill, that had a semblance of about an hour or maybe an hour and a quarter of debate before a hearing, a bill which impacts upon the State of Nebraska to the tune of tens of millions of dollars. Most farmers are in the field planting corn. Most of them don't even
know about the bill. Most of them wouldn't understand the impact because people on this floor don't understand the impact. I told you yesterday when you were adopting amendment, after amendment, after amendment that if you continued it, the Governor would have to veto the bill. Well, obviously, that became apparent and after the Governor came down off the roof of his office, I suppose yesterday, he was able to get back to some of you, you reconsidered the wisdom of your action. The starch came out of your backbone and once again you caved in. And that's all right, that's politics, I understand that. I just don't want you to think that some of us don't know any better. The votes are here. As I said earlier in the issue, I deeply regret the fact that rural legislators are frequently unable to compromise, are frequently unable to understand urban issues. I do not think I can be accused of that. The problem that concerns me is that we seem to have-some of the same problems vice versa, urban legislators unable to understand problems of rural people. Let me explain the fallacy behind the reasoning that the benefits from the repeal of the personal property tax are being enjoyed by a certain group and, therefore, the cost of that should be paid by that same certain group. Is it not just as logical to understand and to reason that the burden of the unfair, improper personal property tax has been borne by a certain group for many, many years and that the same group, the general public, who has benefited from that tax ought to then now bear the burden? To me, if that's not true, then we ought just to put the tax back on and say, okay, it's not an unfair tax. Now Senator Rogers and I have a bill, it ought to be a bill, it ought to be a bill and be introduced before the Legislature and there will be those who will say it ought to have a public hearing. Ladies and gentlemen, we're talking about the exact same number of dollars. Whether you raise it by a tax on food, whether you raise it by a personal tax, whether you raise it by a surtax, an energy tax, get your head out of the sand, ladies and gentlemen, we're not talking about one dollar more one way or the other, it's whose pocket is it going to come from, whose pocket.
SPEAKER BAACK: One minute.
SENATOR SCHMIT: The issue is very clear and on this floor the rural legislators who voted to do what they did will have to explain to their constituencies that for a short period of time they had a little bit of a chance to achieve equity in this situation and they threw it away. Now some of them are more
rural than others but the facts are that we either didn't understand what we were doing or we surrendered, we capitulated, we threw in the towel and any opportunity to obtain a fair situation is not going to take place. And my good friends over here who are in the huddle are cutting up the pie and they're. carving the carcass of rural Nebraska into so many pieces. And I'm telling you, ladies and gentlemen, this is not a proud day for the Nebraska Legislature.
SPEAKER BAACK: Thank you, Senator Schmit. Senator Hall, you're next. Senator Crosby.
SENATOR CROSBY: Thank you, Mr. Speaker, and members. Senator Hefner, would you yield for just one quick question, please.
SPEAKER BAACK: Senator Hefner, would you respond?
SENATOR CROSBY: On the food tax thing, that... I'm sure that isn't on grocery sales. Some way or another you took food out of ... how did you get that figure? How did you come up with the ... how much people buy? You said $3,300 a year.
SENATOR HEFNER: Senator Crosby, it was $3,300... to get a $164 credit, you would have to buy approximately $3,300 a year and this would be a family for four.
SENATOR CROSBY: But where did you get that figure of $3,300? 1 mean, who said that a family of four could live ... could buy only $3,300 worth of groceries a year and exist?
SENATOR HEFNER: Okay, that...
SENATOR CROSBY: I'm not being sarcastic, I really am serious, I want to know where you got that figure because, to me, it's not a realistic figure at all,
SENATOR HEFNER: Senator Crosby, what would you say is a realistic figure?
SENATOR CROSBY: Or was it like a ... was it like a hypothesis, a hypothetical figure?
SENATOR HEFNER: I said... I said in my opening I didn't know whether the $41 food tax credit was the correct amount but we could adjust that up or down.
SENATOR CROSBY: Okay.
SENATOR HEFNER: But this... this is the information I got from some of the other states that do charge sales tax...
SENATOR CROSBY: I see.
SENATOR HEFNER: ... on food.
SENATOR CROSBY: I see, okay, thank you, that's what... I couldn't... I couldn't figure out where your source was because the $3,300 a year and those figures just didn't sound realistic for food, for groceries.
SENATOR HEFNER: Senator Crosby, I think that was in the same information that I got where it said 20 states were charging sales tax on food.
SENATOR CROSBY: I see, okay. Okay, thank you. For me, you see, the food tax is a bad tax and I ... just for myself and my husband and I have a son in town who comes for dinner once in a while and that kind of thing, I...I spend quite a lot for groceries. Now in a grocery store, you do not ... you do pay sales tax on paper items and things that are nonfood items and that was why I was asking my question because I wanted to be sure that those figures they had broken out were just on food. But when you start for a family of four to buy groceries that's a big item out of the budget each month and, as I look back, and I think Senator Will brought this out too that the credit just simply does not work, it doesn't give enough of a credit and a lot of people perhaps don't have enough income and elderly people who are on a fixed income and so on, that tax on food, I just can't vote for this amendment because of that, because I just can't... I just think that going back and taxing food is one of the worst things we could do right now. I voted for the sales tax thing yesterday and the reason I did and I have had a few phone calls because we got people's attention, didn't we? Yes, because up to late yesterday afternoon nobody was paying any attention. Well, we got your attention and we need to go back on the whole thing and decide how we're going to, in a realistic way, bring some kind of order out of what now looks like chaos to me and to everyone else in our tax system because of the Supreme Court decisions and other factors that have come about. So I ... at this moment, I certainly won't vote for this
amendment. I would like to be able to vote for something that would be realistic. I don't like the sales tax raise and I don't like... I said yesterday on the income tax $45,000 a year sounds like a lot of money. It is not, again, for a man and woman who are trying to raise a family, that's not a lot of money because by the time they take income tax out of that you have not a huge amount of take home pay. So the income tax again hits those middle income people...
SPEAKER BAACK: One minute.
SENATOR CROSBY: ... who are the working people and the middle group of people who keep our country going. So I will vote against this amendment. I hope we come to some kind of realization today or tomorrow as to where we stand. And, as far as the special interests are concerned, agriculture and business are what we do here in Nebraska to keep going. So I think some way or another I did vote for the Lamb amendment yesterday and I understand now that's still in force. So maybe we're getting somewhere but I will vote against this amendment.
SPEAKER BAACK: Thank you, Senator Crosby. Senator Beutler, you're next.
SENATOR BEUTLER: Mr. Speaker and members of the Legislature, I just wanted to make two points that haven't come up which were part of the early 1980s experience with regard to the sales tax on food which I did participate in. I am opposed to the Hefner amendment. I would like to keep the sales tax off food. What we discovered, there were two things that hadn't been mentioned, I think, that might be worthy of your attention. First of all, we discovered that there were an awful lot of people who never applied for the credit. They had no tax to pay. They were not aware that they could get money back by filing a return and these people tended to be poor people, tended to be the less educated people and so the people who are actually hurt worst by the tax were the ones who ... who were ... who did not know to apply for the credit. And there were an awful lot of people that failed to apply for credit who really needed the credit. So that's one thing to keep in mind on this subject. The other thing and perhaps more important, from my experience, is this, once you have a credit, let's say that this year you give a $41 credit, well, what happened in the early 1980s was when money got tight instead of increasing the credit as food costs increased the credit tended to stay the same or fall behind the
rate of inflation. It did not keep up with the rate of inflation. So every time finances were tight we would go to the credit and say, no, we're not going to increase it this year like we should in order to keep the tax at the same level of regressivity. So, consequently, over time what could have been a fairly fair provision became more and more regressive and sure enough it will happen again. It's just the way we operate. It's just the way we deal. You can bet that it's going to happen again and our tax system will become more regressive. Forty-one dollars, $3,300 a year for food for a family of four is not all that high right now, probably doesn't cover what the average family of four pays. I don't... I would be interested to hear what Senator Hefner had to say on that, or maybe I missed it. But I don't think it does cover it. And certainly, as time goes on, we will not keep the credit at the level that it should be kept in order to cover those food costs. I can assure you of that and for that reason, that's why the credit system is not appropriate and I hope we will not consider this amendment. Thank you.
SPEAKER BAACK: Thank you, Senator Beutler. Senator Schimek, you're next.
SENATOR SCHIMEK: Yes, Mr. President, I would like... and members of the body, I would like to 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? Voting on ceasing debate. Have you all voted? Record, Mr. Clerk.
CLERK: 25 ayes, 0 nays to cease debate, Mr. President.
SPEAKER BAACK: Debate has ceased. Senator Hefner, do you wish to close?
SENATOR HEFNER: Mr. President and members of the body, Senator Hall said he wanted to expedite this bill. Well, this bill, I feel, is probably one of the most important bills that we have before this Legislature and still he's asking everybody to withdraw their amendments. So I don't hardly think that's quite fair because I don't know whether this is the right way to go but we need to toss a lot of different things out here and then sit around the table and try to figure out a way that we can come up with $90 million. Somebody mentioned that tax on food
is regressive. This is true except when you give a tax credit, and I didn't have time enough to do enough research to know whether the $41 is the exact figure. Maybe it should be a little higher. But right at the present time there's 20 states that do have sales tax on food and some of these states do not. give a food tax credit. I don't know how many there are that don't give a food tax credit but there are some of them that don't. This bill does not call for a city sales tax on food because I didn't want to see the cities get a windfall on this. Poorer people don't spend as much on food as the more affluent people and that's why I figured that if we get the tax credit high enough that we'll take care of the poorer people and I certainly don't want to hit the poor people in this. Somebody mentioned there was no public hearing. Well, Senator Hall, there was no public hearing on the Governor's amendment until after it was advanced to the floor. Now what kind of a policy is that? I guess it's a new policy here in the Legislature. But if we wanted to have a public hearing, we should have had a public hearing before the Revenue Committee advanced it to the floor. But, at this time, Mr. President, I would like to ask for...to withdraw this amendment.
SPEAKER BAACK: It is withdrawn. Items for the record, Mr. Clerk.
CLERK: Mr. President, thank you. Amendments to be printed to LB 167 by Senator Wesely; LB 843 by Senator Robinson and Senator Beutler to LB 719. LR 96 and LR 97, introduced by Business and Labor call for interim studies, will be referred to the Executive Board. LR 98 introduced by Senator Conway. (Read brief description.) That will be laid over. And LR 99 by Senator Smith calls for an interim study. That, too, will be referred to the Executive Board. (See pages 2184-92 of the Legislative Journal.)
Mr. President, the next amendment is to 829. Senator Wehrbein, you have the next two, Senator, or the first amendment you have, I should say, is AM1720, Senator.
SPEAKER BAACK: Senator Wehrbein.
SENATOR WEHRBEIN: All right. I am going to withdraw both of these for the sake of speeding the process along but I am going to make a comment or two before I do. I may put these back on on Select File. I am interested in seeing that this moves
made forward. I just wanted to make a point. Some comments were here again todayabout adding the personal property tax back on. And I am going to say once again that I consider that synonymous with the surcharge on the depreciation schedule in many, many ways. But I had this brought to my attention by someone not in my district about the amount of tax that will be paid on this surcharge as it presently is with the 2 percent. And in this case, this does include agriculture in this case. If you bought a $50,000 tractor, which is a rather modest price for a tractor today, 10 years depreciation, if I understand the way the bill is you will pay... the first year you would have on the $50,000 tractor, 10 percent, you would have $5,000 depreciation. That is $875 or 87.50, excuse me. And so on down the line every year you're going to pay under a $100 and then it gets less and less, the point being that over the 10-year period you will pay about $500 tax on that plus the sales tax that is still in position on this, which in this case would be another 5 percent on $50,000, it would be $250 ... or $2,500. So we are paying quite a significant share for the tools of production. My only point is that those that say that it's fair to have...we ought to be paying on the depreciation schedule or on the personal property says that we should be taxing tools production. I don't know the history of personal property in Nebraska but I would assume that a 100 years ago there wasn't much left... wasn't much to tax besides real estate and personal property and I would guess that that's where it started. Today we make our money from other areas far removed from the rural economy that we had in those days. But we're still taxing the tools of production, whether it's in business or in agriculture, quite extensively and in most cases in the case of business you have a way to pass that on in the cost of the finished product. But here once again in agriculture there is no way to pass it on so, in essence, it becomes a dead end tax on a... on the agriculture producer because there is absolutely no way to pass it on. I can't seem to get that point across and the reason I say that is when we talk about the sales tax everybody says sales tax is regressive, it's unfair, therefore, we shouldn't do it. And I cannot distinguish the difference between that, in my opinion, than I can that's saying the surcharge on depreciation schedule because, to me, that is regressive too, you pay it whether you make it or not and there is no... absolutely no way to pass that on. And I, try as I might, I can't seem to get others to understand that and I would be open to someone coming to me and explaining to me how a surcharge on depreciation schedule or my words, a surcharge on personal property, the tax
annually on your tools of production is fair or at least is any fairer than a sales tax that ... on everything and everybody. And I'm open to that discussion by anybody if they would like to make that point. With that, Mr. Clerk, I would like permission to withdraw both of those amendments that are coming up.
SPEAKER BAACK: The amendments are withdrawn. Thank you, Senator Wehrbein.
CLERK: Mr. President, the next amendment I have to Senator Hall and Will's amendment is by Senator Moore. Senator, I have AM...
SENATOR MOORE: Pass over.
SPEAKER BAACK: It is passed over.
CLERK: Mr. President, Senator Dierks has the next amendment.
SPEAKER BAACK: Senator Dierks.
SENATOR DIERKS: Mr. Speaker, I would like to pass over that amendment.
SPEAKER BAACK: It is passed over.
CLERK: Senator Wehrbein, yours is the next. Senator, AM1826.
SENATOR WEHRBEIN: Okay. This is on intangibles.
SPEAKER BAACK: Senator Wehrbein.
SENATOR WEHRBEIN: Somewhere... somewhere I have how many states have intangibles. I am serious about this and I'm not going to take a lot of time but this will come back. But I can't, once again, understand why we don't have more discussion on intangibles. Figures I have say there's $114 billion of intangibles in Nebraska and I'm sure that's a wild guess. But why, when everyone is comfortable with taxing the tools of production of agriculture and business, ag processing, any other tools of business, why do we not tax the tools of the service economy, if you want, or others? Why do we just automatically throw that out? And I've noticed no one has even picked up the point to defend the lack of intangible... intangible tax. I raised the issue an hour ago, no one has defended that point that we have exempted them. We quietly do. And I will be
serious about putting this on depending upon how this bill passes out of General File to Select. But, to me, we've got to discuss it. We've got a huge, huge industry out there that is literally not being taxed on the same basis that we're taxing the production items of business, and industry, and agriculture, and we just blithely ignore it and we don't even bother to debate it. Mr. Clerk, I would like permission to withdraw ... Mr. President, I would like to withdraw that amendment.
SPEAKER BAACK: It is withdrawn. The next amendment.
CLERK: Mr. President, Senator Moore has the next amendment. Senator, I now have AM1820.
SPEAKER BAACK: Senator Moore.
SENATOR MOORE: Mr. Speaker and members, I guess I ... when Senator Wehrbein withdrew that amendment I wanted to reiterate what he just said. I mean, the interesting thing is when ... whenever we get into the discussion about putting everything back on the tax rolls people's definition of everything is always ... depends on who you are. Obviously, with the one vote we made yesterday when we said everything but 775 exemptions that caused a little bit of consternation, as well as when you talk about everything including... and not including intangibles. I just want to ... nothing to do with my amendment here but I wanted to echo Senator Wehrbein's point of view that if you really want to talk about putting everything back on the tax rolls, the definition of everything needs to include intangibles as well because those are as logical to tax as other forms of personal property. And when many in the state, in the lobby and even in this body want to point blindly and use the expression let's put everything back on, they need to understand that there are at least a few people in this body that when you... that you're definition of everything includes intangibles. And I would like to rise to certainly second Senator Wehrbein's comments on that. As far as this amendment and the next one, I will withdraw them at this time and it's my hope that we ... we pass... we move the bill over with Senator Lamb's amendment intact. That is far from perfect and as a matter of fact that is not even ... not even workable and I'm the first one to understand that. But the one thing that I would say is that you're not going to tax the energy, possibly to depreciate some of the (inaudible) and still we continue to work on it. And so,
at this time, I will withdraw this amendment and the next at this time.
SPEAKER BAACK: The amendments are withdrawn.
CLERK: Senator, does that apply to AM1825 as well? Okay. Mr. President, the next amendment I have to the bill is by Senators Rogers and Schmit.
SPEAKER BAACK: Senator Rogers or Senator Schmit.
CLERK: Senator, I have AM1827 in front of me.
SENATOR ROGERS: Okay, Mr. Speaker, and members, I think ... hang on one second. I think everything is supposed to be on your desk now. I think most of you probably heard about our amendment. It's a radical change. Basically, there is... I think the amendment is 141 pages long but there's only about four or five sections that really deal with what Senator. Schmit and I are trying to do. It eliminates local school districts power to levy property taxes and requires school districts to file their budget requests with the State Board of Education which in turn would submit total statewide requests before the Legislature as part of the Department of Education budget. it's a major effort to shift, I know, school financing from local property to state funding. It would require the school budgets to submit their budgets, requests, and they would still have the 4 percent lid. There would have to be some things worked out how that money would be distributed back to the schools. Section 4 to Section 67, 1 believe it is, mainly deletes terms of real and personal property and the reason for that is after the sales and income tax do support education then everything in this amendment would go back on the tax roll, and when I say everything I mean everything, then that would support the rest of county government. If you would look at some of these things, I mean, I think it's amazing what something like this could do. Although it does increase sales and income tax, I think there's more and more people are saying that's one fair way, sales and income, you have to make it before you spend it. I think there's a lot of entities in here, agriculture, that I'm going to refer to that a few years ago we had some years that we didn't make enough money to pay our property tax. Income and sales tax, a basic part of that is that you have to make it before you spend it. Some of the figures that I think Senator Chambers was remarking about, maybe the income tax is too high
for the lower income. That table could be changed, I mean, as far as I'm concerned and I think Senator Schmit is with me that higher income bracket could be raised or maybe the lower income bracket could be reduced somewhat. Some of the figures that the state average, I think it is with this particular amendment the state mill levy would be about point three something. So there would be no reason for people not to turn in everything they've got with a mill levy that low. Also, the table that Senator Chambers was referring to, I think we passed that out. It shows that the lower income ... and this is total taxes, income and sales tax, takes like 16 and 9 percent of their income. You get up to the top 1 percent, they only pay 8.6 percent of their income for taxes. I think that that's another excellent place to reduce the load on the lower income. There's also an article that was in the I believe, that was by George Holmes, Professor of Economics. I don't know Mr. Holmes but I sure agree with one of the...another point of view. And I will just read one paragraph. Now that we come to a second basic principle of taxation, since income is the ultimate source of taxes paid, what justification is there for taxing someone other than income? In other words, how can taxation of either transactions, sales or ownership of property be justified? Basically, what he's saying, it's the income that should be taxed. Basically, that's what this amendment does. I know that some of the entities and some of the comments that I have heard they're worried about will the local school districts lose their ability to govern? I mean, we aren't doing anything in this amendment to change control. If something does happen, this is something that could be changed later on. I guess I will stop now, Mr. Speaker, and see what some of the opinions are. if there are some questions, I will see if I can answer them.
SPEAKER BAACK: Thank you, Senator Rogers. Discussion on the amendment. Senator Will.
SENATOR WILL: Thank you, Mr. Speaker, and members of the body, I rise in opposition to the Rogers and Schmit amendment. I understand what Senator Rogers and Senator Schmit are trying to get at. They are reacting to the frustration that comes from a system that relies heavily on the property tax as a revenue source that historically we have come in year after year and tried to correct that situation and, as I understand their amendment, it basically takes LB 1059 and carries it to its extreme which is taking away the ability of local school districts to levy property taxes and transferring that to the
income tax which, as Senator Rogers argues, is based more on ability to pay than the property tax base. I guess it's appropriate at this time to talk about the three major tax sources that we have in the State of Nebraska which are the individual income tax, the sales tax and the personal property tax. And each of these represents a different aspect of the concept of ability to pay, I would think. Income tax, obviously, you take wages that are coming in and you take income that's coming in from whatever source, you make some adjustments to it and you have the amount that you pay an income tax on. You structure it so, that you have, hopefully, a progressive tax system whereby the individual that makes a little more is paying a little higher proportion tax than other individuals. The sales tax is based on consumption. If you have resources that you're willing to spend-on certain things, the theory is that the state can tax that transaction, that that's money exchanging hands, that the state is entitled to a portion of in order to provide the goods and services that sustain the system whereby you have the ability to go out and exchange money for goods and services of that type. The property tax exists as a measure, not necessarily of income, but of wealth. This is a... it's a measure of one's ability to acquire and hold property and the theory there being that if you have the wealth that enables you to do that, that you probably are able to put your hands on enough resources to pay a property tax every year. I guess, as I've just described, the three different taxes have somewhat different justifications. But I think it's important that we... because we've had a property tax situation in Nebraska that has been less than desirable for a number of years now, because of the high property tax rates is not a reason to abandon that system altogether which you... they'll argue, no, cities and counties still have the ability to use the property tax but we all know the school districts are the major property tax consumer in the State of Nebraska and essentially by doing ... by doing what Senators Rogers and Schmit would be suggesting we are throwing out ... we're making income and sales such a high proportion of the funding of government that essentially we're changing the very character of our tax system. And I would be the last one to sit here and defend to you the property tax levels that people have been paying that I hear from the homeowners in my district again and again. But I think to throw that out as a funding source for schools is going too far. The property tax inherently is not a regressive tax base. The property tax has a justification that I have described which is that you have wealth as a basis for paying taxes. It's only
when property tax levies reach certain points where they start consuming so much of an individuals' resources that they become relatively burdensome compared to other tax sources that we have problems. And we've had that problem in Nebraska. We've had that problem for a number of years now. But simply to scrap the system, simply to scrap the property tax system, which is virtually what we're talking about here, I don't believe is the answer. This is such a major tax change that I think if we are to make a change like this, if we are to rationalize making a change like this, if we're to be able to go to our constituents and explain that we're making a change of this type, I think that it deserves long, hard study. I think I was quoted in the newspaper as saying that this should be the product of a five-year study, not something that we decide in the last 20 days of the session.
SENATOR LABEDZ PRESIDING
SENATOR LABEDZ: Senator Will, one minute.
SENATOR WILL: And I would stand by that statement. I think this is, as Senator Rogers described this himself, this is a radical ... radical departure from what we're doing now and I think it would be... it would not be to the best advantage of the Legislature, the citizens and the State of Nebraska to take such a precipitous step at this point. I would urge your opposition to this amendment. Thank you.
SENATOR LABEDZ: Thank you, Senator Will. Senator Elmer, on the Senator Rogers amendment to the amendment.
SENATOR ELMER: Thank you, Madam President. What is being proposed here is a major change in the way things are being done. It has its aspects that could be looked at. But I'll talk a little bit about property tax, both personal and real property tax. And I would... I would say to Senator Will property tax is an archaic, obsolete tax. And, Senator Will, it is a regressive tax, for this reason, the value of a piece of property in these days does not represent what your capital is invested in it, I would say a good deal of the homes owned, a large amount of the agricultural land that's owned and a large number of businesses that are owned have only a small amount of the man's capital invested within them because they owe the rest to the bank and they're making payments. Property tax is no measurement and the value of the property that a man has title
to is no measurement of his ability to pay it. If the bank owns 80 percent of the value of a piece of land, the farm individual or the homeowner is still paying all of the property tax. it doesn't represent what he has invested. There are some better ways, though a major change like Senator Rogers and Senator. Schmit are talking about I'm sure should be looked at and have a public hearing. But we need to make a major reform.- The court has given us, in this body, a challenge and an opportunity. The challenge is that we have made some mistakes in the way we have done our taxation system and the opportunity is that here and now in the next nine months we have the opportunity to forge a new way to do things other than reliance on old archaic methods. Thank you.
SENATOR LABEDZ: Thank you, Senator Elmer. Senator Rogers.
SENATOR ROGERS: Madam President, members, Senator Will, could I ask you a question? I need something cleared.
SENATOR LABEDZ: Senator Will, would you yield?
SENATOR WILL: Certainly.
SENATOR ROGERS: You made some comments about, I think, if I understood you right, that we still should have some property tax. Can you explain to me... and I'm going to use a couple of son-in-laws that I have that live in Omaha and I don't know what their property tax bill is a year but we've talked about this for a couple of years when they come home to see us. They own a home. Probably that's all they own. There's a great number of us in here, not just me but some other people who probably pay more property tax every two or three weeks than they pay in a year. Now, and I will let you have all the time you want to explain to me why you think that's fair, Senator.
SENATOR WILL: Well, I think... I think, Senator Rogers, that every ... every type of tax you're going to find situations of that type. I mean, I can turn around and tell you that income tax wise there are people that make far less income than others, while those people with the greater income, I mean substantially greater, simply have an ability to shelter that income. And it's a situation you find in the income tax. I suspect in the sales tax right now people who are heavy purchasers of services, for example, don't pay near the sales tax as someone else who happens to buy equipment or some other large ticket items that
are taxed. In every type of tax that you find, you can find those inequities. And the fact of the matter is that in the area of the property tax there are so many variables relating to assessment, relating to jurisdiction, relating to the entities that tax individual parcels of property whether they be homes, whether they be agricultural units of, you know, farms, ranches, whatever, that, sure, you're going to be able to find inequities out there. I would... I would stress that I'm not saying that that's not the case. I'm simply saying that from a... from a taxation point of view, from a tax theory point of view, there is a basis for paying tax on property that's owned and I'm not ... I'm not going to stand here and tell you it's equitable because it's not always.
SENATOR ROGERS: I guess you answered your question your own way. I guess you really didn't answer my question but it's a hard question to answer and I agree with that. You talk about the inequities, that's one thing that if you would look at that handout that gives the total tax bill, it started off with a lower 20 percent, people that make $11,000 pay 16.9 percent and you get up to the top 1 percent and they only pay 8 percent. I think that's unjustified, too. Maybe that's something that over a period of time we could correct because I think we've had bills in here before to at least have the wealthy pay basically at least the same percent that you and I pay, Senator. And I agree with that 100 percent. Thank you.
SENATOR LABEDZ: Thank you, Senator Rogers. Senator Moore, on the amendment to the amendment.
SENATOR MOORE: Well, Madam President, and members, I guess since the body is in semirecess here I will talk a little bit because, you know, Senator Schmit and Senator Rogers bring to us an amendment that I'm sure many of us out in the country hear often. We go out there and many of my neighbors from the farm say, golly, we've just got to get rid of property taxes. We just ... property tax is the most unfair tax, I'll pay all the sales and income tax in the world that you want me to pay. I would be... I mean, many people, and I don't want Senator... I don't want to endure Senator Chambers' wrath too much when I say that but there are people out there that say that, many people. I'm sure Senator Schmit hears it, Senator Rogers hears it, other people say do away with property taxes, put it all on sales and income. I mean, I've had elected officials call me up in the last two months telling me that that's the way to solve the
problem. And Senator Schmit and Senator Rogers recognize that and bring forth the amendment. Well, there's a flip side to that argument, I think, that has to be made because many of the same people who will call you up and say, do away with property taxes are the same people that will scream at the top of their lungs about maintaining local control. We do not want state intervention in our decision making. We do not want the state running our schools. We don't want Senator Hall telling us, you know, how many kids we can have. We don't want Senator Lynch telling us how many kids we have in our schools. We sure don't want Senator Withem telling us how to operate our schools and things like that. You know, so the very people that say we don't want to pay property taxes but we don't want any state control. Now I've introduced bills in the past in front of the Revenue Committee, predecessors of 1059 that were... certainly wasn't my idea, predates me, and probably Senator Schmit could probably tell you who the true initial introducer of the bill was. You know, Harold Sieck and Wiley Remmers, back in the lobby, introduced bills that would have created half of the cost of education to be paid for by income taxes and I supported those. But the problem always came back to this. The state's going to start paying all the bills, the state's going to start making all the rules. And, as I have said, you know, Senator Schmit and Senator Rogers and though philosophically from the tax side of things I agree with them, that's my preferred method of taxation, and on the other hand, the price we pay for high property tax in this state is a high degree of local control. And some, many, many will say... I'm not one of them that's going to say it, many will say we have a high degree of local control and a high degree of inefficiency the way we operate things. And I guess if you would really carry...if you really wanted to adopt Senator Rogers' and Senator Schmit's amendment, you have to understand, on the other side, well, the old adage is true. He or she who has the gold makes the rules and if the state is going to pay for the cost of counties, there's not going to be 93 of them. There could maybe be 10, all radiating out from the fish' hook. If the state is going to pay for the cost of education, there's not going to be 900 school districts. There may be three, Omaha, Lincoln and the rest of the state. That's the way it's probably going to be and Senator Will would love that. If he's paying the bill, unfortunately, he has the right to kind of say that, unfortunately. And my only concern with Senator Rogers' and Senator Schmit's bill, though I agree with it from the taxation perspective, the problem happens of what actually happens. And I think it's imperative upon many of us
that when we have those constituents that come up and say, do away with property tax, put it on sales and income, first, you have to understand you have the highest sales and income tax rate in the country, given our present base, and you could broaden the base a little bit, and when you really want to have that high of sales and income tax rates. And, two, do you understand that you're going to lose control over the way you do things? And in the end, yes, you may lose control over things, you do things, in the end, you may argue that we have a more efficient way of operating government, but you're not going to...
SPEAKER BAACK PRESIDING
SPEAKER BAACK: One minute.
SENATOR MOORE: ... only drive 10 miles to get a driver's license probably and maybe driving ... depending on where you are, you may be driving a long ways. You're not going to be putting your kid on a school bus that's only going to travel for 15, 20 minutes. You're going to put him on a...him or her on a school bus that may travel a long time and may have to board them in the big, booming metropolis of Broken Bow or something like that because they won't have little schools out close by where you're child ... where you're house is. And there is a down side. That's ... I mean, because of that concern of the down side and because Senator Rogers and Senator Schmit did not address the down side, I'm not going to support this amendment even though, in a lot of ways, I like it as tax policy.
SPEAKER BAACK: Thank you, Senator Moore. Senator Elmer, did you wish to speak again? Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, and members, I rise in opposition to the amendment but, frankly, I like it. I like it in conceptual form because what it does is it gives us an opportunity to begin the process that we have, I think, delayed for too long and that's the process of dealing with the overall tax system. I have stated a number of times in the last year that it's been 25 years since we implemented sales and income tax in this state and it is time that we readdress our tax code. What Senator Schmit and Senator Rogers offer to us is, I think, an opportunity to debate that issue. It's... it clearly has its detractions in some areas but it, in other ways, is very attractive, especially if you look at it from a philosophical
point of view of trying to, in certain areas, broaden the base as much as possible and look at the types of taxes that generate the most amount of income. I think, frankly, that's the only reason you have a tax. You don't tax because you like to, you don't tax because it's something that you need to do to make. friends across the board. You do it because you have to raise revenue and, frankly, those revenue sources are falling off farther and farther in a state like Nebraska. They continue to pick the same pocket over and over again and our fights tend to center around whose pocket gets picked instead of how to, I guess, equitably pick everybody's pocket. That's really what the amendment here says, yeah, it takes away the property tax which probably is never going to happen because of the kinds of reasons that Senator Moore just laid out. But these are the kinds of discussions I think we ought to continue to have when we talk about the tax code because, hopefully, we're going to look at drastic changes like this, probably not this specific type of a change but I think that this is where the Legislature needs to be next year in terms of looking at the overall tax code. It shouldn't just be how can we raise this $20 million to fill this void? Unfortunately, that's where we're at this year on the personal property tax issue. I don't argue that personal property tax probably isn't a very viable tax in terms of what sense does it make? If it was a good tax, we wouldn't have exempted 75 percent of it. We wouldn't be in the mess that we're in right now, but we're there and we have to deal with that. What the Rogers-Schmit amendment does though is say that you can't lose sight of what those little changes do to your overall tax system. Every time you make... fill one of those $20 million holes, it has a ripple effect across the board to every other tax portion of your system throughout the code. You don't do one change without affecting every other tax portion of your code. That's just the way it works. I can't raise sales tax without affecting property tax; can't affect... raise property taxes without affecting income tax. It's going to have that kind of impact. You don't see it directly but it's there and those are the kinds of things we need to continue to look at. It's much of what I hope....
SPEAKER BAACK: One minute.
SENATOR HALL: ... takes place over the interim. I clearly hope that the debate next year in the session centers around these kinds of proposals that look at wholesale changes in the tax code, should they be necessary. Should we decide that there are
provisions that shouldn't be changed, so be it, but my purpose for pushing to take a look at a code that hasn't really had anything done to it, except for more holes drilled in it for the last 25 years, is to throw everything back on the table, not just repeal property, not just increase sales or income but to look at everything that's out there and address it. as a total tax package. That's where we need to be heading. I think, although it's a narrower scope than I would like, Senator Rogers' and Senator Schmit's amendment does move in that direction. I think it's good fodder for discussion here on the floor.
SPEAKER BAACK: Time.
SENATOR HALL: I wish there was more debate on it.
SPEAKER BAACK: Senator Will, you're next.
SENATOR WILL: Thank you, Mr. Speaker, members of the body, I rise to dispel any notion that I'm a great defender of the property tax system that we have in Nebraska right now because that certainly is not the case. And if I left that impression with anyone, I would like to correct that right away. In fact, I am the party to a lawsuit challenging the constitutionality of our current property tax system based on the impact that it has on homeowners and because of my concern for the way homeowners are treated under the current property tax system. But that displays right there the differing perceptions that we have in the body. Senator Rogers asked me questions a few minutes ago. Where Senator Rogers sees an individual paying ... an agricultural individual paying a vast amount more property taxes than a similarly situated homeowner, I see a homeowner that's paying taxes on the entire value of his home, whereas that individual that owns the agricultural piece of land has a number of categories of personal property exempt as well as a constitutional amendment in place where we have a bill on Select File right now to reduce the value of that agricultural land. So it's a matter of perspective when it comes to our tax system of where the inequities lie. And I guess I have made it clear that I feel that that homeowner with nonincome producing property that is paying property taxes on a 100 percent of the value of his home is the one that I think is being gouged in our system. That's not to say that there is... that our system treats other people that fairly either. That's the person that I. have focused on in my efforts in the area of property tax. I
guess, the other comment I would have about... I would echo some of Senator Hall's comments about it's concepts such as this, such as radical departures from our reliance on property tax that we need to be talking about when we examine the tax system between now and next session. We need to be talking about things that Senator Moore was addressing, about the way that we organize our political subdivisions, about the efficiencies that could be out there that aren't right now when we're talking about financing government, because in the end that's what's... that's what's important. We need to talk about what we're spending money on, why we're spending money on it, if that is... if that's... the items that we spend money on are appropriate, if they're proper roles of government and if we are doing it as efficiently as possible, that all has to take place when we examine the tax system as a whole. The other thing we need to look at if we're looking at an income tax increase as major... as major as this, we need to start looking at those people that are able to shelter income. We use, as the starting point, for the Nebraska income tax, federal adjusted gross income, and then we make some more adjustments at the Nebraska level and end up with Nebraska taxable income. We need to look perhaps at starting with gross income maybe if we're talking about raising the amount of money that we're talking about in this situation. We may want to start with just simply gross income and try and structure a progressive tax based on the gross that simply the gross receipts that an individual or corporation is bringing in because the rates that we would have to have otherwise might be so high as to be a great detriment to those individuals that are not able to shelter income as some wealthier individuals are. So I think we need to take a look at all sorts of things like that. That's just one question... one aspect of this situation that bopped into my head as I was sitting here thinking about the Schmit-Rogers amendment. With that, again, I would urge your opposition to this amendment. I would urge you to heed the words of the Revenue Committee Chairman who spoke about examining concepts such as this in an overall review of the tax system and go on from there. Thank you.
SPEAKER BAACK: Thank you, Senator Will. Senator Nelson.
SENATOR NELSON: Mr. Speaker, I somewhat enjoy some of the rhetoric, and, as Senator Will said, it's amazing where the different perspective comes from here in this body. I think in the end we all want to do what we hope is as fair as can be. I
think I represent maybe a mix. I have, as all of you know, agriculture background and we own some agriculture property I will tell we also live not a bad area in Grand Island. And you the valuation of my home in Grand Island has not gone up since 1983. That's not true with our agriculture land. I think last year a quarter section went up $30,000 in value and that's pretty consistent with a lot of the agriculture land. I will tell you the perception that just because you own property which may or may not be paid for or you may own the bulk of that to the bank and the nature of the business, I have a problem why we're not addressing, as Senator Wehrbein, why aren't we addressing other property and the stocks and the bonds. I guess somehow or another it's untouchable. There's tax on some inheritance, some estate funds and so on that we maybe need to look at and to address. I can't support Senator Rogers' amendment at this time. I really appreciate all the work that someone has done on this and I think that it's too radical at this point, at least. It may give us some points to think about but far too radical to make that move and to support our education system in that manner. And I'm not quite so sure what it would even do to the small schools in some of those territories. But I did want to point out, I have some figures and which are exact figures of March 20th of this year when you think of tax and tax is... our schools, and so on, the average urban taxpayer in District 26, which happens to be Doniphan, when you're all finished, and I won't go down through this or bore you, is on a $200,000 valuation or. the average urban resident in that district is taxed on $61,000. The average farmer in that district is taxed on $757,000. So, in essence, one is paying $15,000, about $727 per student in school and the average urban is about $1,232 and so that I think is consistent. But, again, that doesn't get us over our dilemma. That's our state and we all have to recognize that. But I do have a problem and I know that many small ... people that have only a job and so on, a lot of them have been taken off the tax rolls and I see that there are tax benefits that some get that others do not get. But I would hope that by the time we're through the mix of this that we don't each one of us think that be it rural or be it urban that they're all floating in money and that we do think of everyone and be as fair as we can. But, at this point, I do have to say that I cannot accept Senator Rogers' proposal. I know someone really did a tremendous amount of work on it but I think it's too radical a change at this time.
SPEAKER BAACK: One minute. Senator Smith.
SENATOR SMITH: Thank you, Mr. Speaker. I am going to speak very briefly and I wish Senator Hall were here because this is something that I wanted him to hear. I was listening to the discussion a little bit earlier in the exchange between the. folks that were talking about the Schmit and Rogers amendment. And Senator Hall indicated that this was a very good philosophical discussion and since that time some of the members have stood up and they have brought some other issues that need to be discussed and I think that's something we should take into consideration as one more issue to add to that list, Senator Hall. I'm really glad you came back because I would like to have you have a little paper out and pencil and list all the things that you will be looking at as you look at this whole tax issue during the interim, I hope, and then for next year resolve it all. But I think we should also look at cost of government and what that ... what it is that's created the position that Nebraska is now in, in the nation. My understanding is we're now 19th in the nation in taxation and yet I have a handout that was given to me by a senator on the floor here which indicates that our average income in Nebraska is much lower in comparison than the national average. So maybe it's time for us to take a look at the size of government, the things that we're doing not only in the name of government but in services and programs and in the way we're delivering those services and programs. The other day I was asking some questions in the budget about the Medicaid waiver that could have been utilized and that they turned back money from. That's an example. I know it isn't going to be an easy thing to do but I think that's something that we're going to have to take, you know, grapple with and get a hold on. The other thing is that it's been brought to my attention by a number of not only constituents but the local newspaper in my district that they haven't heard us talking about cutting anything or trying to cut taxes in this discussion about the whole tax issue. Maybe we should be looking at that as a part of this whole story about what is being done as the way we provide services, how can we better make use of those services, the economy of what we're doing for folks right now and maybe need some revamping in the system and I would be very supportive of that although I know it would be very difficult to do. Thank you.
SPEAKER BAACK: Thank you, Senator Smith. Senator Elmer.
SENATOR ELMER: Thank you, Mr. Speaker. I would like to
continue my conversation with Senator Will just a little bit, if I may.
SPEAKER BAACK: Senator Will, would you respond?
SENATOR ELMER: Senator Will, when you were visiting about the basic needs to have the three types of property, you mentioned the control of property as a measurement of wealth. Do you feel that that's a good way to measure a person's wealth?
SENATOR WILL: Sometimes it can be. I don't... I wouldn't... I wouldn't claim that it's always a good measure but I think sometimes the ability to or the desire or the willingness to go out and invest in a certain piece of property to... I understand the argument about that, you know, any type property, my house, some land that you may own isn't paid for that, in fact, the bank indeed owns part of it but I think the willingness to invest in that type of property indicates if not a continuous purchase of wealth coming from whatever means or it may indicate an expectation of the same. So, to that extent, it's a measure of some type of wealth.
SENATOR ELMER: To continue this just a little farther then, a piece of property may have liabilities attached to it either in the form of debts or in the form of liens or some such of encumbrances that detract from it's value to that owner. I would suggest to you that if we are to be fair in levying a tax of this type, given the type of accounting systems and the taxes and everything that we pay today, that if we're going to tax property as a measure of wealth, why don't we address instead a tax on a person's net worth or a corporation's net worth uniformly?
SENATOR HALL: There may be some merit to that. That certainly would be something that would be worth looking at in the type of system that we're talking about, the investigation into our tax system that we've been talking about.
SENATOR ELMER: And if we must maintain some sort of a tax on people that have been able to accumulate and have large net worths, then they should pay their fair share. And if that net worth then is representative... represented by a large accumulation of securities, such as stocks and bonds, then their net worth would reflect that and they then would pay the same fair share that many of us have to pay on large holdings of
property that are absolutely necessary for us to make a living. I would suggest that a tax on an individual's net worth would be much more fair than the current property tax system we're now using.
SPEAKER BAACK: Thank you, Senator Elmer. Senator Schmit.
SENATOR SCHMIT: Well, I'll tell you what, folks, I wasn't even going to speak on this amendment. Been so many nice things said about it but people won't vote for it that I thought possibly if I got up and spoke against it that it might possibly pass. I'm not going to take the time to ask Senator Elmer to answer this question but, Senator Elmer, I'm going to throw it out there anyway. If you have a negative net worth then would you get a check from the government? You know, there are so many people that have so many good ideas. One time in a debate like this, after a serious discussion of issues, walking off the floor, and I don't like to quote reporters because I don't like to put the onus on them that I might think that what they said meant anything, but Eddie Howard said one time that if the Lord hadn't meant for sheep to be shorn, he wouldn't have given them fleece.. And what we have done is to have shorn the taxpayer time, after time, after time but the fleece kept coming back. Now the bill which the Governor has proposed to you and which we are apparently going to give to him will not take the fleece off the animal, it will take the hide off and when you take the hide off the animal dies. My good friend, Governor Nelson, is just setting the stage for a single term as Governor. Way back in the days when Nobby Tiemann proposed the sales tax and income tax and took the full credit for it, he set the stage. Governor Nelson ought to take a little lesson from the master that sat on that seat ever since I have been here, Jim Exon. Jim Exon would have said, that Republican dominated Legislature is going to craft a tax plan and your Governor will see to it that it is fair to you or he will veto, veto, veto until it is fair. But you wouldn't have found Governor Exon prescribing the formula by which taxes would be put out. And this Governor has chosen to inject himself into the system and provide leadership. Let me tell you, if, in fact, we gave the Governor the exact program he wanted, it would lead him right out of the office and, as a Republican, maybe he ought to do that. I want to just say this, that the bill that Senator Rogers and I have put together does some things which need to be done but we have on this floor 49 persons who don't like property taxes but who wouldn't ... but of that 49, 40 of them wouldn't vote for the amendment. We have
people here who don't like to do those things such as exempt intangibles. How many votes do you think you could get to put a tax on intangibles? Senator Owen Elmer again very eloquently talked about ownership of property not being a measure of the ability to pay but if you buy a stock, you're going to pay for it cash. You don't buy stocks with borrowed money but we do not tax stocks. We do not tax cash in the bank and you couldn't get five votes on this floor today to put a tax on the cash in the bank. The bill that Senator Rogers and I put together ought to have a public hearing, it ought to be discussed and debated. But, ladies and gentlemen, this Legislature has chosen another course. This Legislature has abdicated its responsibility to craft a program on taxes which we ought to take ... which we ought to do. We ought not to have opted for a temporary plan because it's not going to be temporary. What you put in place here today, and some of my rural friends have said, well, if we don't buy this, we're going to get a tax on energy. Well, what the hell, and I say that deliberately, make it as odious as possible so that someone has to bite the bullet and swing by the neck till their dead. You haven't got the intestinal fortitude, ladies and gentlemen....
SPEAKER BAACK: One minute.
SENATOR SCHMIT: ... to just buy the entire package the Governor has given you so you want to wrap it up a little bit. Well, ladies and gentlemen, you can wrap it and wrap it and wrap it and it's going to smell eventually. And the day will come when someone is going to have to say, yes, I voted to reconsider the Schellpeper amendment, didn't like to do it but it seemed like the thing to do. And, yes, then we adopted the Governor's plan, didn't like to do it but we did it. And then we're going to turn it over and we're going to hide behind the pillars again while the 3-R Committee come back and shove it down our throat again. We've got Senator (inaudible), yeah, we've got a couple of rural senators on there, not too bad out of 12, but that's, within my estimation, the...
SPEAKER BAACK: Time.
SENATOR SCHMIT: ...idea of what's going to happen to us. So I support the amendment.' And I'm going to ask ... hope we vote on it just to see where the chips fly.
SENATOR WARNER PRESIDING
SENATOR WARNER: Senator Schimek. Is Senator Schimek here? If not, Senator Lamb.
SENATOR LAMB: Thank you, Mr. President, and members, I'm going. to vote for this. I think it has merit. It's not going to pass but parts of it I like. I came very close to introducing a bill this year which would put all teachers on the state payroll and we would have a system then where all the teachers should be ... have an equitable salary base and then, of course, you would have to have some sort of a system so that school boards didn't hire too many teachers. I mean, they would have to have a quota, the number of teachers they could hire, and they could do their own hiring and keep the school boards. It's different than Senator Schmit and Senator Rogers' amendment in that respect. We would still have the school districts. We would still have the local property tax used for buying the books and the crayolas and the chalk and the fuel. But then the teacher's salary which is 60 or 70 percent of most school district costs would be borne by the state and you are then taking them off the property tax roll. That's the major accomplishment. I am becoming more and more convinced that the only way we reduce property taxes in the long run is to take things completely off the property tax. We don't give them more state aid because then the property tax just creeps back up. It doesn't... in the long run, that doesn't do the job. The only way we have a significant shift away from property taxes is to take certain entities off the property tax rolls. One of the most logical ones is the community technical colleges. They should not be getting property tax money. There is really no logic for that because the other institutions of postsecondary education rely completely on sales and income tax for their state... for their public money and so there's no reason why the community colleges should not also be on that level. But I'm going to support this but I guess I would prefer it... the problem with it, of course, is that there may only be one school district in the state eventually, like they have in Hawaii. But if we just pay the teachers from the state, I don't think we would run that. chance.
SENATOR WARNER: Senator Kristensen, then Senator Schimek. Senator Kristensen.
SENATOR KRISTENSEN: Thank you, Mr. President, and members of the body, I'm undecided on how I'm going to vote on this but, Senator Schmit, I think you certainly have captured the
fascination of the state with this and, as usual, you are attacking with a real low-flying scud missile here and I think if it hits the target, it will probably do what it's designed to do. But Senator Lamb, we must have been busy, Senator Lamb, because last year I had drafted an amendment that would do similar to what you wanted to do and that would be to don't take the full step of what Senator Schmit is doing, and Senator Rogers, I guess I should give Senator Rogers ... his name appears first on this, but that's to place those employees, the local political subdivision of the school, the teachers, to put them onto the state tax roll and for a philosophic point of view, the philosophic point being that we are having more certification statewide. We're doing projects like LB 91 with funding at the state level, we're beginning to encroach and we start down that path and eventually that's where we're going to get to, so why not do it and get the benefit and that's the property tax relief benefit. But it makes some sense to still keep property tax for certain things and those certain things are the capital assets of the school district. If Wilcox High School wants an Olympic size swimming pool, let them spend their property tax money to build that pool. If they decide that they don't want that capital asset, they don't do it. But the key is that they control the capital assets and those capital assets are paid for by property which are the assets of the county and you have some sense. If you want meaningful property tax relief, the only way to do it in my judgment is to also take away those costs of staff and teachers and put them onto the state area. The administrators I'm not...I haven't worked that through. Quite frankly, I see those as the operators of the capital assets and they've got to manage and do those sorts of things, but that's a firm policy and, Senator Lamb, I think you're right, that maybe you should have dropped that bill in because that probably fits into this scheme a lot better than what Senator Rogers is. Senator Schmit, I may well vote for their amendment, but at some point in time if you're after meaningful property tax relief, 1 think that's the only way you can do it, but you still have to keep the integrity of building buildings, maintenance and upkeep, you've got to build roads, there is still good reasons to have property tax and you can't get away from that. You shouldn't have personal property tax for all the other reasons we've talked about, but for the system and I think I stand up to join Senator Lamb, that that is one thing that we certainly should consider. I'd urge, Senator Rogers, as you refine this, to put that into the mix because I think that's something that would sell and would receive votes on the floor. Thank you.
SENATOR WARNER: Senator Schimek.
SENATOR SCHIMEK: Mr. President, members of the body, I respectfully call the question.
SENATOR WARNER: Do I see five hands to call the question? One, two, three, four, five. The motion is to cease debate. Those in favor vote aye, opposed nay. Motion is to cease debate. Have you all voted? Clerk, record.
CLERK: 25 ayes, 0 nays to cease debate, Mr. President.
SENATOR WARNER: The motion pending is the adoption of the Rogers amendment. Senator Rogers, do you wish to close?
SENATOR ROGERS: Mr. President and members, you know I'm very pleased to hear that at least some of the senators agree with the concept even though they said they wouldn't support the amendment, so I guess maybe that's one plus. Senator Will, you know I'm glad that...Senator Will isn't even in here, is he? Well, I won't address Senator Will. Senator Kristensen made some comments. You know we'll still have property tax, Senator Kristensen, to build roads. I mean, after all we're just talking about sales and income tax to support education so we can still build roads and whatever is necessary for county government. You know sitting here the last two or three days and I just decided that I would make this comment and the 3-R Committee that the Governor has appointed I think it should be expanded to 49 senators this summer because I can see the 3-R Committee meeting this summer, this fall, coming up maybe with a plan, but we'll be right back where we are tonight. I mean, we'll come back, the 3-R Committee will come back next January with a plan and we'll go through the whole process just like we are tonight, so why riot have all 49 senators on the 3-R Committee? And, Senator Robak, what are you laughing about? And I, don't know about Senator Schmit, maybe he doesn't feel exactly the same way I did. I had no pipe dreams that this amendment would pass, but I thought maybe it would bring up some discussion, maybe it will be something that we could study this summer or this fall to try to iron out some of these problems, but I've enjoyed the discussion. I mean, it's...we haven't solved anything tonight. We didn't think we would solve anything, but I think that maybe we had more support, even though some of the senators have announced that they won't vote
for the amendment, but they like the concept so I think maybe that's a plus. It's something that I'm sure the state has to address, but with that I'll close and I tell you what. I'm going to ask for a call of the house. I'd like to at least see how many green lights we'll get on this. All right, Loran, Senator Schmit can have the rest of my time.
SENATOR SCHMIT: Mr. President, members, how much time do we have left?
SENATOR WARNER: Two minutes.
SENATOR SCHMIT: Ladies and gentlemen, if it were not so tragic it would be comical. We have been engaged in debate here for several days about how we're going to solve the tax dilemma and we have pussyfooted around every single major issue. Yesterday when we were engaged in various kinds of activity I told you that you would ... didn't know what you were doing on the bill. If it became law the Governor would veto it. He announced this morning he would veto it and everybody "crawfished" and backed water and reversed what they had done yesterday and now we stand here and say, well of course we're going to look at this next summer and so forth. I just want to say this, ladies and gentlemen, that this Legislature is the policy-making body of the state. It is not the Governor's responsibility to draft tax legislation. That is our responsibility. We have handed it to him. If I were he or if anyone else who had any experience in that area were ...
SENATOR WARNER: One minute.
SENATOR SCHMIT: ... in that position, they would hand that hot potato right back to us. But the Governor has embraced it and he's going to have to toss it from one hand to the other and hopefully doesn't drop it. The facts are these, ladies and gentlemen, this is the kind of bill that we ought to have on deck and which we ought to hold public hearings and gather testimony. Let everyone come in and say why we don't want it or why we do want it and then once they've had that opportunity, let this body decide how to do it effectively. Everyone wants property tax relief, but no one wants to pay any sales tax. Everyone thinks the sales tax is too high, but you don't want to put up any more property taxes. One thing we've never agreed upon is it won't cut spending. This body is not going to cut spending nor will the local subdivisions. Senator Kristensen
spoke about the teacher's salary. Senator Rogers and I have that kind of a bill also, if you want that, Senator Kristensen.
SENATOR WARNER: Time.
SENATOR SCHMIT: I'll offer that as an amendment. I don't think that will fly either. I ask you to support the amendment. Thank you very much.
SENATOR WARNER: Motion is to adopt ... we had a call for the house requested. Those in favor of a call of the house vote aye, opposed nay.
CLERK: 21 ayes, 0 nays to go under call, Mr. President.
SENATOR WARNER: The house is under call. Please indicate your presence. Senator Rogers.
SENATOR ROGERS: And a roll call vote.
SENATOR WARNER: Roll call vote. Senator Ashford. Senator Beutler, do you wish to check in, please. Senator Bernard-Stevens, come to the Chamber. Senator Withem. Senator Beyer, come to the Chamber. Senator Bernard-Stevens, Senator Beyer, Senator Withem. Senator Beutler, Senator Withem, come to the Chamber, please. Okay, all present. The motion is the adoption of the Senator Rogers-Schmit amendment. Roll call vote has been requested and it was also requested to be in reverse order. Mr. Speaker, record the vote. Mr. Clerk, record the vote.
CLERK: (Roll call vote taken. See page 2193 of the Legislative Journal.) 16 ayes, 24 nays, Mr. President,
SENATOR WARNER; Motion fails. Are there further motions on the desk? Raise the call.
CLERK: Mr. President, the next amendment to Senator Hall and Will's amendment is by Senator Elmer.
SENATOR ELMER : Thank you...
SPEAKER BAACK PRESIDING
SPEAKER BAACK: Senator Elmer.
SENATOR ELMER: ... Mr. Speaker and members, this amendment is one in which we can pay $92 million without having to use the constitutionally suspect surcharge on depreciation nor do we have to raise taxes in any other way. It's .4 of 1 percent charge on all tangible personal property sold for resale. I've been visiting with various persons interested in this bill and we recognize that it possibly could have some merit but the Department of Revenue and the Research Division need a little time to see actually where the revenues would come from. Therefore, in deference to being able to furnish you with good, solid data and being able to visit with the Governor's Office and with the Revenue Committee and Senator Hall, I would like your permission to pass over this and address it on Select File.
SPEAKER BAACK: It is passed over. Next amendment, Mr. Clerk.
CLERK: Mr. President, the next amendment I have is by Senator Schellpeper. Senator, AM1899.
SPEAKER BAACK: Senator Schellpeper.
SENATOR SCHELLPEPER: Thank you, Mr. Speaker and members, this amendment is one I talked about before. It will lower the surcharge with the Lamb amendment from two to one and a half by raising the top income bracket. It will raise the $18 million but at this time I will also consider with all the others so I would like to have it passed over at this time.
SPEAKER BAACK: It is passed over. Next amendment, Mr. Clerk.
CLERK: Mr. President, Senator Moore would move to amend.
SPEAKER BAACK: Whose amendment is it? Yes, next amendment, Mr. Clerk.
CLERK: Mr. President, Senator Kristensen would move to amend. (Kristensen amendment appears on page 2193 of the Legislative Journal.)
SPEAKER BAACK: Senator Kristensen.
SENATOR KRISTENSEN: Thank you, Mr. President, members of the body, Mr. Speaker, this amendment that I have is an amendment to the amendment. It deals with the Lamb amendment which was
adopted earlier and as you remember there were basically five sources of revenue, replacement revenue. Senator Hall has gotten up and has spoken about those revenues and those sources and where they come from. I intend to pull this amendment, but I want to explain why we're doing it and what the ramifications of doing it. Two of those appear, as Senator Hall has stated, to not be controversial or at least at this point in time have not drawn a lot of fire and, thus, have some acceptance, that being the retail collection fee and the depreciation surcharge. The other three are the access charges or the, also the telecommunications services and the common carriers. Those three sources of revenue were put on with less than 25 votes and were a majority. I think that we should take those off the table and start over. Senator Hall has pledged to this body, and I think that he will be able to do that and put a package of replacement revenue. The key is to not allow this to be a given, that these all are going to go back on, Senator Hall has agreed with me. I thank him for that. I will pull this amendment. He has agreed that these three items will not come back or at least will be part... there has to be a package examined on Select File that these three items are not givens. They will not be placed on to do that, that there will be a replacement package that he is going to be working on to do that. Senator Hall, I thank you for that commitment to do that and with that, I would pull this amendment.
SPEAKER BAACK: It is withdrawn. Next amendment.
CLERK: Mr. President, I have nothing further pending to Senator Hall and Senator Will's amendment, AM1772.
SPEAKER BAACK: We will now go back to the Hall amendment, AM1772. Senator Hall, do you wish to address that amendment?
SENATOR HALL: Thank you, Mr. Speaker, members. Just so that I guess we can run a scorecard on the amendment as to where we're at, this is what the proposal does. If you remember right, AM1772 was introduced as the proposal that Governor Nelson brought to the body. It takes on a fairly different complexion today after being debated for a couple days. It still retains the change in the refund schedule. We didn't alter that. it's one of about only two things we didn't deal with. So the refund schedule in terms of tightening up that with regard to the property tax statutes is retained in the proposal. We struck the motor vehicle fee. We left personal property taxing method
for motor vehicles as it currently exists in place. We left the definitions with regard to the changes that were made in LB 1 of the special session redefining rural property. They remain in the bill. The provision that had all the 1991 personal property tax removed from the tax rolls is part of this proposal. The fact that it was intended to continue to all go back on effective January I of 1992 was struck from this proposal. We now go back to the... in January the system as it currently exists today. The depreciation surcharge with the Lamb amendment, as it was adopted, is at 2 percent for 1991. We reduced the sales tax collection fee as it was laid out in the original proposal. We take and eliminate sales tax exemptions with the Lamb proposal for some telecommunication services, railroad rolling stock and the truck parts. And then we also didn't touch the provision that the Governor had originally brought in, at least we haven't yet, tightened up the 1059 lid to allow for zero percent growth in the tax levies with the 5 percent growth provision as long as there is threequarter, a three-quarter, three-quarter, as long as three-quarter percent of the members of the voting board support an increase. That's what we have in front of us, ladies and gentlemen. The issue has been talked about much. Much of the discussion has centered around whose role and responsibility is this. I would argue that when you look at this amendment, it clearly bears the mark of the Legislature, that there is very little remaining of what the Governor brought to us as we have had much needed debate, I think very good debate and discussion on the proposal. We're not done dealing with it. We're not done dealing with it. There are going to be amendments that are offered on Select File to hopefully deal with the provisions that are the approximately 32 to $35 million that Senator Kristensen mentioned in those three entities that were put on, on General File, with a simple majority vote. We're going to address that. I intend to have a meeting of the members of the Legislature to discuss options, do that off the floor, invite everyone to attend and try to get some kind of consensus that we can bring in. We also talked much about the overall tax system and changes that we need to look at in the coming interim. I think that is very much needed discussion. It needs to continue, it will continue throughout the balance of this session but also through the interim and the discussion that is centered around the 3-R Committee is discussion that I think...
SPEAKER BAACK: One minute.
SENATOR HALL: ... is very good, but I think you need to recognize and remember that the 3-R Committee will not subvert the legislative process. Any proposal that comes out of that is going to be scrutinized, open to public hearing, debate, amendment, what have you, and the legislative process will. retain the responsibility in the job description of creating tax policy for the state. I think the proposal is a good proposal as far as it goes right now. Want to continue to work with the members of the committee as well as the full body on this issue. I appreciate the support and the cooperation that was, I guess, shown this afternoon with moving this proposal along. We still debated it for approximately an additional three and a half hours this afternoon.
SPEAKER BAACK: Time.
SENATOR HALL: I hope there is some more discussion yet before the motion is made to adopt this amendment. Thank you, Mr. Speaker.
SPEAKER BAACK: Thank you, Senator Hall. Next speaker, Senator Coordsen.
SENATOR COORDSEN: Thank you, Mr. Speaker, members of the body, I can't say I'm altogether very interested in property tax because I believe last year 27 percent of my realized net income went toward property taxes, but it says either something about the property tax rate or my ability to farm. Last fall when my son-in-law finished harvest he went home and told his family that and the first remark of our six-year-old grandson was, well, we'd better go help Grandpa George because he's kind of old and pretty slow and probably isn't done yet and he was right on all counts, and I was wondering if Senator Hall would be kind enough to answer several questions for me.
SPEAKER BAACK: Senator Hall, would you respond, please.
SENATOR HALL: Yes.
SENATOR COORDSEN: Now I guess I kind of need to get a couple of things fixed in my mind, Senator Hall, The intent of this amendment is what, to repeal the remaining personal property tax?
SENATOR HALL: That's correct, the 1991.
SENATOR COORDSEN: Okay, thank you, sir. Where might this personal property be located in the State of Nebraska?
SENATOR HALL: The personal property that is currently taxed, Senator Coordsen, is basically business equipment.
SENATOR COORDSEN: Okay, and that business equipment is located in various and sundry taxing subdivisions across the state.
SENATOR HALL: That's correct. It's a local tax, levied and collected at the local level.
SENATOR COORDSEN: Okay, thank you. And those taxing entities and the residents therein have enjoyed the benefits of that particular amount of assessed property for, lo, these many years in the fact that by having that in the valuation of that taxing subdivision, the tax levy was at some rate less than what it might have been if the tax, if that had not been assessed.
SENATOR HALL: Correct.
SENATOR COORDSEN: Okay, now is it... it is further my understanding, I believe, that one of the other intents of this bill is to remit to different entities across the State of Nebraska, dollar for dollar, the loss of tax collections that results from the repeal of the personal property tax.
SENATOR HALL: Correct.
SENATOR COORDSEN: And it is further the intent of this bill to collect from various and sundry people who may or may not have much business property in their valuation mix in their particular subdivision's money to create a pool from which to remit this across the state wherever the losses occur.
SENATOR HALL: Fair representation.
SENATOR COORDSEN: Okay, well it does kind of seem fair to me that rather than transmitting the loss to those taxing subdivisions that have enjoyed the benefits of that valuation, that we do transfer it across the state to perhaps those who have not enjoyed the benefits. Thank you, Senator Hall, for your interest in this matter. I surely do appreciate it. Thank you, Mr. Speaker.
SPEAKER BAACK: Thank you, Senator Coordsen. Senator Rod Johnson.
SENATOR R. JOHNSON: Thank you, Mr. Speaker, members, I will be. very brief. I will not be supporting AM1772 nor the advancement of the bill. As I look at it I realize Senator Hall is in a position I've been on or in with issues affecting natural resources where you're trying to fight off amendments as the bill is redrafted on the floor and it's nearly impossible to draft legislation or redraft legislation on the floor. And I full well expect that Senator Hall and the other members of the Revenue Committee as well as other members of this body can sit down off the floor and vote or work together in coming up with some compromise language because I believe we need to reimburse the political subdivisions for these losses. But there's an old adage, it's easier to push a boulder down the hill than it is up the hill and by moving this bill and with this amendment onto Select File, if we can reach no accord, no consensus on any new revenue plan. This bill as it is written now whether it is with or without the Lamb amendment affects particular groups that I will be very blunt and honest with you about, I don't think should be taxed or under this premise and so I'm not really willing to move this bill today. I think we can do whatever we have to do off the floor by leaving this bill on General File and then working out whatever new compromise that we want to develop and come back next week, come back later in the week and with this great compromise be able to move it onto Select, onto Final and pass it. But I just fear that if we keep nudging this bill a little bit closer to home, little bit closer to home the chances of reaching compromise will become less and less and you know I've listened almost all day and all of yesterday on the battle over this is an urban, rural, agriculture versus homeowner kind of battle. I hope that's not the case at all because I think we're all interested in equity to whatever group is involved in this issue but it concerns me a little bit that we are in a hurry to hurry up and get this thing across the board when I think we all recognize, as one reporter told me today or yesterday, as a matter of fact, this is the biggest issue affecting Nebraska this session. And if it takes time to deal with it, then we should take the time to do it. And I'm willing to stay here as long as it takes to do it whether it's on General File or Select File, but I'd just as soon leave the bill here. I don't see any particular reason or hurry up to move it to Select and then work out the compromise. Why not
work it out today, or maybe not today, but leaving it here on General and then working out the compromise before we get that boulder over the ridge and heading on down the hill. It makes it much more difficult for those of us who may be fighting particular proposals in the Governor's plan to keep them or get them out of the plan after it gets to Select File. That's a selfish, probably mean spirited thing to say, but that's the way I feel about it and as I said yesterday when I spoke that most of my lights were going to be reds. I guess I'll keep with that plan.
SENATOR LANDIS PRESIDING
SENATOR LANDIS: Thank you, Senator Johnson, there are three lights on. Senator Schmit, followed by Senator Hall, followed by Senator Schellpeper. The Chair recognizes Senator Schmit.
SENATOR SCHMIT: I don't like to disagree with my good friend Senator Timmy Hall, but I'll tell you what, Timothy, this bill does not carry the imprimatur of the Legislature. It's the Governor's plan and a group of legislators here, some of my good Democrat friends and a few Republicans, are buying the Governor a one-way ticket back to Omaha and that's all I've got to say.
SENATOR LANDIS: Thank you, Senator Schmit. Senator Hall, followed by Senator Schellpeper and Senator Will. Senator Hall.
SENATOR HALL: Thank you, Mr. Speaker, members, again, I rise to urge the body to adopt 1772 to become LB 829. And I don't disagree with I guess the thought process that Senator Johnson uses, but in all fairness I would just like to say this, and I don't take any of that personal at all because I do understand the issue and how it affects each of us differently and individually. But consider this vote, I guess, if you would, this vote on this amendment and the vote to advance 829 to Select File, my version of LB 404, if you will. If you remember early this session we dealt with the issue of the increase that was going to hit ag land, 12 to 14 percent on average across the state, as much as 30 percent in some cases. And there was a real need and desire to move that issue along. I had a number of individuals who came to me and said we would like this hearing as soon as you can hold it, Senator Hall. I said I'll do that. I said I'll go to the Speaker and ask to have the bill expedited. We did that. We had the hearing. We moved it along. We dealt with that issue I think at a very honest,
reasonable professional manner. Nobody said that we're going to try to play games with this issue. It was addressed because it was a tax issue where the agricultural sector felt that their hands were being tied. They were going to be hit with a huge increase because of the issue of going to 100 percent of market. until we dealt with a change in the statutes reflecting the way that we value ag land. I think it dealt with that pretty straight up, was pretty honest, worked real hard. I remember a lot of people saying, we appreciate what you did over the microphone, you know, we think that, you know there were a lot of kudos being trowed around for old Senator Hall because he moved that bill out, got it advanced up. Hell, I introduced the damn thing. I mean, you know, I don't like the situation we're in either with our tax code. I was walking down the hall and I said, you know, I wish Elroy was a chairman right now. And I mean it is not an easy position to be in, but the fact of the matter is we're here, we're all here. It's not just on my shoulders, there's 49 of us out here. I need 25 of you to help amend this into the bill so we can advance it over and continue to work on it. The problem is not going to go away. We'll deal with the second half, the Select File, my version of 320 in this proposal on Select File. All I'm asking is to move it along, help me expedite this right now. I think you have and I appreciate that cooperation that has been displayed today. I'm not going to invalidate that trust that you've laid out there,* but I sure do hope that you support this because when I opened the discussion on this issue I said we have a couple options. One of them is to reimburse, to look at this issue and say we need to pay for it, we need to help those local subdivisions find a way to have that revenue base restored. And the other option was to do nothing, to frankly do nothing. I'm afraid that if we don't advance this at this point in time, we're getting closer and closer to doing nothing. Because I think things will start to break down at that point. We're getting to the witching hour.
SENATOR LANDIS: One minute.
SENATOR HALL: We're getting to crunch time as we always do when the Legislature boils down to the evening hours at the end of the session. Tempers get short, mine is consistently short, but it is, and I apologize for that most of the time, but the issue here is that look, we've got to address this. I think it would be irresponsible not to move this at this time. It's open for examination again. I wanted to do it in 320, skip a stage of
debate. The Speaker said I don't want to do that. I agreed, We've gone through all that process. I'd like to continue the process. I hope you'll support the amendment. It's not in perfect form. We will have a number of amendments to it. I hope you will let us get to those amendments, I hope you'll support advancement. I would urge adoption of the amendment. Thank you, Mr. Speaker.
SENATOR LANDIS: Thank you, Senator Hall. There are now three more speakers. Senator Schellpeper, followed by Senator Will followed by Senator Hefner.
SENATOR SCHELLPEPER: Thank you, Mr. Chairman and members, I'm going to support this amendment at this time. I think that Senator Hall has given us his word, he's willing to work with us and I'm sure that he will and just because that we get something worked out, hopefully, that can be accepted by the body doesn't mean that it's going to be passed this year or this session. I shouldn't say this year, but this session. It may take a special session. We maybe can't come to any agreement, but I guess by holding up the bill this evening isn't going to make that much difference. We need to all sit down, all 49 of us, not just five or six of us, but the whole 49 and try to work something out that we can come to agreement on with 25 votes. And so with that, I guess I'm going to support this amendment and hopefully with the understanding that something will be worked out. Thank you.
SENATOR LANDIS: Thank you, Senator Schellpeper. There are now five lights on. Senator Will, followed by Senator Hefner, Withem, Elmer and Schimek. Senator Will.
SENATOR WILL: Thank you, Mr. President, members of the body, I rise in support of the Hall-Will amendment. I think that Senator Schellpeper is absolutely right, we need to work through this process. We're in a situation where we know that if we don't pass something this session we're going to be back here in a special session virtually without a doubt and I think that the wisest thing to do at this point would be to adopt this amendment to advance LB 829 over. I don't think anyone in this body right now is completely pleased with the way that LB 829 is structured. I think we know that there is some changes that we need to work through on Select file, but at some point I think we've reached that point. We know that we have to advance the process along, and by adopting this amendment and then advancing
the bill I think it puts us in a position to deal with some other issues for a few days, then come back and work through some more amendments on this, not let this bring the process grinding to a halt and I would encourage your vote in favor of the adoption of the amendment. Thank you.
SENATOR LANDIS: Thank you, Senator Will. Senator Hefner, followed by Senator Withem, Elmer, Schimek and Lamb. Senator Hefner.
SENATOR HEFNER: What's the hurry here? Here we have the most important bill of the year up and we want to rush it right on through. Senator Hall was successful in getting most of the amendments withdrawn, but I still say that in some of those amendments that was proposed, they were important and we should. have discussed them because as you go through the process, you'll always find that somebody has a different idea and I think it's good to explore those. But I think we're getting the cart before the horse here. I think it's good to have a lengthy debate. Look at how many hours we spent on abortion. Look at how many hours we spent on some other bills, and here we're talking about a very important bill. We're talking about property taxes and property taxes affect the lives of many of the citizens in the state. So I would say if we've got to stay here a few more hours, well let's go ahead and do it, but I can't see any advantage of advancing, adopting this amendment and then advancing the bill and we'll take care of the problem on Select File. We all agree we still have a problem here so why don't we sit down and work it out on General File? So I would encourage you not to support this amendment or the advancement of the bill until we get it right.
SPEAKER BAACK PRESIDING
SPEAKER BAACK: Thank you, Senator Hefner. Senator Elmer.
SENATOR ELMER: Thank you, Mr. Speaker, I'll not take long. I have some problems with some of the aspects of this bill. A number of us, along with many people out in the state, feel that the 2 percent surcharge or the one and three-quarters, whatever it is now on depreciation is another form of property tax being levied by the state. By the time we get to Select File we should have an Attorney General's Opinion on that. We do need to make the process work. A lengthy debate at this point is not going to preclude a lengthy debate at Select. Perhaps the bill
will pass, perhaps it won't. I'll support the amendment at this point and the advancement of the bill, but if it stays in somewhat the form it is, I'll vote against it at Select File because I feel it's, in its current form, flawed and there are going to be better ways to do it. We won't be to Select on this till next week I'm sure, maybe late in the week. We will have had a great deal of time or at least some time to get some data and figures on the amendments that are going to be proposed and have been proposed. Give the people the time to look and see who are the people affected by these amendments; what effect are they going to have on the state? If we keep it on General File, then the process becomes bogged down and I agree with Senator Hall in that aspect and I think we should adopt the amendment and advance the bill.
SPEAKER BAACK: Thank you, Senator Elmer. Senator Schimek.
SENATOR SCHIMEK: Mr. President, I would like to 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: 29 ayes, 1 nay to cease debate, Mr. President.
SPEAKER BAACK: Debate has ceased. Senator Hall, would you like to close?
SENATOR HALL: Thank you very much, Mr. Speaker. Again, the proposal is I guess to some extent in an unfinished form, but it has had much debate. Earlier this year one of the first days we passed a cloture rule and that rule could have been invoked about three hours ago. I wouldn't have had the votes, so wouldn't have made much difference, but I didn't want to do that, didn't want to do that I don't think. But at least by our rule book we had examined the issue at this stage of debate to a point where if one wanted to, they could have looked at using that rule. I did not, did not want to, did not think needed to and clearly the body didn't think so either. That's why we're at this point right now because we shouldn't do that. I don't feel that there was a point where it would have been appropriate. The discussion and the debate was all on a very high level and I know will continue to be that way. Taxes are
not an easy issue under any circumstances. And when you have your back to the wall, as we do right now, to deal with the issues, I think that you clearly have to address them. There is a point in time where you can't just say what's the rush? .I mean what's the rush is, is that we're looking at 1991 changes. and we're looking at May 15. You have to address them sooner or later. This isn't the last stage, this isn't Final Reading, this is just the beginning. I would urge adoption of the amendment. If there are others who wish to speak, the motion to advance the bill is debatable as well. Right now I just hope we can adopt this amendment, make it become LB 829. Thank you, Mr. Speaker.
SPEAKER BAACK: You've heard Senator Hall's closing. We will now vote on the amendment by Senator Hall. All those in favor vote aye, opposed vote no. Record, Mr. Clerk.
CLERK: 27 ayes, I nay, Mr. President, on adoption of Senator Hall's and Will's amendment.
SPEAKER BAACK: The amendment is adopted. We are now on the advancement of LB 829. The speaker is Senator Lamb, do you wish to speak to the advancement?
SENATOR LAMB: Yes, Mr. Speaker and members, and I'd have a few questions that perhaps Senator Hall would respond.
SPEAKER BAACK: Senator Hall.
SENATOR HALL: Yes.
SENATOR LAMB: I would admit that I'm a bit uneasy about advancing the bill with so many unanswered questions. I'm very uneasy, but that seems to be what is happening. I understand that you're committed to make the changes in the bill on Select File,, but I'm not quite clear on what some of those changes might be. For instance, would you be amenable to reducing the 2 percent surcharge on depreciation which is currently in the bill?
SENATOR HALL: Senator Lamb, the bill, as was originally brought in, had a depreciation surcharge of 1.75 that I think virtually everyone pretty much signed off on. It was, if I remember right, your amendment that increased it to 2 percent. Prior to that I had an amendment that reduced it from 1.75 to 1.6.
Clearly, I ... if you look at the track record, I'm closer to moving it down than you are, but the answer to that question is yes.
SENATOR LAMB: Then would you be able to share with us any insight as to where you plan to find additional funds to fully fund the socalled...I guess, $95 million?
SENATOR HALL: Well, I thought I'd take out a loan from Senator Hefner, but frankly, I can't tell you that. I ... you know, it's not my decision, Senator Lamb. All I'm going to do is help facilitate that process. I intend to sit down with the staff and the committee, members of the committee, the entire Legislature will be invited to look at some options that we'll put together for you, discuss that off the floor so that it's not a 25 votes or not to deal with the issue. I clearly don't know. It's going to have to be a decision that has to be made by the body as a whole, not by one individual or even a group of individuals. That's the decision we made when we just adopted this amendment. I intend to deal with options in that same manner.
SENATOR LAMB: Senator Hall, do you have any time table when we may either have this conversation or when there may be possibly a decision made or at least the options thrown out for people to consider?
SENATOR HALL: Senator Lamb, I'll try to have the options to you early next week, early being Monday or Tuesday, and I'd like to get together and chat, you know, shortly thereafter.
SENATOR LAMB: Thank you.
SPEAKER BAACK: Thank you, Senator Lamb. Senator Withem. Senator Wehrbein. Senator Hall, do you wish to close? Senator Will, excuse me, Senator Will's bill. Senator Will, do you wish to close?
SENATOR WILL: Thank you. I'll give Senator Hall some time, no, I think we've had a full debate on the bill. Obviously, the amendment we just adopted became the bill. LB 829 as originally advanced would have put all personal property back on the tax rolls. Clearly, it's in very different form at this time. And as I said when I addressed the amendment that Senator Hall and I filed that was ultimately adopted, we're at a point now where we
can ... where the discussion can begin in the types of things that Senator Lamb was talking about and Senator Hall has promised to develop for us and that I'm sure I will be part of developing as well, are things that we need to be talking about on Select File. I think at this point we need to move the bill over. We. need to continue the process and make sure we're in shape to debate it on Select File. With that I would urge your advancement of LB 829. Thank you.
SPEAKER BAACK: You've heard the closing on the advancement of LB 829. We will now vote on the advancement. All those in favor vote aye, opposed vote no. Have you all voted? Record, Mr. Clerk.
CLERK: 29 ayes, 10 nays, Mr. President, on the advancement of 829.
SPEAKER BAACK: LB 829 is advanced. I would like to say that I do appreciate the hard work that we've put in today. We've put in a long day. We've gotten a major piece of legislation advanced and one of the reasons that I was pushing for advancement to Select File was just for scheduling reasons because we're getting close to the end of the session, so I do very much appreciate what we've done. Mr. Clerk, items for the record.