Committee on Revenue

Second Public Hearing

LBs 299, 829

March 20, 1991


The Committee on Revenue met at 1:30 p.m. on Wednesday, March 20, 1991, in Room 1520 at the State Capitol, Lincoln, Nebraska, for the purpose of conducting a public rehearing on LB 299 and LB 829.  Senators present were:  Tim Hall, Chairperson; Elroy Hefner, Vice Chairperson; Rex Haberman; David Landis; Richard Peterson; Jerome Warner; and Eric Will.  Absent:  Senator Carson Rogers.


SENATOR HALL:  ..two bills that were heard a couple weeks ago, LR, excuse me LB 829 and LB 299.  We are going to take testimony on those bills jointly, meaning that when you come up, doesn't matter what side you're on.  Normally, we'd take it proponents and then opponents and then neutral testimony.  It's going to be basically first come, first serve, whoever wants to come on up and speak to us.  We did hear about four hours of testimony two weeks ago.  It was pretty much unanimous consent that we take some additional testimony after folks had a little more time to digest the opinion from the Supreme Court, and that's what this hearing is all about.  With that, my name is Tim Hall and I chair the committee.  Other members of the committee who are here with us right now, Senator Dick Peterson from Norfolk, Senator Rex Haberman, who's coming in right behind me, from Imperial, Senator Eric Will from Omaha on the far left.  Sherry Shaffer is the clerk of the committee.  Tim Erickson is the research analyst and George Kilpatrick is the counsel to committee.  What we're going to do is just again ask you to please come forward.  We'd like you to state your name for the record, sign in at some point in time.  If you're not able to sign in, if the sheet's moving around, as long as you sign it before you leave so we have a correct spelling of your name and any organization, if there is one, that you represent other than yourself.  With that, we're going to begin with the Revenue Department who are going to give us a fairly brief discussion of some of the issues that have been raised with regard to the personal property tax, and the Tax Commissioner, Mr. Balks, is here to start that off.  Berri..  Thanks, John.


LB299 829


M. BERRI BALKA:  Thank you, Mr. Chairman.  I'm Berri Balka, Tax Commissioner for the State of Nebraska.  What we would like to present today is a very brief slide presentation showing how we got to the circumstance we did before the Supreme Court came down with their decision, and then I


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would like to make a few comments after that time setting out what we think are some of the proposals that the committee should look at today.  And with your permission, we will proceed with the slide show.


SENATOR HALL:  That's an appropriate title slide, by the way.  (SLIDE PRESENTATION)


DENNIS DONNER:  My name's Denny Donner with the Revenue Department.  I'm actually going to just run through what we've done here.  What we have defined as the history, and if I went forward, what we're presenting here today is a reflection of what the last ENRON case said and how the scheme of things in perspective of Nebraska have led to that decision.  The Uniformity Clause in Nebraska's Constitution says taxes shall be levied by valuation uniformly and proportionately upon all taxable property and franchises.  The last decision clearly indicated that all tangible property includes both real and personal, so as we go through this we are talking about, when we say tangible property, we are not isolating personal from real.  We are talking about the Supreme Court's definition, that being one class of property.  A little bit of the history of what's gone on in Nebraska.  In 1967, the state no longer collected property tax revenues.  They got out of the business.  Also, goods and personal effects were exempted.  We also exempted intangible property and by intangible here I'm talking about stocks, bonds, CDs, primarily financial instruments.  The voters...


SENATOR HALL:  Denny, can I stop you for a moment.




SENATOR HALL:  Can you hold that microphone that Berri's got there with your other hand so that folks can hear you a little better?  Thank you.


DENNIS DONNER:  Okay.  I'm going to go through this again, 'cause this does set the stage.  In 1967, the state no longer collected property tax revenues.  Property tax revenues after '67 were strictly a local function, went to support local government.  We exempted household goods and personal effects from tax, and we exempted intangible property, and by intangible property I'm talking about as defined in our statutes and that being financial instruments.  I'm not talking about intangible as a blue sky


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thing.  I'm talking about intangible as stocks, bonds, CDs, et cetera.  In 1970, the voters approved a constitutional amendment which would allow the Legislature to classify individual classes of property and to exempt those classes if they so choose.  Okay, now prior to 1972, when this exempt property started to become exempt, the mix of the tax base was as you see it here:  78 percent real; 22 percent income-producing personal property.  In 1972, the Legislature partially exempted this:  inventory, agricultural machinery and equipment, livestock.  The first year was a 12.5 percent exemption.  What we'll see now happening, and it becomes significant in what the Supreme Court said eventually, is that legislatively, due to tax policy, we in the state determined that certain groups of property should not be subject to a personal property tax.  In the beginning, the loss in valuation base for the political subdivisions was made up from the state General Fund in the form of sales and income tax rebates--our matching funds, or fill the hole, whatever you want to call it.  Now, the remaining taxpayers at this point were not picking up the additional burden caused by these exemptions, but there was a group of taxpayers who now were not paying at the same proportionate rate on their value based on the constitutional amendment and statutory exemptions, which at that time were all right.  Okay, then, to move on in the sequence of things, 1974, in Stahmer v.  the State, the Supreme Court basically said, hey, your scheme of exemptions is fine, it's okay.  1976, Congress passed the 4-R Act, and in 1977 the property originally set on the tax rolls for incremental exemption became 100 percent exemption.  These particular dates are important as we progress into the court and legislative process.  Okay, by 1978, all of this property that was partially exempt was now off the tax rolls.  The proportions had now shifted to 88 percent of the property tax paid was now supported by real estate and 12 percent supported by personal property, keeping in mind that this, the amounts of personal property that were off were still fully funded from sales and income tax in 1978.  Okay, in 1978 to the 1986 period we started to see a different phenomena happening in the property tax area, which you draw your own conclusions, but what happened then is that the 70 million dollar reimbursement amount that was going to these exempted classes of property was frozen at 70 million dollars.  However, the value of those classes of property and the tax needs of the political subdivisions were those properties set did not freeze, so the remaining property on the, tax roll, both the real estate and the income producing property, personal property, that was still subject to tax started to pick up the proportionate burden for those


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classes that had went off of property, off of the tax rolls for property tax.  The reimbursement never kept pace with the value of those or the expenditure level of the political subdivisions.  Okay, 1987, now we'll see some other things starting to interplay.  In 1987, the federal courts ruled that our property tax violated the 4-R Act.  Finding that we were discriminating, it relieved carlines from their personal property tax.  Well, carlines, by their nature, are all personal property so, therefore, they were totally exempt as a class of property.  The railroads at that time filed similar litigation saying the 4-R Act refers to railroad operated property and, if carlines are railroad operating property, so are we.  Okay, here's the result of what happened.  We have the four basic groups that were fully exempt.  The federal court has said, okay, carlines, you get equalized to zero just like the other property that is ...  just like the exempted properties.  They said, you get to be equalized with the exempted properties because the exempted properties make up the major portion of the taxable personal property.  Here the comparison was personal property, but that's under a federal standard.  That's not under Nebraska's Constitution.  Okay, the railroads effectively, and now this, I want to point out, this is only referring to the railroads personal property portion.  The railroads still pay full property tax on their real estate.  The railroads never were totally litigated.  The railroads entered into a settlement with the State of Nebraska that says, in effect, we will pay taxes at the level of the aggregate of all income-producing personal property, so effectively they paid taxes on 25 percent of their personal property equal to the level of taxation of the aggregation of all income-producing personal property, whether taxable or not by Nebraska statute.  So we now have another sliver coming off the property which is not subject to tax anymore.  Then we have ENRON, what we refer to as ENRON 1, which basically Nebraska's Supreme Court equalizes personal property of pipeline to zero, utilizing state constitutional Uniformity Clause and Equal Protection Clause of the U.S.  Constitution.  They referred to both of them in ENRON I in...  well, this is basically a clip of the case that tells the whole story.  Nebraska, by not taxing personal property of railroads and car companies, although acting involuntarily and under compulsion of federal law, has denied ENRON uniformity under the Nebraska Constitution and equal protection of the law contrary to the Fourth Amendment of the U.S.  Constitution.  Consequently, the personal property of pipelines must be equalized to zero.  What was a 40-page opinion, that's the meat of it.  Pipelines get to compare with other property that they choose to compare to


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within this state.  Okay, this was the pipeline decision.  There's no reason why this decision wouldn't refer to all personal property if it had been similarly litigated.  Public service companies, for all practical purposes after this, were united in claiming this exemption on their personal property--another sliver off the pie.  In addition to these judicially and legislative exemptions, other types of property, whether you want to call them narrow classes, also achieved exemption during this same time period:  agriculture income-producing machinery and equipment, we know that one; business inventory; feed, fertilizer, farm inventory; grain, seed, livestock, et cetera; earthmoving equipment used for agricultural and soil conservation purposes; LB 775 exemptions (planes, computers, agricultural processing equipment); the other one of course is the carlines as we talked about; the rolling stock of railroads, which was ultimately legislated as somewhat of a compromise to a full hearing on the merits in a 4-R case; court ordered equalization to zero for public utility companies in '89, sorry.  So, by today, this is where we are.  Now we have all these white streaks basically off the tax rolls.  The original four we have off the tax rolls with money still flowing to the counties and other political subdivisions to reimburse it, but only in part.  These are not proportional but they just show that the taxable personal property has continued to erode as part of the base.  Today, we're at about a 92 percent real estate, 8 percent income producing personal property is all that's left on the tax rolls.  So you can ...  and the people on the tax rolls are the ones picking up the burden for the people who have come off ever since that 70 million dollar amount was frozen.  As a practical matter, during the '78-86 period, that 70 million shrank to 60 million at one time because of state budget cuts, et cetera, so that burden is constantly shifted to the remaining taxpayers.  This is what we were back in pre-'72; this is what we are today.  I'll just lay them on the side of each other so you see what's happened to the burden.  It's shifted very heavily towards the people remaining on the tax roll and I guess the Supreme Court has basically said it's getting to be too much, that the exempt people are getting an advantage.  This is one thing we've thrown in here.  It's from a concurring opinion.  It doesn't carry any weight, but I think it carries a message that we need to look at.  We wish to point out that the entire property tax base for school districts and other local governments may be at risk, and the only reason I say it's important is because in a concurring opinion, you know, it's not agreed to necessarily by the other judges, but some of the judges are saying the whole base, the 1.2 billion base, may be at risk


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if you don't, you know, clean up your act on exemptions.  I think I'll stop there and probably...


SENATOR HALL:  Okay, if we could have some lights,


M. BERRI BALKA:  Thank you, Mr. Donner.  Thank you, Mr. Chairman.  What we do have for the committee are some copies of the slide show presentation as it was done.  (See Exhibit A)


SENATOR HALL:  Okay.  Good.  Thank you.


M. BERRI BALKA:  By way of comment this afternoon, two weeks ago Governor Nelson addressed this committee and essentially made a commitment that we had to address the concerns of the court and that the proposal that was adopted had to be fair to all Nebraska taxpayers, but the decision and the final proposal had to be sound, reasoned and fair.  For a final solution to the problem not to address the concerns of the court or to adopt a proposal that was fundamentally unfair to all taxpayers, really only compounds the problem to the middle income taxpayers and homeowners in the State of Nebraska.  The Governor asked the Revenue Department to meet with various industry and public meeting groups for input and to analyze the options available.  It would appear there are three options available and all of which contain some elements of benefits, concern-and risk.  Option one would be to take all business income-producing property off the tax rolls.  Now, while there are certain benefits and gains to certain elements of Nebraska, the favored group, the middle income taxpayers and homeowners would pay a higher real estate tax and bear the ultimate risk of that solution.


SENATOR HALL:  Now, Berri, when you say "option one", are you talking about any preference or just...


M. BERRI BALKA:  No, I'm just listing...


SENATOR HALL:'re giving us a laundry list here?


M. BERRI BALKA:  ..a laundry list of options...




M. BERRI BALKA:  ..that we have seen so far.


SENATOR HALL:  I thought that's what it was, but I just wanted to clarify that.


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M. BERRI BALKA:  That's correct, Senator.  Thank you.  The adoption of that solution could well put at risk the I


billion dollar real estate property tax base here in Nebraska.  I don't think we are at a place where we can afford to accept that risk with nearly double sales tax rates and income tax rates if that were to be the ultimate outcome of that decision.  Another option ...


SENATOR HABERMAN:  That was number one or number one, right?


M. BERRI BALKA:  That would happen.  That could be the outcome of it.


SENATOR HABERMAN:  All business property off, that's number one.


M. BERRI BALKA:  That...


SENATOR HABERMAN:  Now you're on number two.


M. BERRI BALKA:  Yes, Senator.  That some portions of the personal property, the income-producing property, be adopted, take some portions of the business equipment, agricultural equipment or livestock or inventories and place them back on the tax roll, and to exempt other portions of those particular items.


SENATOR HABERMAN:  You're suggesting three of them?


M. BERRI BALKA:  Well, all of those other areas that we have off of the tax rolls now, that some of them could be put back on, some of them left off for...


SENATOR HABERMAN:  You're suggesting the three to be placed on or what?


M. BERRI BALKA:  Well, no, I'm suggesting that there have been people who have argued that that should be done, that we place business equipment back on the tax roll.  There have been people who have expressed that agricultural equipment should go back on the tax roll.  There have been people who have said that livestock should go back on; that perhaps inventories of all types be left off the tax roll.  But with that total collection of ideas I think the consensus has been at this point that that will not pass a constitutional test with our court.  That's the language that I'm hearing, is that no one has come up with any language to do those types of things that will pass muster


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with the court at this point.  If this is the final solution proposed and we add further tax years then to that circumstance, it will cause a refund to eventually be made if the court then, in turn, rules that proposal is unconstitutional, or does not pass the test and has to go back to the State Board of Equalization for further action.  We need to take a look at who bears the risks and who bears the burdens and gets the benefits out of that circumstance.  Certainly the favored tax, the favored individuals in that class that are exempt get all of the benefits at that point, but the risk, again, is borne by the middle income taxpayer and the homeowners because they're going to pay higher taxes regardless of whatever comes out in that circumstance, That I don't think is fair in any circumstance in looking at the outcomes.  Option number three would be to put all forms of business income-producing property back on the tax.  rolls.  All segments of Nebraska in that case are asked to bear their fair burden and fair share of the income of the tax burden at that point.  The middle income taxpayers and homeowners are not being asked in that case to carry more than their fair share of the burden.  We are not faced with constitutional challenges at that point from the various interests who have challenged those cases in the past.  We have broadened and expanded the tax base and we have protected the taxpayers.  In looking at what happens if the Legislature and/or government as such decides to do nothing at this point, as we continue on through April and into early May, we have been advised that there are individual taxpayers who are going to be filing and asking for their county boards to equalize their value of their real estate property to zero.  Some time in early June or July those cases, supposing we get a negative action by the county boards, are going to start reaching the district courts in the State of Nebraska, and certainly by July we're going to have centrally assessed taxpayers beginning to ask those same questions for equalization, and by early August or September we could well see a decision in the first of those district court cases, and some six to nine months later a decision by the Supreme Court again.  If the court should determine that it's an unconstitutional tax we're dealing with here, we could well be faced with refunds to all taxpayers, whether they had filed or not, because of the way our refund statutes are drawn.  I don't think that we can wait much beyond late April or early May to reach a decision that we have to go back to the counties and so that the taxpayers know exactly what is going to happen.  The question has been asked with regard to what the State Board intends to do with regard to the actions in the ENRON case at this time.  I believe that a board meeting will be held


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sometime in the third or fourth week of April, at the best my guesstimate is this time.  Now, what I will say now is that I only have one vote on that board, but based upon the recommendations I have from my legal counsel, I will be forced to vote at this time, with the information I have, to equalize the property values of the effective property to zero.  Now I don't know what the other board members may do, but I think this body must move forward along those lines that this may well be the outcome from the State Board.  Whatever we do at this point has to come in a sound, fair, and reasoned approach that will pass the constitutional test, and I believe that essentially is what the Governor said two weeks ago, that he will not accept anything less than that.  Mr. Chairman.


SENATOR HALL:  Questions from the committee.  Senator Haberman.


SENATOR HABERMAN:  Are you making a recommendation?  What are you recommending we do?


M. BERRI BALKA:  I have recommended to the Governor that essentially all business incomeproducing property should be put back on the roll based upon the information that we have today.  On the way to this committee hearing, I was given two more pieces of information of the taxpayers that they would like to have considered.  We have not even reviewed this information.  But based upon what we have today, it looks like the safest and most reasoned approach is to put the business income-producing property back on the tax rolls.


SENATOR HABERMAN:  What is the Governor recommending?


M. BERRI BALKA:  The Governor has not come forward with a recommendation to date.  What he is asking, though he is saying the time is drawing very close to the time which he will not be able to accept any further input, and if anyone wants to have input put to him to consider, they need to have that in very shortly because the time is very close to the time when he's going to come down with a recommendation.


SENATOR HABERMAN:  Well, maybe I'm mistaken, but I thought that he indicated to us two weeks ago that he would come forth with a proposal in two weeks.  Now, how...  evidently, he's not coming with one, is that correct?


M. BERRI BALKA:  He has not made up his mind as of today, Senator.


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SENATOR HABERMAN:  Do you have any idea when he is going to make up his mind?


M. BERRI BALKA:  No, he said that the time was drawing close and that he wanted to make sure everyone had the input in.  Apparently there were people who still asked to have input to him and he wants to make sure that all of the legal considerations are taken into account.  We have heard a lot of public policy, not only in this committee but outside the committee.  What we need to have is the legal reasoning if someone wants to be outside or exempted from that tax base, we need to know the solid legal reasonings that will pass the constitutional test.


SENATOR HABERMAN:  Then we are not supposedly to make any decision for another whatever because we're under the same restrictions he is, is that not correct?


M. BERRI BALKA:  I think, Senator, I understand the dilemma that I guess that we're all in from that standpoint.  The Governor is saying at this point he has not reached that decisions.  I gather that perhaps this committee has not either from that standpoint and that's, again, why we've asked to have some of that input here again today, but I think we're reaching the point where we're absolutely running out of time.  I've told the Governor that and he's saying that he understands that and, within a very close period of time, that decision is going to be made and the recommendation will be made.  What I've also recommended to him is I see no reason to do anything other than to put the property back on the tax rolls.


SENATOR HABERMAN:  Thank you very much.


SENATOR HALL:  Senator Peterson; Senator Hefner.


SENATOR PETERSON:  Mr. Balks, this morning I sat on the floor and there was an amendment laying on my desk and I started jotting down some thoughts, I mean some questions I had for today.  If everything goes back on, would that include household goods, intangibles and those sort of things, or government property?  And should they be put back on, or should they not?


M. BERRI BALKA:  Well, Senator, there are I guess many aspects to that question and I would answer this way.  What we have talked about here, one, is business income-producing property.  Certainly, and I think the court also said that


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there was a classification of home household goods and that type of thing that could be left off the tax rolls, one, for reasons of collectability and economy of scale.  They also talked about the questions of certain religious and other properties that could be left on that had other social purposes that the, essentially, the court would recognize.  The question of intangibles I guess raises an interesting issue.  There are states that do have and that still tax intangibles, though we have not for a number of years here.  I guess the question that has to be addressed by the Legislature, if we're asked to put a...  let's say we have a business that has a million dollars worth of business property equipment, we have a farmer that has a million dollars worth of real estate, why do we tax those and we don't tax intangibles.  If someone has a million dollars worth of CDs or something in a bank, that's a storehouse of wealth.  We have started to analyze some of those figures and we do have preliminary estimates of how much property we're talking about.  The intangibles in Nebraska are probably 114 billion dollars.  That's a considerable amount to be added back to the tax base.  If you were to do that, you can address, because of the way our constitution is drawn, different tax rates.  You can also address certain exemptions, like a homeowners exemption.  You could give an exemption to persons with lower amounts of intangible property, and that, it's my understanding, would pass a constitutional test if it were the wishes of the Legislature and the Governor to do so.


SENATOR PETERSON:  On cattle, you got...  I got a feedlot out there and I'm feeding cattle.  You got a dairy farm across the road from me.  Can these two be valued ...  do they have to be valued the same or can they be valued differently?


M. BERRI BALKA:  Senator, as...


SENATOR PETERSON:  In what you interpret.


M. BERRI BALKA:  Senator, as I understand from the legal counsel I've been given, we essentially have one class of property, whether it's real or personal, and those two items really are the same class of property and...


SENATOR PETERSON:  So they'd have to be valued ...


M. BERRI BALKA:  ..I believe you would have to value them the same, Senator.


SENATOR PETERSON:  If we was to exempt the first 50,000


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dollars of value for everybody, would that be constitutional?


M. BERRI BALKA:  Well., the question, are you talking about all business income-producing property?




M. BERRI BALKA:  It is my understanding we do have somewhat the same problem that you may end up with saying that is the maximum that you can tax in some instances because that is the lowest common denominator.  Where we're now saying equalized to zero, we might well be saying equalized to 50,000 dollars on some of the properties.  You could do that with regard to intangibles because they are not in the Uniformity Clause, but within the properties covered by the Uniformity Clause, you probably could not do that in that fashion.


SENATOR PETERSON:  Did I understand you right that we could do it probably with intangibles?


M. BERRI BALKA:  That's my understanding, Senator.


SENATOR PETERSON:  But not with others.


M. BERRI BALKA:  That's correct, as I understand it.


SENATOR PETERSON:  Okay.  If everything went back on, could we set, instead of 100 percent, could we set everybody let's say at 75 percent and be constitutional?


M. BERRI BALKA:  What I think the court has said as long as you do it fairly and reasonably to everyone then you're all right.  It's when you select between those portions of the business personal property that we're talking about here and you make distinctions, the court has said that probably is unfair.  Then it becomes only a question of how unfair the court will allow those things to stand.


SENATOR PETERSON:  Could you see a constitutional amendment put before the people to resolve these issues, or are there federal questions that would be involved there?


M. BERRI BALKA:  Well, certainly you have the Equal Protection Clause of the Fourteenth Amendment.  You certainly do with certain of the railroads, the pipelines and those would come back into play.  I don't know what language of the constitution, exactly how it would be


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phrased, but I think we still might run up with some of those same questions with the federal law.


SENATOR PETERSON:  The federal law.  Okay.  That's all for now.  Thank you.


SENATOR HALL:  Senator Hefner.


SENATOR HEFNER:  Okay, earlier in your statement you said putting some business equipment back on the tax rolls, or putting business equipment on the back ...  back on the tax rolls.  I thought all business equipment was on the tax rolls.


M. BERRI BALKA:  Well, no, you have a certain amount of your property that is exempt.  You have your inventories, you have the other items that we listed that are not on the tax rolls at this point in time.  There are some...


SENATOR HEFNER:  Okay, you're saying business inventory then.


M. BERRI BALKA:  Business inventory, you have ...


SENATOR HEFNER:  But business equipment we have on the tax rolls at the present time.


M. BERRI BALKA:  In the income-producing property, yes, Senator.


SENATOR HEFNER:  Okay.  Okay, then what you're saying, you believe we need to put farm machinery back on, business inventory and livestock.


M. BERRI BALKA:  What I essentially...  that's the outcome because essentially the court is saying if you do other than that and the ratio gets high, as it is now, they're not going to allow that to stand.


SENATOR HEFNER:  Okay, but we may be able to leave household goods off and we may be able to leave intangibles off.


M. BERRI BALKA:  Well, certainly the intangibles are off and they had not raised that question because it's a different class of property, and the household goods they have already said in their opinion they think that's a valid class to leave out of the formula, yes, Senator.


SENATOR HEFNER:  Okay, how is all of this going to affect


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the ag.  land proposal that this committee put out a few days ago?  Do you think this will be intertwined or...  ?


M. BERRI BALKA:  I don't have an answer for you on that question, Senator.


SENATOR HEFNER:  Okay, but that could be one of the things we may have to consider too.


M BERRI BALKA:  Well, certainly it may well have some bearing at some future time, yes.


SENATOR HEFNER:  Okay.  Thank you.


SENATOR HALL:  Other questions?  There are none.  wait, Senator Peterson.


SENATOR PETERSON:  Yes, I just thought if we was to take everything off, I know that's been suggested from a number of people in my district, how much sales tax.  I mean this is what they're saying.  About 90 percent of my people up there are saying take it all off and put it on sales tax or income tax, preferably sales tax.  What would we have to ...  how much sales tax would we have to raise?  Do you have any idea?


M. BERRI BALKA:  Well, Senator, it's a two-part question from that standpoint.  You could perhaps replace that portion of it the first time around with a...  let's say, I'm not sure whether it'd be one or two cents, but if that action then causes the court to rule that the whole real property base is not valid and throws that out, we're looking at at least double the sales tax rates and perhaps approaching a double income tax rate to replace all of that 1.2 billion property, real property, that is now supporting that local tax base.


SENATOR PETERSON:  Right now I think we're looking at if we take it all off we'd have to make up about 113 million.  A cent would generate 90 to 100 million, right.


M. BERRI BALKA:  That's correct.  It's that second question that no one seems to know the answer to at this point and if the court were to come back and say, you really made it unfair to those, the real property taxpayers and we say that is not allowed, besides compounding the yearly effect of how many years you'd have to make the refunds then, it would be a question of then how much sales tax and income tax do you have to have to replace the whole 1.2 billion in the real


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property tax base.


SENATOR PETERSON:  So really taking it all off we're looking at just a shade over one cent, but then if we have to go back on personal or on that, that could take another cent to two cents maybe.


M. BERRI BALKA:  No, I think you're probably talking about more.  You're probably talking about ten cents.




M. BERRI BALKA:  Or some combination thereof to double the sales tax and increase the income tax rates.


SENATOR PETERSON:  Okay.  Thank you.


SENATOR HALL:  Other questions?  Commissioner, you raised the issue of intangibles.  The fact that the constitution only reads to tangible property, allows us to then classify intangible property.  Is that correct?


M. BERRI BALKA:  To treat them differently, Senator.


SENATOR HALL:  We could set up different classes for CDs as opposed to stocks if we felt like it, put a different rate, tax rate, on each of those and not run afoul of the constitutional provision because there is none that's addressed...


M. BERRI BALKA:  Well, this ...


SENATOR HALL:  ..that addresses that specifically.


M. BERRI BALKA:  The question only came up within the last couple of days, but that's our preliminary investigation would lead us to that general conclusion, Senator.


SENATOR HALL:  And the base that you said was out there in the form of intangibles was how much?


M. BERRI BALKA:  It's about 114 billion dollars.


SENATOR HALL:  What...  you also said that there aren't very many states that currently...


M. BERRI BALKA:  I believe there are 14 that tax intangibles in some forM. We have not gotten the total breakdown, which we'll be glad to furnish the committee with as soon as...


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SENATOR HALL:  Would you do that?  M. BERRI BALKA:  Yes.


SENATOR HALL:  I would be very interested in what the other 14 states are doing and whatever you could generate for us in the form of how those intangibles breakdown and what categories they fall in and if you could get that to us we'd appreciate it very much.


M. BERRI BALKA:  I would hope we could have that information within the next few days, Senator.


SENATOR HALL:  That would be very much appreciated.  Senator Peterson; Senator Hefner.


SENATOR PETERSON:  Could you get everything that's intangible listed down, what, stocks, bonds, anything else, I mean so that we , if there's anything else out there that's important?


M. BERRI BALKA:  We'll try to give you the most complete breakdown that we can gather together, yes.


SENATOR PETERSON:  I'd appreciate that.






SENATOR HALL:  Senator Hefner.


SENATOR HEFNER:  Has you or your staff contacted the other states to know what they're doing?


M. BERRI BALKA:  Well, we do have some understanding with regard to that.  Again, we can fill the committee in more with regard to the intangibles hopefully within the next few days.


SENATOR HEFNER:  And how about the tangibles, like...


M. BERRI BALKA:  We will try to give you a breakdown as to that information.


SENATOR HEFNER:  What are the other states doing about livestock, business inventory, business equipment...


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M. BERRI BALKA:  We'll try to provide the...


SENATOR HEFNER: machinery?


M. BERRI BALKA:  -committee members with that information, Senator.


SENATOR HEFNER:  okay, Thank you.


SENATOR HALL:  Any other questions?  Senator Will.


SENATOR WILL:  Would you know off the top of your head, Mr. Balka, within the class of real property what percentage is residential?


M. BERRI BALKA:  Let me address that to Mr. Donner.


DENNIS DONNER:  Approximately 40 to 45 percent.


SENATOR HALL:  If you would repeat it for the record.


M. BERRI BALKA:  Approximately 40 to 45 percent, Senator.


SENATOR WILL:  Thank you.


SENATOR HALL:  Any other questions?  If not, Commissioner, thank you very much.  Appreciate it.


M. BERRI BALKA:  Thank you.  (See also Exhibits B and C)


SENATOR HALL:  Appreciate that information.  Now, I'd like to see a show of hands of those who would like to testify today.  okay, we've got a number of people that are here I think to at least sign in and to listen.  I'm going to ask the Pages, Erin, if you would, to pass around the sheet.  if you'd like to sign in support or opposition to either one of the measures so that it goes on the record that you were here and we appreciate that not all of you can testify because there's a large group here, but if you'd like to show your preference one way or another by signing in and stating the bill that you would support or oppose, we'd appreciate it.  I'd like to ask those folks who have come in a ways to testify to please come up first.  I'd like to start by asking is there any members of the Legislature who would like to testify?  okay, then...  and then what I'm going to do is I'm going to ask the folks who lobby for a living to just kind of hold off.  I'd like to hear from the people who have driven in and have a personal perspective on it.  We'll hear the lobbyists a little later in the day, and I'll


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listen to you first.  And the committee probably would like to hear something, a new approach to things, but if you'd come on up, it's going to be first come, first serve, so if you'd like to move up to an open seat, there's an extra chair here for the next person who's going to be on deck.  We'd like to listen to you.


ALBERT EBERS:  Can I testify?


SENATOR HALL:  You sure can.


ALBERT EBERS:  (See Exhibit D) I have a few copies for my...  for the committee.  Chairman, Mr. Hall, and members of the Revenue Committee, my name is Albert J.  Ebers of Seward, Nebraska.  Richard Maresh, lobbyist for the Nebraska State Grange, and Norman Tooker, State Grange Master, both have asked me to testify at the Revenue Committee hearing for the Grange.  The Nebraska State Grange opposes LB 829 for the following reasons.  Using Fiscal Office Study Committee figures, as published in the World-Herald, I figured the impact of LB 829 on Hamilton and Seward counties in their respective school districts because I have actual farm owner net farm figures.  In Hamilton County, the residential house in town property tax would decrease by 540 dollars that formally paid 2,000 dollars.  Now the resident property tax would be 1,460 dollars on that property.  A 265 acre good irrigated land owners' property tax would increase 581 dollars.  Add this to the 7,500 dollars property tax he is now paying, that would make the total 8,081 dollars.  In Seward County, the residential would decrease 460 dollars to 1,540 dollars on a 2,000 property house.  The good irrigated 265 acre land would increase to 8,524 dollars, About the same ratio in both counties in both school districts--a 400 percent variation.  Can this be defended before the State Supreme Court?  Figuring both parties have a net income of 19,000 dollars, which is the actual farmer's landowner income, is there any uniformity or just equitable or fairness about the residential paying 1,500 dollars property tax and the landowner paying 8,302 dollars?  Being on the Agricultural Business Committee that sought to abolish the personal tax, it was abolished because it had developed so much lying, cheating, and bribery that it was a shaM. it was replaced by the combination sales and income tax.  This worked well, until personal property to be replaced rose to be, I notice 70 million, but the year coming was going to be 100 million.  When the Legislature said sales and income tax could no longer afford that, then personal property tax shifted onto residential and land property taxes, Now that school district educational property taxes are soaring out


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of sight and real estate property taxes pay most of the bill, relief is sought.  The Grange supports replacing all personal taxes with the combination sales and income tax.  Then we all pay alike and there is no shifting of taxes on a certain segment.  To make the state income tax more fair, the high bracket income should be raised to the federal income level.  LB 773 made the state income tax regressive instead of progressive, and an incentive that went beyond all equitable bounds.  Let corporations keep the property tax, sales and corporation tax incentives to provide more jobs, but allow the shift of high bracket personal income taxes to be shifted to the middle and lower personal income taxpayers.  I would like to add, Senator Will, you asked the question how much of the entire property tax is residential.  I believe our Department of Revenue said 45 percent.  The rest of it is what?  Farm, mostly, or land, and industry, but land has a big share of it.


SENATOR HEFNER:  Okay, are there questions?  I have one here.  You say that the Grange supports replacing all personal taxes with a combination of sales and income tax, and you heard Mr. Balka say that we may have a problem with that with the Supreme Court.  They may rule that then the real estate taxes are unconstitutional too.


ALBERT EBERS:  Could be.


SENATOR HEFNER:  Any comment on that?  Then it would take a whole bunch of sales and income tax if we had to take the real property off the tax rolls too.


ALBERT EBERS:  Yes.  Oh, I still think the farmers will always face some property tax and I guess the residential too.


SENATOR HEFNER:  But right now you feel that the farmers are paying too much in taxes.


ALBERT EBERS:  In property tax.


SENATOR HEFNER:  In property taxes.




SENATOR HEFNER:  Okay.  How about sales tax when they go out to buy a new combine?


ALBERT EBERS:  You pay that once.


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SENATOR HEFNER:  A 100,000 dollar combine and 5 percent of that is 5,000 bucks. 


ALBERT EBERS:  You pay that once.  Property tax comes every year.


SENATOR HEFNER:  Okay, so you think the sales tax on farm equipment is okay then.


ALBERT EBERS:  You got to have the combination sales and income.  Sales tax is so regressive and the high income bracket on sales pay very little sales.  They're investments, pensions, insurance, everything that don't have any sales tax.  That's why they invest their money.  And if you have it all income, half the people don't pay anything.  So the combination makes it fair that we all pay but the income people pay a little more than the poor people.


SENATOR HEFNER:  Okay.  Thank you.  Any other questions?  Thank you for testifying.


ALBERT EBERS:  I appreciate it, Senator.


SENATOR HEFNER:  We're ready for the next person.  Please come forward.


SENATOR HALL:  Others who would testify, come on up.  If one of you can take the microphone, there's a chair here, a folding chair next to the table, that the other one can take.  Mr. Kalb, if you'd like to come up and get on deck after these two gentlemen so you can catch your plane, wherever you're going.


GEORGE FEREBEE:  Senators, my name is George Ferebee.  I'm a farmer from rural Nebraska.


SENATOR HALL:  George, could you spell that last name for US.


GEORGE FEREBEE:  F-E-R-B and two E's.  (sic)


SENATOR HALL:  Thank you.


GEORGE FEREBEE:  And I wonder, of those people that are in support of 829, what their definition of "fair" is.  If you're using a definition of treating people equally and alike, this bill isn't even close to that.  For why do those people feel that just because my occupation, or take small businessmen in general, anybody that his job or occupation


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requires personal property to make a living, why do they feel that we should pay a bigger portion of operation of government than someone who has no personal property involved in their job, whether they work for a big company or work for the government.  The government furnishes all the personal property that they use to make their income.  Why do they feel that we should be responsible for a bigger portion of paying for government?  Do we produce more children that require schooling?  Do we demand more fire or police protection or any other aspect of government?  I don't think so.  And I don't know how you can classify that as fair.  The only fair way to deal with this personal property tax issue is throw it all out.  If no one pays it, that's the fairest way.  And this whole issue in regards, as I don't remember which senator in the Legislature (sic) Update classified this as a Mack truck, I've got a better classification.  Let's classify it as a sinking ship, and the reason the ship is sinking is the fact that the government are boring holes in the bottoM. And those of you who are ...  proposed 8 ...  LB 829 as a solution, your solution is to throw just a few of us on and telling us to fix the holes, while the majority of the people are sitting off at the side watching and seeing, well, are they going to get the holes fixed or are they going to go down with the ship?  And I can tell you, Senators, let me be your crystal ball.  What's going to happen is we're going to go down with the ship, and why it solves one of your problems, you no longer have to worry on whether the ship's going to sink, 'cause it sank.  Now you have a bigger problem and that is dealing with getting the ship back up.  And if we went down with the ship, you're going to have less people to do it.  And the only fair way to deal with this is to throw everyone on the ship.  Then everyone's got a vested interest in getting the problem solved, everybody can see what's causing the holes and how big they are and, believe me, Senators, you'll get your problem solved quicker and what I mean by that is, as the gentleman said before me, go back to your sales and income tax.  If I make money or anybody else, then we can pay some and all of us are consumers.  We can argue on what ratio or variation, but as Senator Hefner said, what about the real estate property tax, then if it means doubling the sales and income tax, so be it.  Then, believe me, if everybody has a clearer picture of what government's costing, then perhaps you'll get your problem solved, Then maybe they'll start the question--do we really need this much government or can we get along without some of it?  But by just trying to, quote, unquote, "balance your budget" on a few of us, you're just going to create more problems on down the road, and I do not see how anyone can classify this


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829 as being fair and equitable to the people.  The only way you're going to solve this problem is to be fair to everyone, and a good example of that would be another situation.  If you feel, taking a farmer, that it's fair that we have to buy our personal property that we use to make our income, we pay sales tax on it, then we have to maintain it and we pay sales tax on the parts that we use to fix it, and regardless of what brand or kind it all breaks down and wears out, and then you feel that it's fair we pay a personal property tax upon it, then let's look at another group of people.  Let's take government employees for a good example.  If you feel that it's fair for us, then perhaps we should take them and it would really solve your tax problem and we'd tell all the teachers, the secretaries for that matter in this office, okay, you're responsible for your office equipment and you can pay tax or you can pay rent on your office space or your classroom and then you can pay perso nal property tax upon that.  And I know you're sitting up thinking, well, this guy's a little off, but think about it.  And I bounced this idea off a neighbor who happens to be on the school board, and she informed me, well, I can tell you what will happen, you won't have any school teachers or government employees left.  Perhaps she's right.  But if they can't survive under those conditions, how long do you think we can?  When you stop and think about it, you're trying to put us in the same situation, in the same boat.  And I guess, in essence, what I want to try to get across to you senators is treat people fairly, and taxing personal property isn't treating people fairly.  And, with that, it's basically what I have to say.  There's probably some other points that other people will say and I'll let other people testify, unless you have any questions.


SENATOR HALL:  Questions for Mr. Ferebee?  Mr. Ferebee, I would just say that I don't think you're a little off.  I just want you to tell my secretary that she's going to have to PAY.


GEORGE FEREBEE:  Well, I realize that if one of you senators introduced a bill to that effect the repercussions probably could be measured on the Richter scale and this poor old building would have more cracks, but let's be realistic.


SENATOR HALL:  What...  And I appreciate your testimony, George.  What would you...  I mean I thought I also heard you say though that if you're going to do this, do this for everyone; that the...  I mean is that ...  was I listening well?  Is that what you said, that if you're going to put personal property tax on, put it on for everyone?


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GEORGE FEREBEE:  No, get rid of the personal property tax.  Throw it all out.  That's the only fair way you can deal with personal property tax.


SENATOR HALL; And you would advocate then shifting the burden to sales and income.


GEORGE FEREBEE:  Something that everybody pays, yes.




GEORGE FEREBEE:  Because let's take the government worker.  Well, how much personal property do they have invested in their job?  And so we demand any more government than they do, or someone who works for a big corporation?  And when we get to dealing with big corporations and that you have to ask, do they really pay taxes?  When you first look at it, yes, they do, but if you look a little farther they figure it in in the cost of doing business and pass it on to the consumer.  So the people are paying taxes, not the really, really the big corporations.  But as a farmer, who do I pass it on to?  I'm the end of the line and I just have to absorb it.


SENATOR HALL:  Okay.  Senator Hefner.


SENATOR HEFNER:  I didn't catch the occupation.  Are you a farmer?


GEORGE FEREBEE:  Yes, Senator.


SENATOR HEFNER:  Okay, where are you from?


GEORGE FEREBEE:  Edgar, Nebraska.


SENATOR HEFNER:  Okay.  Okay.  I kind of figured that you were, but I wasn't sure.  What do you think we ought to do about some of these attorneys and accountants and some of those people that don't pay too much personal property taxes?


GEORGE FEREBEE:  Well, if you threw it all out and put it on sales and income tax, you'll catch some of those.




GEORGE FEREBEE:  I mean, I think some of those are making money, aren't they?


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SENATOR HEFNER:  I wouldn't know.  Thank you.


SENATOR HALL:  Any other questions?  If not, thank you very much.  Appreciate your testimony, George.


GEORGE FEREBEE:  Thank you, Senator.


SENATOR HALL:  You bet.  others who would testify on the proposal, please come forward.  You got to watch those wires there.


GARY THOMPSON:  Mr. Chairman and members of the committee, my name is Gary Thompson.  I am an attorney.  I make very little money, but I pay taxes.  I am here as the president of the Beatrice School Board and I wanted to give some information to you about what we see, or at least I see, as some of the problems dealing with the decision of the court.  I need to tell you, of course, as you may understand, that with the ENRON decision the Beatrice Public Schools were the governmental entity that was most affected by that because all those pipelines happen to be there in Beatrice.  I'm passing out, to give you some indication as to what the impact we are trying to determine, may be to us and also as far as the possible passage of LB 829 is concerned, and I wanted to speak in favor of that.  (See Exhibit E) I think it's, first of all I need to say that we're very, very concerned that you come to some resolution of this.  As I say, we can't afford in the Beatrice Public Schools to continue to have decisions that are requiring us to refund taxes.  As I say, it was 400,000 dollars last year.  As Mr. Balka said a few minutes ago, it's possible, because of the refund provisions, that we could be looking at a substantially greater refund for this coming year.  The last figure that I've given to you on the piece of paper which I gave to you is the '89 personal property taxes that were paid to us.  That's actual dollars, 781,000 dollars.  If we were required to refund that, not only for '89 but you can almost double it for 1990, we're talking about almost 1.5 million dollars in refunds which we would need to make, so we are very concerned that whatever you do is going to pass the muster with the court.  And you've heard the testimony of Mr. Balka and I, you know, I have to agree with him completely.  I think the court has given us a very clear indication that either you're going to tax it all or you're not going to tax any of it, and if you don't tax the personal property, if you don't have personal property tax, you may be putting at risk the entire real property base.  Now I have no problem myself if you want to take all


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property tax off the tax rolls and shift it all to income and sales tax.  I don't have any problem with that if you will allow the school districts to have that authority to levy the taxes.  Unfortunately, you know, I'm not...I don't have any real problem with the fact that property tax is a part of our tax base, but it ought to be done fairly, and the problem that we have as far as the schools are concerned, as you well know, is that a huge percentage of our budget and our support comes from the property tax.  I think, and I'm here to support, putting all of the personal property onto the tax rolls.  We've tried to determine what effect that would have within Beatrice Public Schools and that's what this sheet is.  The figure that I've given to you as to what our personal property income is on taxes constitutes about 14.6 percent of our tax askings.  Reducing that and applying that toward a valuation figure, although we can't get it accurate, means that we would reduce our base, our valuation base, down to 305 million and the effect of that, as I have tried to point out as far as out tax levy is concerned, is that at the present time for our current year our tax levy is $1.50.  If we were to lose that property tax valuation and generate the same tax figure, we would have to have a tax levy of $1.7614.  It's a 17, over a 17 percent increase in our levy to try and make up if you take off all the personal property taxes.  And that goes directly, obviously, onto the real estate.  You've narrowed the base again.  And I think, you know, again we're trying to figure out how this would affect agricultural taxes in Gage County.  If all personal property were taxed I'm convinced that actually agricultural taxes would at least not go down and not go up a great deal, but perhaps, particularly in our case as far as District 15 is concerned, agricultural taxes might, in fact, be reduced if we spread it across all personal property as well as the retaining of current real estate.  But we've tried to put those figures together.  I might further say that if we were to take out all of our personal property tax and we had to go to a levy of $1.76 in order to generate our current budget, I might tell you that our budget or our levy a year ago was $1.80, just a little over $1.80.  Then, of course, with 1059, the 1059 money that was generated, we were able to decrease that levy by 30 cents, but if personal property tax is taken off you, in effect, at least as far as Beatrice is concerned, you've eliminated all the gains that made on 1059.  That, I want to try and give you some idea of the impact that I think 299 would have.  I can't give you the full impact of what 829 would have, but I'm convinced that, you know, we need to have personal property tax as well, Senator.


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SENATOR HALL:  Thank you, Mr. Thompson.  Questions?  Senator Hefner,




SENATOR HEFNER:  Mr. Thompson, what do you say or how do you answer that farmer that was just up and said if we put it back on some farmers are not going to make it because they can't afford to pay sales tax on that combine and then pay a personal property tax each year on top of that?  They can't afford to pay personal property tax on their livestock.  The new car, the new or used car dealer says he can't survive if he's got to pay personal property on that inventory.




SENATOR HEFNER:  What do we do?  Do we just put these farmers out of business?  Do we just put these businessmen out of business?  What's industry going to do if they have to pay inventory tax?


GARY THOMPSON:  Senator, I understand the concerns that there are there, of course.  What I'm trying to say and I wish that I could have the figures but since we have had most of the ...  so much of our personal property off the tax rolls since 1978, my county assessor, I went to him to try to determine what the impact of putting that back would be and I don't know, but I think from what I can tell and looking at the figures that the Legislative Fiscal Office put out, what I believe is that by putting all of the personal property back on, putting all the business inventories up and down Court Street in Beatrice and Highway 77 in Beatrice, and the business inventories throughout the county and throughout the state, by shifting the tax burden to that you're going to decrease some of the taxes that the farmer would have to pay, and from what I can see in my county, at least, and as far as Beatrice is concerned, I'm convinced on the basis of the figures that the Legislative Fiscal Office has put out that, in fact, the agricultural sector of the Beatrice Public Schools would not be adversely affected by putting all personal property tax (inaudible).  I'm sure that there's many people who would disagree with me with that, but by lowering the real estate property taxes by perhaps another 20 cents, or 30 cents on our levy that we apply to agricultural land, I think a good deal of the personal property tax could be made up in that way.


SENATOR HEFNER:  But I think what he was saying was that a


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farmer has to have a huge investment to make a living, whereas an attorney, I'll just use an attorney because you're an attorney...


GARY THOMPSON:  You may use an attorney.


SENATOR HEFNER:  -whereas an attorney doesn't have to have too much, or a school teacher, or some other professional people.  So he was saying, he said, I don't think it's fair to put all this back on and tax us out of business.


GARY THOMPSON:  Yes.  Yes.  I understand that.


SENATOR HEFNER:  So you can see the dilemma that we're in.


GARY THOMPSON:  Sure.  Surely.  Surely, I understand.  I very well ell under s tand the dilemma that faces this committee and the Legislature and you've had...  obviously the court has given you great problems in this dilemma and one of the significant problems as I see it too is, even if you do take off those property...  the personal property taxes, I think you're going to be facing a collapse of the entire system.


SENATOR HEFNER:  And I appreciate you coming up and telling us what the impact is going to be on Beatrice School District.


GARY THOMPSON:  Well, I wanted to share it with you.


SENATOR HALL:  Senator Peterson and then Senator Warner.


SENATOR PETERSON:  Mr. Thompson, if everything goes back on, don't you feel that probably or that a lot of livestock feeding, some business and that, may move out of the state with the high tax that they'll probably be ...  ?  You're saying that they're not going to have to pay.  I don't see it quite that way, but ...


GARY THOMPSON:  I'm sure you don't.


SENATOR PETERSON:  ..I'm real concerned about that.




SENATOR PETERSON:  'Cause there's a lot of states sitting around us that would be willing to say to a lot of operations, come to us now.




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SENATOR PETERSON:  And they probably would 'cause people are looking for less.


GARY THOMPSON:  I understand that concern too.


SENATOR PETERSON:  (inaudible) live there too if we'd lose.


GARY THOMPSON:  Yes.  Yes.  I have, you know, as you well know, we're sitting right down there by Kansas.  We recently put in a city sales tax and, of course, everybody said, well, that will drive business out of Beatrice, and certainly go down to Kansas, and we're prospering.  I understand that there is that probleM. I think the other factor that may have something to do with this is the fact that this is becoming more and more a federal issue.  The Kansas property tax system is in court as well.  I don't know whether it would be beneficial to a businessman to go to Kansas or to any other state because he may, in fact, have to pay the same kind of thing in those other states, even though it may be beneficial at the present time.  Speculation.


SENATOR HALL:  Senator Warner.




SENATOR WARNER:  Mr. Thompson, nice to see you again.  The question I have though is, 'cause I assume you look at this as a ...  from a legal viewpoint and if I understand clearly, would it be your professional judgment that the most likely option we have to stay within the constitutional limits is to put all property on, all personal property tax back on because of the opinion, or do you feel that there is any room within what the Supreme Court has written to find some other form of classification of personal property?  Or maybe you haven't even thought about that.


GARY THOMPSON:  No, I have thought about that, Senator, and before this last decision came out I felt that all of the personal property tax needed to go back on in light of the ENRON decision.  I really did not feel that LB 107 could pass muster, but that was my own personal opinion.  As a school board member, I also, you know, I have a great deal of fears in looking at the language that was used in this last decision and, you know, so I do approach it both as an attorney and as a school board member.  I am convinced that, legally, everything needs to go back on in order to pass the muster, but I would also say that that legal opinion may


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somewhat be shaded by the fact that I have a prospective visit as a board, a school board member too, but I don't think so.  I think it's valid.


SENATOR WARNER:  Have they given any thought to any, as a policy matter, if one should...  if it's right, and I assume many people will indicate today that there is a necessity for some change in the constitution to accomplish what they want, do you have any thoughts as to the appropriateness of a policy change in amending the constitution to essentially do away with in some form the Uniformity Clause and the proportionate clause and the prohibition on special taxes clause?  I mean, there are numerous areas in the constitution.  But would you ...  had you given any thought to looking at that option in the event that the Legislature cannot develop constitutional classifications currently?


GARY THOMPSON:  I have.  I would answer and say I haven't really given a great deal of thought to that, Senator.  One of the things again that I would echo that Mr. Balka said is that even if there were constitutional amendments passed by the voters of Nebraska and placed in the Nebraska Constitution, you run into a real problem of what we have ...  has happened with the 4R cases and ENRON that the federal constitution is not going to permit us to do it.  We're going to run into a ...  we're going to run afoul of the Equal Protection Clause.  I think that's a problem.




SENATOR HALL:  Any other questions?  If not, Mr. Thompson, thank you very much.


GARY THOMPSON:  Thank you very much, Senator.


SENATOR HALL:  I am now going to ask Senator Lamb to come up.  He has requested some time and he wasn't here when I asked before.  Senator Lamb, I saw you in here and I was looking out for you and then you skipped out on me.


SENATOR LAMB:  Well, I'll tell you, the Natural Resources Committee is meeting in Executive Session across the hall ...


SENATOR HALL:  Okay.  I know you're busy.


SENATOR LAMB: I have a real problem here...


SENATOR HALL:  All right.


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SENATOR LAMB: I appreciate, Senator Hall....


SENATOR HALL:  No problem at all.


SENATOR LAMB:  ..the opportunity to testify.


SENATOR HALL:  Then we'll follow it up with Mr. Kalb and then I see the gentleman right here who's interested.  Senator Lamb.


SENATOR LAMB:  Thank you.  I'm not in support of putting everything back on.  I think that'd be devastating to agriculture in particular, also our businessmen.  If we put business inventories back on, farm machinery, livestock back on we're back where we were 20 years ago, which I think would be a real step backward and, you know, I'll fight like a wounded steer to not put those things back on.  But then your next question is going to be, okay, what's your solution, and I don't have a complete solution.  However, I have a couple thoughts I'd like to share with you if I could.


SENATOR HALL:  Please do.


SENATOR LAMB:  Okay.  Let's just assume that we go through the scenario of taking everything off.  We've...if you believe the lawyers, you've got to either put it all on, well, maybe not completely but that's one scenario--take it all off or put it all on.  I say take it all off, and one of the problems that brings up is if there is some money, see, we're going to put a lot more burden on real estate, on home owners and all other real estate if we take all personal property off.  That's a given I think at this point if you don't do anything else.  So, assuming that we did have some state money to replace some or all of the reduction in revenue to the subdivisions if we took everything off, one of the questions is how do you get that money back to the subdivisions, and let me offer this thought.  The community technical colleges are currently partially on...  they get some of their funds from property tax, about half their funds I think, and that's about 40 'million dollars a year.  So if we wanted to, in effect, reduce the property tax, this is a easy, simple, fair way to do it, just eliminate the property tax for community technical colleges and have them get their money from the General Fund like the University and the state colleges do.  It's never made a lot of sense to me that they are funded from property tax in the first place.  So there's a 40 million dollar ticket that would come off property taxes all over the state.  Now we're


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talking, in some of the numbers I have here, that if we did take all the remaining personal property off the tax roll, we're talking about 103 million dollars or somewhere in that vicinity.  So if you take the community technical colleges off the property tax roll you are then, you have 40 million dollars back to the property tax payers, which leaves another 60-63 million dollars, which could be taken care of by maybe a homestead exemption, is one possibility.  So I think there are ways to deal with the problem of how do you get the money to the subdivisions that would lose money if all personal property was taken off the tax rolls, There's a couple of ways you can do it right there, which I think are viable.  Of course the other major problem in this scenario is where does the money come from to do that, and, as the Revenue Committee, I leave that in your hands.  (Laughter)


SENATOR HALL:  Senator Lamb, we appreciate that.


SENATOR LAMB:  For myself, you know, I'd be willing to put another penny on the sales tax.  I'd be willing to do about anything other than put business inventories, livestock and machinery back on the tax roll.  I would even accept you know maybe an increase, somewhat of an increase in property taxes on real estate, if that's the choice, because I feel so strongly against putting some of those things that have been exempted over the past few years, That is...  I do have some ideas that I am going to share with you at this point where we could get some of that money to replace it.  There are some options I think that are reasonable.  I mentioned the sales tax.  That's one we always think about and, you know, we're talking about, under this scenario with the numbers I have, we're talking about a penny on the sales tax.  Well, I don't think it'd take that much.  I think there's some other sources that we could cut it back down to a half-cent with some of these other sources.  But my main points that I wanted to bring to you is that I think there are easy ways to get the money from the state back to the subdivisions on a fair and equitable basis.  That completes my testimony.


SENATOR HALL:  Let me guess, but I ....  Okay, any questions of the committee for Senator Lamb?  Senator Will.


SENATOR WILL:  Yes, Senator Lamb, Syracuse University did a study of our tax system a couple years back and they had an estimate in there of the savings that could occur if our system of school districts were reorganized and if I recall


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correctly that estimate was in the neighborhood of 100 million dollars.  Would you go so far as to support something like that?


SENATOR LAMB:  I think that was a completely invalid proposal.  I don't know, you know, seriously, I don't think that's true.  I think there are some things that are happening as a result of 259 that I support.  I don't support all of it, but it's going to happen anyway and I'm not.  throwing big road blocks in the way of it.  I've had some amendments to 259 which are being incorporated into 719 which I think make it more workable, but I think there is movement toward more cooperation between schools without completely relinquishing the viability of some of those small schools that do need to continue to exist.


SENATOR WILL:  Thank you.


SENATOR HALL:  Other questions?  Senator Peterson.


SENATOR PETERSON:  Senator Lamb, do you think that if everything went back on that you would see like livestock, feeding operations, those type of things leaving the state?


SENATOR LAMB:  Well, I don't know.  That's speculation.  I'm sure that would be a disincentive, you know.  I don't know how much of a disincentive, but certainly it would be a disincentive.  I should mention, and I heard some of your questioning before in regard to intangibles, and certainly if we're going to put...  if we were going to put everything on there I see no reason for not putting intangibles on there.  And I heard Mr. Balka say 114 billion dollars.  You know, if we put those intangibles on there our tax rate could be minuscule.  It could really go down substantially, and I think that is a viable alternative.  They tell me that there are 14 states that do tax intangibles.  We, in the past, have heard, well, if you tax intangibles they're going to, you know, they're going to leave the state.  Well, that may or may not be true and I'm not convinced it will be.  The other point I would address is the fact that some people are saying if we take all of personal property tax off the tax roll then we're going to have a problem with the Supreme Court in regard to real property.  You know, that may ...  maybe it is, but I don't believe it's going to go that far.  You know, I don't think the Supreme Court has said that and I'm willing to take that chance.  I don't believe that the court will ever come to the point where they will throw out the real property tax just because we do things with personal property tax.  As a nonlawyer, that's my professional


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opinion, but (Laughter)


SENATOR LAMB:  ..I'm willing to take that chance and I think people are saying that are saying it as sort of a scare tactic, basically.


SENATOR HALL:  Senator Hefner.


SENATOR HEFNER:  Senator Lamb, as long as you're here to help the Revenue Committee ...


SENATOR LAMB:  Yes, I'd be glad to do it.


SENATOR HEFNER: do you propose that we help local government pay back 35-40 million dollars for '89, 35-40 million for '90, and perhaps the same amount in '91?


SENATOR LAMB:  Well, we have a history.  We have done that to a certain extent in the past, but we have never fully done it.  When the railroads first had their tax reduced because of a court decision, I think we appropriated something like 9 million dollars for one year to help those people out of a budget crunch because their budgets were already calculated on the higher number, and I do think it's appropriate for the state to help them over the hump to a certain extent, but not 100 percent and not for a long period of time.  I don't think we can do that.


SENATOR HEFNER:  Would you care to say what percent you'd be in favor of, and then where would we get the money?


SENATOR LAMB:  Well, again, I guess I don't have an answer to those, but...




SENATOR LAMB: know, raising a tax, a sales tax or something, that...  it's not out of the question in my opinion.  You know, I ...  you're hearing it from somebody that never advocates increasing taxes or almost never, but...


SENATOR HEFNER:  When you go to buy that 100,000 dollar combine then you ...


SENATOR LAMB:  That's right, agriculture pays a lot of sales tax when you figure the sales tax on it.


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SENATOR HEFNER:  And you don't mind doing that.


SENATOR LAMB:  I mind doing it, but, depending on the alternative, I may be willing to do it.


SENATOR HEFNER:  Okay.  Thank you.


SENATOR HALL:  Other questions?  Senator Peterson; Senator Warner.


SENATOR PETERSON:  That brings the question, Senator Lamb, if we take it ...  put everything back on, couldn't we exempt the sales tax on farm machinery maybe?


SENATOR LAMB:  We could do that and I've heard that being part of the deal, but I reject that because it's such a small amount.  You know, it's not a big thing when compared to the amount of tax that agriculture would pay if farm machinery was put back on the property tax roll.  Then they say, well, this is going to work, I'm going to cut a real big deal with you, we're going to eliminate the sales tax on farm machinery and what is ...  the numbers don't anywhere near match up and, as an old horse trader, that doesn't sound like a very good deal to me.


SENATOR PETERSON:  Okay.  Thank you.


SENATOR HALL:  Senator Warner.


SENATOR WARNER:  Senator Lamb, if we go the route of attempting to find some sort of an exemption system without a change in the constitution for personal property tax, our option is to enact legislation, get the test case in whatever months or a year or two that it takes, then we're, and the question's already been brought up, we'd then have local government facing refund potentials, at least, depending on how the suit's filed.  Maybe, if we're going to go that route, it would seem to me we better do a tax increase right now not to reimburse local governments for past so much or maybe the past too, but we better start building reserves to pay back local government in the next couple years, whatever.  If all these items do not work then the other option would be that if something is found that it is constitutional then you would automatically have a rainy day fund to protect state government, would be used otherwise, but not used but as a safeguard.  But I find myself having a lot of concern that I don't want to see half my property tax every year being like the debt service of the national government that half of my tax is to pay back


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taxes in effect that people overpaid.  Would some kind...  if we're going to go this route, had we not better start some sort of a reserve fund back here so that local government isn't sticking out?  They're the ones that are at stake in this, got a stake in it.


SENATOR LAMB:  Certainly that could be prudent, however, as you well know, Senator Warner, it's very hard to develop an effective argument for raising taxes in anticipation of something that may not happen and, you know, and the other argument against that is that the Legislature, being composed of very fine people, also has a tendency, if there is any money available from any source for spending, usually the Legislature can find a way to spend it.  And so, when you start developing reserve funds, the question is whether they really remain reserve funds or if somebody has a bright idea about how that money could be spent, at least on a temporary basis, it's much more apt to happen if the money's already there sitting there ready to be appropriated.


SENATOR HALL:  Any other questions?  If not, Senator Lamb, thank you very much.


SENATOR LAMB:  Thank you.


SENATOR HALL:  Appreciate your testimony.  Mr. Kalb is next and then whoever else is up here, there's a couple people in the front row already.  All right.


KENT KALB:  Mr. Chairman, members of the Revenue Committee, my name is Kent Kalb.  I'm senior tax counsel for Union Pacific Corporation.  I appear before you today in an attempt to try to help focus possible solutions for the Legislature.  I have spent a great deal of time in trying to analyze this case and I too find the options to be very limited as the means in which we can address theM. I think there are a number of options, however, and I'm going to address them from what I consider the safest to the most risky and would be glad to try to answer your questions.  The safest proposal, obviously, is to return all tangible personal property to the tax rolls so we'd have a full degree of taxability, Under that scenario there's no question that the Uniform and Proportional Clauses of the constitution are met and that there is no equal protection probleM. Same time, I have to tell the Legislature that that has some serious downsides in my opinion.  Nebraska does not live in a vacuum and, whether it's good or bad policy to tax inventories, the fact is that there isn't a single surrounding state that does, and there will be border


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bleeding.  There will be businesses move that are easy to move.  They will move to the surrounding states.  Farm machinery, the others, you could make the same type of arguments.  I think there are lots of downsides to putting everything back on.  It's not good for the business climate of the state, it's not good for economic development, it's not good for the farm economy, let's face it, it's probably not good for Nebraska.  But it is an answer that would provide the safety network for the taxing subdivisions of this state and obviously has to be one of the major concerns of this Legislature, is to provide that safety network, and it may be you have no other option in the end unless you're able ...  willing to make certain other very difficult choices.  So it's a proposal that, in my opinion, has to stay on the table, has to be given serious consideration absent other activity by the Legislature.  Number two, I would propose that you could amend the constitution.  That means suspend "uniform and equal".  Perhaps even suspend your equivalent of the due process clause, or the Equal Protection Clause, as far as taxes are concerned.  You could then determine which property you would tax and which you would not, and have a proportional and equal only within the class, but not between the classes.  Again, not a simple thing to do.  A very ...  you have to have a constitutional amendment.  You have to have three-fifths vote of the Legislature to do that.  You have to have approval of at least a majority of the people and you have to have it in place and active before November 1st of 1991 or you have jeopardized another year of local revenues.  So, if you go that route, the time frame is very short.  And I do want to point out in my opinion in reading the case that even if you go to a constitutional amendment where you're suspending the uniform and equal, the Nebraska court, beginning in 1923 with the Sioux City bridge case, has made a unique tax alliance between the uniform and proportionate clause of our constitution and the Fourteenth Amendment to the federal Constitution which requires equal protection.  My research reveals that Nebraska's the only state that has ever done that.  Now I think if we actually amend the constitution and make it clear that we're suspending the uniform and proportionate clause I'd be willing to take that risk, but I can't tell you it's risk free.  Third, I think, and this is a more risky solution, that you can exempt all property.  All personal property you could exempt.  Couple it, in my opinion, with a homestead exemption, which I think would be required because I do not think it's acceptable to the citizens of the state to shift any portion of the reduced tax to residential property.  I think that if, in fact, we're going to remove the rest of the business equipment


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from the rolls that it's only reasonable to ask the business community to pick up that tax.  So you could put together a scenario where it would exempt the remaining portion of personal property.  We would make a flat statement we're going to hold the homeowners harmless by a homestead exemption and then the remainder of that tax would have to be replaced from real property, I mean the real property of utilities and centrally assessed taxpayers, ag.  land, and commercial and industrial taxpayers.  That's a possible scenario.  If you want to get even riskier, you can take an opportunity to say the court didn't say that we can't classify for the purposes of exemption, and I agree they did not say that.  I think they said if you come up with definitions of property that meets the class, it's not special legislation, that you can so classify that property.  The problem is they said that even if you do that you have to equalize, and when you equalize there is only one class of property and that's all tangible property.  And I'm afraid under the scenario you do ultimately equalize to zero, absence a constitutional amendment.  But that is another scenario that if you want to take the risk you could run that one up and wait two years to see what the answer is.  If you do that, obviously, probably Senator Warner's right, you better think of some network of safety for the political subdivisions.  At that point, I think those are about the four options I see there from the safest to the very risky solutions in my opinion.  I'd be glad to try to answer questions.


SENATOR HALL:  Questions for Mr. Kalb.  Senator Haberman.


SENATOR HABERMAN:  What's your feeling about intangibles, taxing intangibles?


KENT KALB:  Senator Haberman, I was here when you exempted intangibles as a staff member of the Department of Revenue and I remember at that time, even in those days there was very widespread avoidance of the intangibles tax.  Obviously today, with electronic communications, electronic transfer capabilities, I think it's much easier to keep your intangibles out of Nebraska, away from you, and try to make them not subject to your tax.  Obviously, if you try to impose a tax on intangibles, I assure you there's going to be litigation because you're going to litigate questions of what is a tax situs of the intangible, is it the domicile of the taxpayer, is it the domicile of the intangible, and those questions.  It would be a very...  that would be a very divisive, long battle on its own.  Also, as I remember, the time we last had intangibles, Lancaster County collected


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more intangibles tax than Douglas County, and that shows me there's something wrong with the tax.


SENATOR HABERMAN:  In Douglas County.


SENATOR HALL:  Or they're just richer in Lancaster County, that's all.




SENATOR HALL:  Senator Warner.


SENATOR WARNER:  Is there any provision, (inaudible) bringing up intangible, was there any aspect of a 4-R Act that conceivably relates to how, wouldn't affect us in Nebraska now, but that in any way relates to the tangibles?  Is there any part of that, there any cases somewhere in the county where states have had court action because of some provision of the 4R Act related to how they taxed or did not tax intangibles?


KENT KALB:  As I understand the question is under the 4-R Act has there been any litigation in any other state that involved directly the question of imposition of intangibles tax, and the answer to that is to this date there has not been any such litigation.  Interestingly enough, just for your information, Nebraska does tax the intangibles of the railroads.


SENATOR WARNER:  As a part of the...


KENT KALB:  Because they are franchises and the other intangibles are part of the unit method of assessment and, at this point in time, no one has challenged that, of course.


SENATOR WARNER:  Somewhere along the line I seem to recall that there was a provision in the 4R Act, maybe it had never been tested, that involved potentially how intangibles were taxed, or maybe I'm asking something I just simply don't remember correctly.


KENT KALB:  I'm not aware of such a provision.  I think the important thing for the committee to remember, and I've tried to focus you, is, under the last opinion of our Supreme Court, the 4-R Act is really Rind of a side issue here because you have a state constitutional problem under your uniform and proportionate and your equivalent of the equal protection clause.  You get the same decision in


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Nebraska with or without the 4-R Act.


SENATOR WARNER:  The other, you indicated that if property continued to be exempt, or if we went the other route, if we exempt what was left, one of your options, it's left to be taxable, that then the business community ought to be picking that up and not have that 103 million, or whatever it turns out to be, to be generally assessed, but you didn't mention the manner in which, if I understood you correctly, that are options in which that could be done.  Now I 've heard such things as gross receipts tax going around.  I don't know that that would work.  Or I've heard corporate income tax.  To me, that wouldn't work.  At least in the past it's never generated revenue.


KENT KALB:  I'll comment on that.  Under the statement I made, the way I presented it, I would fund it as a property tax solution inclusive within the property tax arena.  I would not go outside the property tax for replacement revenue.  I would have it replaced from the real property.  But I will be glad to address the questions of ...  and I should address one other question there and you brought up the amount of money.  I have no degree of safety reliance upon the numbers you have.  I think it's very important that you get as hard a numbers as you can as soon as possible to what you're really talking about.  Also, a unresolved issue can significantly influence the amount of money that might be at stake and that's LB 1, which it's final constitutionality or unconstitutionality has not been determined, and that's a 35 million dollar swing one way or the other as I see the figures.  Now, on replacement revenue, if you turn to replacement revenues at this point, I think the Legislature is stepping in to a pretty large quagmire because you have a lot of issues at that point that, in my opinion, from a fairness standpoint, have to be addressed.  First of all, you have questions, you could have new taxes, such as a gross receipts tax, a Michigan value-added tax, or a vat.  Those would be new taxes.  if you're going to go with the old taxes, then you got to look at what's happening with the current tax structure.  Obviously, there are a number of sales tax exemptions you may want to reexamine.  There is the possibility of expanding the sales tax base and, let's say it, services are not popular but that would be a possibility.  When you look, you've got to consider the fact that there are a number of large taxpayers in the state, as well as small taxpayers who have taken advantage of the law passed in 775 to create jobs for this state and had made major investments creating those jobs and they have significant tax credits to take.  And for


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that reason, the corporate income tax from those taxpayers is going to be greatly reduced, even...  and all you would do, you'd use up their credits faster but you'd not recover any revenue.  So you got a problem with that.  And you have financial institutions that don't pay a corporate income tax in the state.  In fact, you can't tax any true corporate income tax on financial institutions because of federal prohibition, so we have an alternative tax for theM. You would have that to look at.  Same thing applies to insurance companies.  So once you say you're going to replacement revenues, it's not just as simple as saying we're going to raise the sales tax or the income tax, in my opinion.  You've got to examine an awful lot of issues that are very difficult.


SENATOR HALL:  Other questions?  Senator Peterson.


SENATOR PETERSON:  When you was talking about a constitutional amendment, I asked Mr. Balka that, do you see any federal guidelines or questions involved that we could write a constitutional amendment?  Could we write one?  We have any federal thing sitting in our way in regards to this?


KENT KALB:  Outside of Nebraska's reliance, the Nebraska court's reliance upon the federal equal protection argument, I do not see any prohibitions to you having classification or a constitutional amendment provided that it, you know, I'm assuming that you will do it in such a manner that you do not discriminate against rail transportation property.  I mean that's the only other prohibition that's out there and if you address that then I do not see that their constitution, but outside of our unique ties with the Fourteenth Amendment, there's not a problem.


SENATOR HALL:  Senator Warner, was that another question?  Okay.


SENATOR WARNER:  Just one more please.  Kent, yes, when you mentioned this constitutional amendment, would you expand a little more on the type of constitutional amendment, and let me say why my concern is.  Last week, I was talking to a Minnesota legislator and she was telling me or commenting on the fact that I think she said they have between 80 and 90 different classifications now or at one time (inaudible) on real property because of their constitution.  What are some of the things that very clearly has to be done to, if you went the route of a constitutional amendment to protect as much as you can once you make that step, to once protect


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from that kind of thing happening, or to retain the protection of the uniformity clause as we now know it?


KENT KALB:  Okay, when you had mentioned the Minnesota system, what you're talking about is they've gone to what is called a formalized property classification system, and under that system, and just for your information a state much closer to home, maybe Kansas adopted one of those two years ago or it was implemented two years ago and they're having a significant amount of problem with it and are facing new challenges and new legislation all the time.  But that's a property classification system and under that system you come up with regional and rational classes and you not only do that but you also can vary the rate of tax that applies to those classes.  For example, the Kansas system says that residential property is going to be assessed at 12 percent, utility property is going to be assessed at 33 percent, commercial and residential is going to be ...  commercial property is going to be assessed at 25 percent, and things of that type so you've got all those variants.  I'm not saying you'd have to do that.  You could do that, obviously.  That would be an option.  The other thing you could do, you could simply take the type of exemptions that are authorized by Section 2 of our constitution, transfer them to Section 1 as exceptions to the uniform and proportionate clauses and have them exempted there, and it seems to me that would ...  and you put them right in the constitution.  Do not leave it to the Legislature to make the decisions.  Now, the problem with putting it in the constitution, it becomes very difficult to ever change them if you don't like it down the road, but, you know, I don't think you have to go to the Minnesota classification system if you go to a constitutional amendment.  There are other ways to do the constitutional amendment and that would take some technical work to work out what you...  to draft it to get it done, but I think those skills exist in this state.




SENATOR HALL:  Other questions?  If not, Mr. Kalb, thank you very much.


KENT KALB:  Thank you.


SENATOR HALL:  All my questions got answered along the way.  Thank you.  Others who would testify, please come forward.


DAVE MUSSMANN:  Afternoon, Senators.  My name is Dave


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Mussmann.  I'm from Nuckolls County at south central Nebraska.  I am opposed to LB 829.  one of the things I feel is why is the landowner penalized for owning property?  If you, I'd like to use myself as a basis.  I'm going on a real estate tax statement.  Where I live, I own 240 acres.  My tax base there is 5,760 dollars.  That's 24 dollars an acre.  That's my single largest input of my crop expenses in that given year.  If you was to add personal property tax on my livestock and machinery, I don't feel that that's a burden I could bear.  I'm to the limit taxwise.  You know, it's just getting, it's just getting clear out of hand.  You know, if you're going to tax it, it looks to me like you should go with a sales tax or income tax way because in another ...  if you're going to put personal property tax on businesses, I mean, let's face it, them guys are working on a mark-up.  if you tax them, they are simply just going to have to add a little bit more mark-up.  Who's going to pay for it?  The consumer.  Who buys the most goods in the state right now, or I'd say a majority of the goods?  It's the farmer when he goes in and buys parts, fuel, feed or whatever.  If you add inventory taxes, we're going to pay for it and, there again, we ' re paying double whammy.  If we're paying personal property tax on out own goods and then have to pay more for the product, we're just getting more of a load.  And also in the same way the farmer pays for your grain being hauled in.  Well, if you want to put personal property tax on the railroad, they're just going to charge another cent or two per ton or per bushel or however they're going to go.  The farmer has to pay that again.  And if you're going to tax intangible goods, you ought to be, isn't, in essence, that a tax on a tax?  Because if you've got intangible, if you've got savings, you're paying taxes on your interest.  There is no deductions on that.  It's just flat out.  You've got it, you got to pay it.  So if you're going to have income tax, add a little bit more base on your income tax.  If you've got sale ...  if you're going to make money then you're going to have to pay for it, because you make money, you're either going to spend it or you're going to save it.  There's no way around it.  There's just no way around it.  If you make it, you're going to spend it or save it.  Just something to think about.  And another thing that you got to think about, when we're paying sales tax on used machinery and we're paying sales tax on leases, why add more personal property tax?  We're already paying sales tax.  I mean, I don't like paying sales tax on used machinery or sales tax on leases, but if that's what we got to do, that's what we got to do.  If you're going to add it on the personal property tax too, there just comes to a point where you going to stop?  Now it just comes that you just can't bear.  Why pick out a certain


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majority of the people, and that's the landowners and the people that use goods.  I know the state needs money and I understand that, but put it on ...  put it in a fair way.  Sales tax is.  I don't like paying it.  I don't think anybody does, but, you know, you've got to ...  to me, that's the fairest way.  Thank you.


SENATOR HALL:  Thank you, Mr. Mussmann.  Questions from the committee?  Appreciate your testimony.  In my case, married to my wife, you just spend it.  You don't save it.


DAVE MUSSMANN:  Same here.


SENATOR HALL:  All right.  Thanks for coming down.  I apologize, I have to leave right now and Senator Hefner is going to take over chairing the committee, but I appreciate everybody coming out.




TOM HOEGEMEYER:  Members of the Revenue Committee, my name is Tom Hoegemeyer.  We own and operate a small seed company at Hooper, Nebraska.  I guess, as I read the newspapers and the Unicameral Update, I got more and more concerned about this whole issue.  My training as a plant breeder and geneticist, I'm not an economist or a lawyer and I really don't know the in's and out's of what you people need to do, but I tried to sit back and look at this whole issue and it seems to me that the basic premise underlying all personal property tax or real property tax is that we're trying to measure people's ability to pay by, you know, what they own.  That seems to make good sense with respect to houses and the cars that we drive and one thing and another.  If you live in a mansion and drive a Mercedes, you owe a lot more taxes on those than if you lived in a dumpy little house and drive a 20-year-old Ford.  So that works.  The problem comes when you look at business and business activity.  If you have been listening to all the goings on about the Nebraska economy that we've seen in the last four or five years, we've seen, you know, Wade German and Don Purcell and a whole parade of other people telling us all about the rise and decline of various business sectors, and the sectors that have been struggling, according to these people, have been manufacturing and agriculture and transportation, and the sectors that have been doing really well tend to be those service-oriented sectors.  And I guess I think it's really interesting that this whole property tax situation, whether it's real property or personal property, if you look at just businesses, tends to fall most heavily upon the


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sectors that are struggling, and somehow we have to look at a way to include the service sectors and some of the other new information sectors, if you will, on an equitable basis in the economy.  I read a book a few weeks ago by a guy by the name of Peter Drucker.  He is a professor and teacher and author, and kind of a business management guru.  The book was called, The New Realities, and be was discussing all these trends in the U.S.  economy that reflected what we were seeing in Nebraska over the last five years or so, and he made some interesting observations in addition, and one was that, you know, traditionally the means of production have been defined as land, labor and capital.  Well, he's saying that this is largely changed.  Those factors don't matter nearly so much anymore as information and knowledge and electronic access to that information, and high technology, such as robotics and that sort of thing, has largely replaced labor inputs and another key factor is political and regulatory influence, particularly with the federal government.  Well, he also notes that the cost of most goods has become what he had termed as "decoupled" from raw material inputs.  The amount of labor or the amount of ...  the cost of labor and the cost of steel and the cost of grain have little or anything to do with the price of a car or the price of a box of corn flakes.  We're just totally decoupled from that systeM. And as long as we try to use property tax as the vehicle to fund local government, we're really going to run into problems and the problems are going to worsen as these service and information sectors grow and get stronger in the state.  And so, rather than trying to paper over the property tax situation, I think that we really need to sit back and take a fundamental look at what's going on in the economy in Nebraska and I think, if we do that, we're almost going to have to approach something from an income standpoint, and basically there's two ways to do it that I can see, and you people are a lot smarter than I am and I'm sure you can figure out more ways.  But it seems to me your two basic options are you go to a direct income tax or you do sort of like one of the proposals an ag.  land and that is make property, business property valuation dependent on income so that if a company makes widgets, or that company is a farm, or that company is a law firm, or a medical firm, or perhaps one of the lobbyists sitting out in the crowd here, if they make 100,000 dollars I guess I submit that all of those people owe the same amount to support local government.  You can't have property-intensive businesses doing all of the support or the lion's share of the support for local governments, and we're just going to need to back up and look at that whole situation.  And in the little handout that I threw together


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(Exhibit F), and it's not very professional and one thing and another, I threw together some ideas last night, there's really some interesting ideas that you can attach to an incomebased property valuation system, and one of them is, is it's really dynamic.  I mean, as the various sectors of the economy rise and fall, this system automatically adjusts itself.  If you've got various taxing districts that extend over county lines or school district lines or whatever, you have automatic equalization.  You know, there's nothing to worry about in that regard.  You know, one of the real dangers of, rather, an income-based tax scheme is that you can have, particularly in some areas that are dependent on one or two sectors, you can have, you know, pretty wide swings from year to year.  But if one went to an average over three to five years, you could even out a lot of those swings, plus it would give you the opportunity for new businesses to average zeros then so that, as they were getting themselves rolling, they would have the opportunity to grow into full taxation on that situation.  You know, there's no argument over what's real property and what's personal property.  It taxes all sorts of business enterprises equally on output, and just has a lot of interesting advantages.  I, too, was on a school board.  I served for eight years and one of the last years I was on we got an interesting thing from the Department of Education looking at valuation and, therefore, you know, dollars available per student in each district.  And that document concluded that the school district at Santee, Nebraska, and the district of Omaha Public Schools had equal financial resources.  Now I don't know how many of you have been to Santee, Nebraska.


SENATOR HEFNER:  I have.  It's in my district.


TOM HOEGEMEYER:  Yes, sir, You're familiar with Santee.


SENATOR HEFNER:  But I get out of there before it gets dark.


TOM HOEGEMEYER:  You know, not to demean the people at all, but, seriously, if you look at that, there's no way that the GNP, that is the total value of goods and services produced in those districts per capita are anywhere close.  You know, the GNP per capita or per student in Omaha is probably, I don't know, how many times would you say, Senator Hefner?  Five to ten times larger?  You know, it's a huge discrepancy, but yet our property system on valuation would say they're equal and that's patently false.  And I guess my contention is, as long as we try to fund local government with property taxes, we're going to wind up with a really


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unfair, strange situation, unless we base the value of different properties on the amount of income they produce, There's some other interesting ideas that I heard today as far as putting all income-producing property on the tax rolls.  I think that that is an interesting idea if we really mean all income-producing property.  The last time I got a bill from our attorneys, they charge me by the hour, and if you define inventory as that which people sell, I submit that what they were selling me was their time and perhaps their knowledge ought to be personal property as well because their knowledge was what made their time valuable in the same respect.  And I guess I'm just not sure that we have enough wisdom to list all of the income-producing property on the tax rolls.  I think that intangibles are a lot more than, you know, financial instruments.  I think that intangibles include a whole bunch of knowledge and information in this new information society that we live in and I submit that we don't have the wisdom to properly list those on the tax rolls and the only reasonable way to do it is on the basis of whatever income it produces, so that's basically what I had to say.


SENATOR HEFNER:  Are there questions?  Senator Warner.


SENATOR WARNER:  If I am, by the way, I noticed that your written document where Bruce Johnson, things are looking better, he says, that farmers can learn to expect 3 to 4 percent rates of return on investment in the nineties.  it's nice to know things are going to look up.




SENATOR WARNER:  But the ...  if I'm understanding you correct, you would like to see ...  you would be supportive of, apparently, of all personal property being taken off, what's left.  I guess I assume you are recognizing we can't stay with what we are now.


TOM HOEGEMEYER:  I recognize that.  I would have a suggestion.  I would suggest that we scrap real property as well and look completely away from real property, at least as it relates to businesses and value businesses only on their income producing capacity.  And, you know, then the other question comes, well, what about residential and auto and all of this stuff?  That situation on real property isn't nearly so bad, like I say, because those things tend to be quite proportional, although I do know some fairly wealthy people that, you know, do not drive fancy cars and live in big houses.


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SENATOR WARNER:  Are you considering farm land, I assume you are, as business property into that definition?




SENATOR WARNER:  Real estate, I should say.


TOM HOEGEMEYER:  ..some farm land and we have a great deal of business property.  The seed industry is just very intensive.


SENATOR WARNER:  But you think of real property, you're thinking of agricultural land as a business property that should be taxed (inaudible).


TOM HOEGEMEYER:  Yes, I would say that I would define every farm in the state as a business and anyone that takes a business tax deduction is a business, in my view.


SENATOR WARNER:  If it turns out then that we need to ...  if the Legislature, by chance, determined that we need to continue some form of exemption of some of these kinds of property and if it becomes an issue of what's constitutional, what would your reaction be that, I don't recall if the state has ever held a special election, but as one of the previous testifiers indicated that you'd have to have something in place in the way of constitutional by November 1st of this year, would you be supportive of a cost of a special session to have something (inaudible) in the next 60 days?


TOM HOEGEMEYER:  I would be very happy to help pay for the cost of a special session to do that.  I think this is a...


SENATOR WARNER:  A special election.


TOM HOEGEMEYER:  Or a special election, I'm sorry, not special session.  I misspoke.  I think that it's a bullet pointed at local government as well as businesses in the state.  I think that that would be a very wise thing to do.




SENATOR HEFNER:  Any other questions?  I just have a comment.  I'm involved with Santee because it's in my district, and 10 or 12 years ago we had to adjust their levy because the property owners had to pay too ...  were levied too high for school taxes, and so we used the state average for


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that particular district and then the difference is made up with some BIA funds and some state aid to school funds and like that.  So there are exceptions, but I appreciate you testifying.




SENATOR HEFNER:  Thank you.  We need to move right on.  We've been on this, these two bills, for a little over two hours so ...  and I don't want to rush you.  I want you to say everything you want to say, but try not to repeat some of the other points that some of the other testifiers have made.


LOY TODD:  Senator Hefner, members of the committee, I'll be very brief.  My name is Loy Todd.  I'm the executive vice president and legal counsel for Nebraska New Car and Truck Dealers Association.  I testified previously on this issue and I won't duplicate any of that.  I would like to share with the committee though one item of information that we've learned since the last hearing and it goes to something that we run into day in and day out and probably talk - about too loosely, and that is the risk of people leaving the state or going out of business, that kind of thing.  We work with a lot of regulatory matters for the dealers and we're always even making and hearing comments about, well, gosh, if we have to file this extra form or we have to go through that extra procedure it just doesn't make sense to stay in business anymore; we're going to do something else.  This issue really is one of those where it does affect whether you stay in business and whether you stay in Nebraska and I want the committee to understand that.  From the standpoint of the survey we did, it's still coming in, but I can tell you this; that my small town dealers, my dealers with a half million dollar inventory or a 300,000 dollar inventory or a million and a half dollar inventory are responding and I've asked them simply, what's your inventory level now or the last time you took an inventory, and what would be the impact of this...  of putting that inventory back on the tax rolls, and I'm getting some frightening answers because those answers say the tax will be 30,000 dollars, or the tax will be 20,000 dollars, or the tax will be 50,000 dollars.  And the next thing they tell me is, and we didn't make that much income last year.  And my big dealers, my metropolitan dealers that are carrying a five, or a seven, or a ten million dollar inventory, their answers are coming back the saying the taxes will be 300,000, the taxes will be 200,000, the taxes will be 250,000, and you don't have to be a rocket scientist, you don't have to be any of the experts you've


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heard testify today that if you ask that person, what do I do as a business owner in Omaha, Nebraska, if I'm faced with year, after year, after year an extra 300,000 dollar expense for being on this side of the river as opposed to the other side of the river.  The answer simple.  You move across the river.  And that's what's going to happen.  It's not an idle threat.  It's not somebody's mad or miffed about something or think that they're being treated unfairly.  It's simply a very easy, economic decision.  You will tell the small town dealer, close down.  You'll tell the big city dealer, move.  And that's the only thing I have to add to the kinds of things we have.  It's simply you've heard it in here over and over again that the value of those cars as far as a property value has absolutely nothing to do with the taxable income from those things.  If you tax the profits of them, the only other thing is, and I keep reminding people of this, with a car, if it's in inventory on January 1st and there's an inventory tax, that's paid at 100 percent by that car dealer, and you turn around, sell that car on January 2nd and you, as the consumer, pay it again, 100 percent.  There is nothing else that's taxed twice in the same year.  Even that combine that people are upset about doesn't get taxed again till the next year as far as property taxes.  It's leased once a year.  With us, it's twice in the same year and nothing could be more unfair than that.  You tack the sales tax on top of that.  You've got a situation.  When we want to talk about unfairness, there's a lot of people in here saying we don't want to pay anything, there's a lot of people saying we only want to pay once.  That's us.  We just want to pay once.  We're not coming in here saying exempt us totally.  We're saying on that piece of property that we have to deal with, tax it once.  GM Chevy dealer in Omaha and a Chevy dealer in Council Bluffs both buy their cars from GM. They both buy it for the same price.  If we go to this system, if it's a 15,000 dollar standard price of a new car now, that Iowa dealer can sell it for 500 dollars less and still make money on it.  So obviously there is going to be no business in Nebraska in that area.  So when people talk about taking a chance, what we're saying to you is we'll be as flexible as we can be.  There's no tax that we won't look at as an alternative to it.  All we're telling you is that we cannot survive if this Legislature isn't willing to take a chance, to some extent, with us.  Thank you.  Any questions?


SENATOR HEFNER:  Any questions?  Senator Warner.


SENATOR WARNER:  What would be your attitude of a chance of a special ....  Well, let me ask first, are you convinced or


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I take it you're not convinced or you wouldn't talk in terms of taking a chance, that the kind off classification system that you are in support, I take it that you feel it's chancy as to whether or not the Supreme Court would support that.


LOY TODD:  I think anything you do at this point has some risk involved.  I think even simply putting everything, and everybody talks about "everything" as if it really meant everything and obviously "everything" in this case means tangibles, some tangibles.  I think the risk of not putting intangibles on also creates some risks down the road that can bring down the same house of cards that everybody tries to scare you with now.


SENATOR WARNER:  Well, there isn't any question that a lot of legislators are using ...  not...  retract that, not necessarily legislators, people are talking about putting in intangibles and that's how to some attention but to the seriousness of the issue, but, by the same token, you can make a logical case for intangibles as you can for some tangibles.


LOY TODD:  Certainly.


SENATOR WARNER:  But what I wanted to really ask, then if it is chancy, it is chancy enough, what you'd like to see done, that we should have a special election in the next 60 days to amend the constitution, or is that even more chancy?


LOY TODD:  I think you really improve, no, I think you really improve your odds by doing that and I can tell you that, you know, if that's what the Legislature chooses to do, to take the most favorable risk, we support it.


SENATOR WARNER:  I guess it's not so much of an issue of is that the most prudent thing to do or do we attempt to pass something such as you would support and then wait two years while we go through the court system and then, in the event, find that was not successful and then we again have another round of refunds and all the problems associated with it?  It's a gamble.  I'm looking for the least gamble.


LOY TODD:  In that case, certainly the constitutional amendment has a lot of appeal and I can tell you that our association would be probably spending money to help advertise to promote and pass something that allowed business to stay in Nebraska.




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SENATOR HEFNER:  Any other questions?  I have one, Loy, and before I ask you the question I'm not in full support of putting everything back on, but say that that was the only way we could see our way clear and say, so we wouldn't tax this vehicle twice, maybe we could work out some kind of formula that if we had ...  if the dealer paid the tax on the January 1st inventory and it was sold, say, like by January 30th, why, then he would be, he or she would be, rebated back that property tax on that certain vehicle.  if he sold it in February, it'd be two-twelfths, and ...  or I guess it goes the other way.  But could we work out some kind of formula like that?


LOY TODD:  I would certainly hope so.  If we end up in that situation, we'd hope the Legislature would take then into account, currently, if you sell your car during the year you can get a pro rata refund...




LOY TODD:  ..and ...


SENATOR HEFNER:  It'd be worked on that same sort of deal.


LOY TODD:  ..and an amendment is certainly possible that would allow the dealer the same equal protection, equal opportunity.


SENATOR HEFNER:  That way there wouldn't be property taxes paid on that certain piece of property twice in one year, which...


LOY TODD:  Right.


SENATOR HEFNER:  ..I think is wrong.  Okay, thank you, Loy.


LOY TODD:  Thank you.


CARL GRONENTHAL:  Senator Hefner, the rest of the board, committee, I'm from Humphrey, Nebraska.  My name is Carl Gronenthal, and if you want that last name, it's G-R-0-N-E-N-T-H-A-L.  I wasn't going to come up here, but about two speakers before mentioned that, as a dealer of farm implements, if the profits are down all we have to do is add onto it and the farmer pays for it.  I'd just like to say that's not true, absolutely not true.  Our profits have been dropping the last five years so viciously it's unbelievable and if you people think that we can take, and


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this prior speaker saying about two and three million dollar inventories, you look at some of these inventories, look at Hartington and Laurel and Wayne, look at Humphrey, whether it's John Deere, whether it's International, Case, International, what it is, their inventories are high and I could not and I will not support any type of taxation that's going to send me into bankruptcy.  I will say this; that I will be looking for someone to buy my implement dealership just as quick as you put on a tax, a heavy tax.  I don't mind paying four or five thousand dollars, but the way we paid in 1976, 1975, we were paying four and five thousand dollars then.  What will it be tomorrow?  So all I'm saying is, this is all I've got to say, is I'm speaking for every John Deere, every International, every farm implement dealer in the country saying our profits are down and are down bad and we can't tax the farmer any more because he can't pay for the profits.  The implement dealer supplier is the one that puts the taxes on or puts the extra price on, not us.  We don't do that.  And that's all I have to say, gentlemen, and I don't think your questions would ...  that I could answer them unless you have something to say, Mr. Hefner, or you, Mr. Warner.


SENATOR HEFNER:  Are there questions?  Thank you for coming down and testifying.


CARL GRONENTHAL:  Fine.  Thank you.


SENATOR HEFNER:  Do we have anybody else that would like to testify on this issue?


MICK KARMAZIN:  Good afternoon, Senators.  My name is Mick Karmazin.  I'm from Nuckolls County, Nebraska.  I'm a diversified livestock and grain producer.  I try to run a wholesale business and buy retail, which is a very difficult position nowadays.  I own 400 acres and I feel that my inventory, my livestock and my machinery would more than double my tax.  In this day and age, it don't take long to figure out that you cannot pay double your taxes.  As the fellow from Beatrice School District spoke earlier, he said our taxes will go down.  I ask you where?  I have not seen my taxes go down in 25 years of farming.  In fact, they increased.  Inflation has basically made money, what do you want to call it, won't buy as much as it used to.  I think the way to alleviate the problem, let's tax income.  If an operation makes money, I have no problem with paying income tax.  When a person has to compete, I would very much like to go back the way it was 20 or 25 years ago when a person could sit on a quarter of ground and make a living with a


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tractor, a small combine, and the inventory would be way down there.  You're talking about a large amount of money, a big business, and something that you're asking to tax that does not have the income.  *I'm sitting there with a goal of trying to make 20,000 dollars a year so I can support my wife and my family.  I think it's very true if a person has money, they're willing to spend it.  I think another alternative would be to increase the sales tax.  I also support cutting some of the budget, cut some of the programs, would be a very effective alternative to this government waste.  So I would support 299, which would eliminate everything off the tax rolls.  I feel you're dealing with two different classes.  You're dealing with real property and personal property.  I think that you'll be able to hold that up in court that those are two distinct property items and they're defined separately.  Also, I feel that the majority of ag.  related people's inventory, what they currently have now, and you impose a tax tomorrow would drastically alter.  Not saying that everybody's a crook, but I think there's ways you can beat a deadline as far as purchasing livestock.  or other things this way.  I think it was ...  reason the ag.  sector was granted exemptions was because of sales tax was a viable alternative as a more fair tax.  My alternative to a fair tax is income tax.  If you make money, you can pay tax.  To just impose a tax on a person that buys equipment or inventory to run a business and make a living is an unfair tax.  And I thank you for your interest this afternoon.


SENATOR HEFNER:  Are there questions?  Thank you for appearing before us.


JACK MILLS:  Senator Hefner and members of the committee, for the record, my name is Jack Mills.  I'm appearing here on behalf of the Nebraska Association of County Officials.  Two weeks ago we appeared here and said that we would try to bring to you some information because, and I want to state this clearly, we have not taken a position for either one of these proposals, but we I re clearly concerned about the ramifications of each.  We asked Senator, former Senator Vard Johnson to read the opinion and do some background study as to what he thought might be able to be achieved.  Again, his comments that I might read to you are his comments and not to be construed of that of our organization.  First of all, as you can see from here today, that reinstating the personal property tax is going to become a very emotional and heated issue.  I think perhaps less today than it was a few years ago but, nonetheless, if anyone thinks they can put this back on, it's going to be


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easy and politically acceptable, I would differ with that.  Secondly, I want to note to you that during the testimony here it was noted that the...  there had not been a challenge, there had not been a challenge of the railroads' valuation inclusive of intangibles, and that is ...  it has not been a legal challenge but is my understanding, as we've been briefed by the Department of Revenue, that the Burlington Northern has, in fact, made objections to the Department of Revenue, including within the unit system, that amount, a certain amount, which in net effect comes back to this year, about a 700,000 loss to Nebraska.  I'm not talking about a valuation, loss on taxes collected, With your permission, Senator Hefner, I'd like to read some excerpts at least from this letter.




JACK MILLS:  I was out of town and I asked Vard to come.  He could not be here.  Again, I will read some of the excerpts from here and I'm not just picking and choosing, but some of them are personal to me admonishing us not to become embroiled in this particular issue until our feet are completely on the ground, and I appreciate that.  I'd like to tell you some of his thoughts though.  First, he says thoughtful analysis of the pipeline decision and its progenitors leads to the inescapable conclusion that ad valorem taxation in Nebraska will remain in serious jeopardy until the Legislature restores all agriculture and business exempted property to the tax rolls or, and I think this part's important, the voters approve of constitutional amendment that effectively breaks the uniformity requirements currently in place, and I believe that was discussed earlier here today and I think Senator Warner's been coming in on that question.  So Vard starts off by saying you probably have to put it back on, or you're going to have pass a constitutional amendment, unless we go back to taking everything off.  Second, in the absence of immediate affirmative action by the Legislature, local government will suffer serious losses over the next two years to its tax base with each loss requiring refunds and with each loss placing ongoing budgets in jeopardy.  Third, if the Legislature feels compelled to take half measures in shoring up the system of ad valorem taxation, then the Legislature should increase sales or income tax receipts through a special levy with the funds in a special levy being held to accommodate any refunds that may arise in the future should the half measure fail, and I think Senator Warner was touching upon that.  Vard puts it a little bit stronger than Senator Warner did, but, nonetheless, he in my


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opinion is saying, and we're not saying we agree with this, but he's saying if you're going to address some of these issues perhaps you ought to create a separate fund and hold that.  Then he gives me great admonishment here about becoming involved, which I appreciate, until our Legislative Committee has had an opportunity to take an appropriate position.  So I'm only leaving that part out.  He says I will now take some space to succinctly provide my thoughts on each of the points, and I know this is taking some time, Senator.  If you want me to quit, I'll quit.




JACK MILLS:  Just stop me, because he doesn't speak nor write with succinctness, I find.  (Laughter)


SENATOR HEFNER:  I think we're used to that.


JACK MILLS:  You know him, right?  Three judges, White, Fahrnbruch and Grant, in the 1991 pipeline case claim that all property, except household goods and property owned by nonprofit educational, charitable, horticultural, or cemetery organizations, must be taxed or no property may be taxed.  Three also claimed that Stahmer v.  State, which upheld the exemption for taxation of agriculture, machinery, farm livestock and business inventories, was wrongfully decided.  Thus, a strong court minority claims the entire system to be in jeopardy.  Again, we asked him to go through this decision and make some comments.  The majority in tile 1991 pipeline case hold the classification of railroad rolling stock as a separate and distinct class of property from assets of other common carriers violate the uniformity clause of Article VIII, Section I of the Nebraska Constitution, and the special legislation clause of Article III, Section 18 of the Nebraska Constitution.  The majority, and he went on to quote what they said, "failed to see any real and substantial difference between personal property used for income." You've had that before you.  Thus, with three members of the court claiming Stahmer to be incorrectly decided, and with three other members, Justices Boslaugh, and Caporale, finding that one cannot find a real and substantial difference between personal property used for income production by one type of business and the same type of incomeproducing property used by another type of business, I cannot help but believe that the ad valorem tax on business equipment will fail.  Farm equipment is income-producing and is not taxed.  Business equipment is


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income-producing and is taxed.  Though Stahmer v.  State specifically found a logical reason to distinguish an exemption granted to property used in agricultural production from other kinds of properties, it is clear from the foregoing that judicial belief in the Stahmer rationale is seriously eroded.  Thus, we can reasonably expect ad valorem taxation of business equipment to fall in the near future.  Of course it goes without saying that ad valorem taxation of centrally assessed taxpayers, other than pipelines, will fall.  The 1989 decision of the Nebraska Supreme Court in Northern Natural v.  State Board of Equalization made clear that personal property of centrally assessed taxpayers could not be treated differentially from personal property of the railroads without violating Article VIII, Section 1 of the Nebraska Constitution and the Fourteenth Amendment to the United States Constitution.  I think that was referred to earlier by Kent Kalb.  Currently, local government realizes approximately 100 million in ad valorem taxes from centrally assessed personal property and from business equipment.  In my view, the pipeline case has sound the death knell in the next one to two years for these funds as part of the local tax base.  Because Justices Fahrnbruch, White and Grant believe all ad valorem taxes are in jeopardy, I would be remiss in failing to comment on the potential challenge to the ad valorem taxes on motor vehicles and ad valorem taxes on real property.  Article VIII, Section 1 of the constitution excepts motor vehicles from its uniform and proportionality requirements.  The Supreme Court, in Gates v.  Howell, commented on this exception as follows, and I'm not going to go through all that.  I think you know most of it.  Since the valuation and taxation of motor vehicles are not subject to the uniformity requirements of the Nebraska Constitution, the pipeline decision ought not to place motor vehicle taxation in jeopardy, and we did ask, is this in any way going to violate that or motor vehicle tax, at least insofar as the decisions turn on the applicability of the uniformity requirement of Article VIII, Section 1.  of the Nebraska Constitution?  Ad valorem taxation of motor vehicles is jeopardized in my view only if the court could find that the placement of motor vehicles in a separate class for taxation purposes was unjustified and unreasonable under the equal protection clause of the United States Constitution.  That, accordingly, motor vehicles could to be taxed at a rate greater than that of other personal property.  Notwithstanding the reliance of the Nebraska Supreme Court on the equal protection clause in its 1989 pipeline decision, I seriously doubt this court would use _the equal protection clause to strike down taxation on motor vehicles


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in an appropriate case for the reason that the court has already held that classification of motor vehicles is a separate and distinct group, for the purposes of taxation, is rational and justified.  He says see Boyd Motor Company v.  County of Box Butte.  Thus, I remain optimistic that ad valorem taxation of motor vehicles will continue notwithstanding the pipeline decisions.  Shall I go on?




JACK MILLS:  Okay.  Ad valorem taxes on real property actually are in greater jeopardy in my view than ad valorem taxes on motor vehicles for the reason that Article VIII, Section 1 of the constitution contains no exception for the uniformity and proportionality requirements in valuation and taxation of real property, other than the exception approved by the voters in 1990 with the respects to agricultural property.  Twenty-five years ago, in Grainger v.  Board of Equalization, the Nebraska Supreme Court stated the following, and he goes on there.  Subsequent to the Grainger decision, Nebraska voters amended the constitution to allow the Legislature to classify personal property and to exempt all or part of any one or more class of personal property from ad valorem taxation.  Thus, business inventory was classified as such and eventually exempted from all ad valoreM. The process of classification and exemption was upheld in Stahmer v.  State.  Since three judges of the Nebraska Supreme Court believe that Stahmer incorrectly decided and since the entire court 25 years ago did not distinguish business inventory from real property for purposes of taxation, it is quite possible the court would decide current taxation of real property is neither uniform nor proportionate with nontaxation of exempted personal property, excluding business inventory, the reduced taxation of centrally assessed property and the reduced taxation of business equipment, which I foresee occurring in the future.  If real estate cannot be distinguished from personal property as the Grainger court upheld, then the court will require equalization of real estate values to aggregate personal property values.  It is clear from the foregoing that the pipeline decision truly has placed in jeopardy Nebraska's system of ad valorem taxation of all centrally assessed property and all business equipment and has raised troubling questions about real property taxes.  It should also be clear from the foregoing that local government can expect unfavorable decisions with respect to all other centrally assessed property and all business equipment further eroding local government tax base and receipts over the next one to two years.  'Succinct,' he said?  Well, I


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think I'll end this.


SENATOR HEFNER:  Jack.  Jack, maybe you could share that thousand dollar letter with the committee.


JACK MILLS:  Okay.  I think that I ...  if I could have one last paragraph here.




JACK MILLS:  The Legislature can respond to the avalanche by eliminating the exemptions of farm equipment, livestock, (inaudible), or providing the voters with an amendment to the constitution.  I think that's what we're trying to say here, that he is saying, and it goes on further, but he also indicates that we ought to say to you that if you're going to come in with some approach and whether it's an experiment, if it's an experiment you ought to set aside a certain amount of money to take care of that experiment ' cause this year, somebody said, there's no question there's going to be 35 to 40 million dollars returned.  There's no question.  It doesn't come from local government.  It comes from property taxpayers.  People are going to pay it.  Businesses are going to pay it.  So I ...  Vard is going to do some more work.  We asked him another question, how does this relate to the recent constitutional amendment which allows the Legislature to separate agriculture property?  I think it's an appropriate question and my feeling is he's going to say he thinks it's okay.  So I just wanted to ...  we're here to try to help.  I want to make sure that my comments are Vard's comments, not necessarily our association's, but I'll end by saying this.  For those who do not ...  for those who believe a certain way, I think they ought to be asked to give you legal definition of how it can be done.  What basis is there that can be done?  A constitutional amendment?


SENATOR HEFNER:  Would you be willing to share that letter with the members of the committee?


JACK MILLS:  Sure.  It has some personal things in it.




JACK MILLS:  That's the reason I didn't pass it all out.


SENATOR HEFNER:  okay.  Okay.  Are there questions?  Senator Peterson.


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SENATOR PETERSON:  You probably can white line that out, huh?


JACK MILLS:  I'll white line most of it.




JACK MILLS:  You don't want to read that long of a letter, I know that.


SENATOR WARNER:  Just leavethe complimentary things in there.  JACK MILLS:  Right.  I'll leave part of the bill with it too.


SENATOR HEFNER:  Any other questions?  Thank you, Jack.


JACK MILLS:  Thank you,


SENATOR HEFNER:  We appreciate you trying to help us find a solution for this...


JACK MILLS:  Dilemma.


SENATOR HEFNER:  ..large probleM. That's right, dilemma.  Okay, do we have anybody else that would like to testify?  Okay.  How many more do we have that want to testify?  Please hold your hands.  Why don't you move up here to these front seats so we can keep moving on.  Go ahead.


LARRY HUDKINS:  Senator Hefner and members of the committee, I'm Larry Hudkins, president of Nebraska Cattlemen Association, and I'll make my comments brief.  Nebraska Cattlemen opposes personal property tax of any livestock and our Nebraska Cattleman board adopted the following resolution:  If the court is trying to say that we must either tax all or exempt all personal property in order to avoid continued litigation, Nebraska Cattlemen recommends removing all personal property tax from the rolls and replacing the revenue shortfall with existing taxes, and I'd like to give you an example.  There are 6 million head of cattle in Nebraska.  We are currently number one in the nation.  The current value from the ag.  statistician is 685 dollars a head, or a 4.11 billion dollar industry.  Under the current average state levy at $2.31, you'd have 94 million dollars, or a tax of $15.82 a head, which the producers in the surrounding states of Nebraska would not have to pay because they do not have a personal property tax


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.on livestock.  If we did put machinery and livestock and business inventory back on, according to our figures, that would bring the levy down to $1.84 and would cost our industry statewide still 75.624 million dollars, or $12.60 a head.  We have been gaining in Nebraska, but that $12.60 a head is enough to make me, as an individual producer, look at feeding cattle in Kansas, Colorado, Wyoming or the states around us.  Not only would we be paying the $12.60 a head, but if we make money on that animal we also pay the state income tax.  Just wanted to bring this up for a point of information.


SENATOR HEFNER:  Senator Warner.


SENATOR WARNER:  Larry, I ...  if I understand the Cattlements position, from what you've said I take it you're not in support of a classification system which would classify steers as inventory but breeding stock as business equipment, would be taxable.  I assume you would not support that.


LARRY HUDKINS:  No, Senator, we do not ...


SENATOR WARNER:  Or are not.


LARRY HUDKINS:  ..because it's not fair to the various members of our industry.  The feed stock producers ranchers, cow/calf producers, their breeding stock is depreciable inventory.  Their bulls are depreciable inventory.  While if you could consider the other stock as held primarily for resale, it is an unfair advantage and we don't know if it's constitutionally possible.


SENATOR WARNER:  A second question then.  I take it ...  is your group supportive of taking the balance off as a ...  from the theory of all personal property tax is exempt?


LARRY HUDKINS:  We see two separate classifications of personal, property tax and real estate tax and we think that all personal property tax should be exempt.


SENATOR WARNER:  And then does that extend to the state providing an alternative revenue for that?  If it's 103 million, whatever the number is, has there been any discussion of how that money could be returned back to the governmental subdivisions that you collected?  You would collect a state sales tax, that's collected statewide, but we had experience under the old personal property tax you distribute it back on population, but it didn't go back to


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where the property was.  Business equipment most certainly is not uniformly distributed across the state.  You then have a, I assume, in order to make whole those governmental subdivisions where large amounts are inventory are that's being exempt, you'd have to have a distribution formula which would, at least the logic of it would be to make them whole for their loss, but there would be other areas of the state that would virtually have no (inaudible) because there's very little business equipment.  And I ...  I'm just sitting here, I'm not sure how you constitutionally do that on a distribution formula with what we ran into on personal property.


LARRY.  HUDKINS:  Well, you've identified the crux of the problem, Senator, and while we have had discussions in that view, things such as Senator Lamb outlined today where you can possibly take over the community colleges or something like that, are on a per person or per pupil distribution formula, but certainly a lot of questions to answer in that regard too.  We do not have policy in that regard.


SENATOR WARNER:  Any of those solutions does not go ...  money does not go back to where the loss is.  You still would have a significant shift in a given tax (inaudible).  What's your attitude toward, for your organization or have you given thought to, a special election if it takes a constitutional amendment?


LARRY HUDKINS:  We do not have policy on it at this time.  However, this has such broad ramifications for agriculture.  We were part of the coalition for ag.  land valuation in the fall and I would see our organization being a part of that and I would recommend that to my membership and my board of directors.


SENATOR WARNER:  It's not a simple issue because, I mean obviously you've got the cost, but there's quite a roll of the dice because in order to have it approved you're going to have to have a sufficient number of people who vote "yes" that relates to the previous election, I believe.  Can't remember of the top of my head, but it's ...  it's a fairly major gamble also.


LARRY HUDKINS:  It's a very major gamble when a growing industry that's vital to economic development of the State of Nebraska will have to pay a $12.60 a head, whether they make money in that endeavor or not.  They simply have to have that type of an inventory because of the business that we're in.


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SENATOR HEFNER:  Any other questions?  Are you through, Jerry?  I have one, Larry.  How do the other states handle it?  They don't have a personal property tax on livestock?


LARRY HUDKINS:  And in the case of Kansas, the real estate property tax isn't as high as ours either.  I know our producers down along the Kansas line are constantly telling us that, that they don't even have a fence through that piece of property in some cases and the Kansas portion is significantly cheaper, and then if you do have a system here now where there would be a $12.60 a head advantage to feed and cattle down there, why, again, it doesn't take a rocket scientist to decide where you're going to go.


SENATOR HEFNER:  So you're saying to us if we put personal property back on livestock we'll be losing a large portion of the cattle industry?


LARRY HUDKINS:  Well, I would certainly feel that you'd stymie the growth and not everybody's going to have the opportunity to keep that inventory out here or to move it out of here, but it's a very hard tax to administer.  I think you, Senators and the committee, need to take a good, hard look at the cost of administering this tax too.  How do you put a value on the different classes of animals?  You know, I gave you an average of 685 dollars, but those animals can weigh from 200 pounds to 1,400 pounds and we, don't have a manual where you can go there and find every type of farm machinery that is out there today, and it's going to be expensive.  As a county commissioner here in Lancaster County, my assessor says that they used to have 23 precinct assessors to do this when it was on in '78, so take a good, hard look at the cost of putting everything back on also.


SENATOR HEFNER:  And then if we'd lose part of the cattle industry, we'll probably lose some of the packing plants.  Is that right?


LARRY HUDKINS:  That all goes hand-in-hand and the jobs and the sale tax and the income tax.  Our purest thing is that if we make the money, we can afford to pay it.  The cattle business has been excellent the last three years and most of us have paid a great deal of state income tax and we're very willing to do that and glad to have the opportunity, but it's the years like 1983 when personally I had a 73,000 dollar loss and still had a 20,000 dollar property tax bill.  That hurt.  It takes years to make up for that, and that's


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where we're asking for fairness and equity in our industry.


SENATOR HEFNER:  Okay.  Thank you, Larry.


ROBERT THOMPSON:  (See Exhibit G) Members of the Revenue Committee, fortunately for you and myself, I just have one page here for you...




ROBERT THOMPSON: this time of day.  My name is Rob Thompson and I'm the chairman of the newly formed Nebraska Individual Taxpayers Association.  I appear on behalf of the association in a neutral capacity to LB 299 and 829, and, with your permission and about 60 seconds of your time, I'd like to give you a little background since we are a new group in Nebraska.




ROBERT THOMPSON:  The Nebraska Individual Taxpayers Association is a grass roots group of people from places like Sidney, Fairmont, Beemer, Palmer, Battle Creek, from all over Nebraska who, after discussions held during the past six months, concluded that their concerns and frustrations were not theirs alone but were common to nearly all the taxpayers of this state.  NITA intends to be distinctly different from other taxpayer groups formed in the past.  We intend to work with the Legislature rather than against it.  Our primary emphasis will be on research, gaining information from Nebraska individual taxpayers and then sharing that information with the Legislature in a positive setting.  We want to develop positive, ongoing relationships with senators and state government officials.  We hope this improved communication will have a positive impact on all the decisions made by elected officials and government bodies.  The individual taxpayer is the foundation of the Nebraska tax structure.  Through their payment of sales, income, real estate, and personal property taxes, we are already given special consideration, but collectively they are the single, most important special interest group in this state.  We also believe that any and all discussions aimed at resolving the personal property tax crisis should be addressed openly and I respectfully ask this committee to take the leadership to ensure that the solution to this crisis is not made in a closed door session with only special interest groups present.  That's all I have.  If you have any questions, I'd be happy to answer them.


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SENATOR HEFNER:  Are there questions?  Senator Haberman.


SENATOR HABERMAN:  Would you call yourself a special interest group?


ROBERT THOMPSON:  I probably would in a special, special interest group.


SENATOR HABERMAN:  Well, the reason I asked the question is you said that, to ensure that the solution to this crisis is not made in a closed door session with only special interest groups participating ...




SENATOR HABERMAN:, therefore, if you are a special interest group, which I would have to say that you are, I'm not saying that your interest is wrong but I'm saying that you are, I don't know of any closed door meetings but would you mind explaining to me where you're coming from on that statement?


ROBERT THOMPSON:  Where we're coming from that statement would be that we feel that this tax issue needs to be discussed openly amongst all parties concerned, and let us not forget the individual taxpayer, the average person out there working for a living that pays the bulk share of his fair share of the taxes too.  And when I say "special interest group", I don't know of many groups or lobbyists in this state that can really honestly say they represent individual taxpayers.  They may represent business groups.  They may represent labor unions.  They may represent teachers associations.  We are none of those.  We hoped to just represent individuals and individual taxpayers only, which all of us are.


SENATOR HABERMAN:  Well, if you take the NSEA and the labor unions and you take all of those groups that represent their special interest, aren't they taxpayers, average taxpayers?


ROBERT THOMPSON:  They are as a group.


SENATOR HABERMAN:  Okay, then, in essence, basically you're going to or want to do the same thing and represent the folks that don't belong to one of those groups.


ROBERT THOMPSON:  We don't want to represent those people as a group, classified by where they work or their


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associations, otherwise.  We want to represent them strictly as an individual.


SENATOR HABERMAN:  I am 100 percent in favor of what you're trying to do, but I'm trying to find out here ...  well, we'll have the Farm Bureau come and they say, we represent 25,000 farmers; this is what we think.  I have questioned that in the past that all 25,000 farmers were not polled to see what they think.  How do I know that when this group, which I like, is speaking for all of these citizens who, at the present time, as you indicate, don't have a representative?


ROBERT THOMPSON:, If I might, I would like to defer that question to Kathy McCallister....




ROBERT THOMPSON:  ..who is the executive director of this association.


SENATOR HABERMAN:  Well, she'll get a lot further than you will anyway because she's prettier than you are.


ROBERT THOMPSON:  That's right.


KATHLEEN McCALLISTER:  Thank you, Senator.  If I might make the statement ...


SENATOR HABERMAN:  State your name and your ...


KATHLEEN McCALLISTER:  I'm Kathy McCallister and I am the registered lobbyist for the Nebraska Individual Taxpayers Association, as of yesterday.  As a matter of information, we formed just on Saturday and there are 20 members, as Rob stated, and we are hoping, as he stated, to represent taxpayers on a broader basis.  If I might make my prepared statement that might answer your question, and then go into any other questions that you might have.  Would that be all right?


SENATOR HEFNER:  Okay, why don't we have her do that.  I think that'd be proper at this time.


KATHLEEN McCALLISTER:  (See Exhibit H) Up to this point in time, the individual taxpayer as part of an organized effort has not been heard on this issue.  We have been talking at home, at work, in coffee shops, diners all across this great state.  As Nebraskans working hard to assure our families and communities the good life, we have not up to this point


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taken the time to come before this body.  We've been too busy working to pay our bills and pay our taxes.  Each and every special interest group and their lobbyist has been heard during the past two weeks loud and clear--tax anybody except us.  That is not to say that many of the comments made during recent weeks on this issue are not valid.  The shock waves sent by the recent Nebraska Supreme Court decision has not only riveted the Legislature.  It has also traumatized Nebraska's individual taxpayers.  Quite frankly, Senators, NITA members are worried that they, the individual taxpayer, will be the casualties in the war to find a solution.  You will be hearing from us on each and every tax issue asking the kinds of questions taxpayers would ask if they could take time away from their jobs to be here.  Questions like:  Why is this needed?  Where does the money come from?  And what will be the bottom line impact on the lives of individual taxpayers?  You see, we won't be asking fancy questions and we won't be expecting fancy answers.  We just want the people we represent to have an opportunity to be heard as a collective body, to have another advocate to ensure that each and every dollar raised and spent is absolutely necessary.  In order for there to be a balance, Nebraska taxpayers need to be heard and that's what I intend to do on behalf of theNebraska Individual Taxpayers Association.  I will be of any assistance to this body that I can to bring information to you and information that might assist you.  It would appear to be nearly impossible for senators and their staffs to evaluate and quantify details of 845 pieces of legislation introduced this session and also be present in your district to the degree you and your constituents might like.  We can help by being your eyes and ears in your district through our membership in research we will be performing.  Again, it is our philosophy and intent to assist the Legislature with information in the viewpoint of Nebraska's individual taxpayers.  We think the resulting improved communication from the taxpayer to the Legislature and providing bottom line information to the taxpayers through our newsletters and the media is well worth any effort., It is time taxpayers began to feel like the master of government once again, rather than a slave to government.  Information and communication can take a big step toward accomplishing that goal.  Thank you, Senators, for allowing me to speak this afternoon.  If you have ...  if that didn't answer your question, I'd be happy to answer it at this time.


SENATOR HABERMAN:  Kathy, I would like to have you come to my office and I'll show you my phone call slips, I'll show you my letters, I'll show you the people who visit my office


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and tell you about what they tell me at the coffee shop at home,




SENATOR HABERMAN:  So, really, I am getting plenty of input from the average taxpayer.  Now these are people who own cleaning shops, the gasoline station, the local newspaper, whatever.  I'm getting plenty of input.  I'm sitting here saying we have 340 registered lobbyists now.




SENATOR HABERMAN:  Here's a new one.  I like your goal, but I don't know what are you going to ....  Okay, let's do it this way.  What do you offer us this afternoon to solve the tax problem?


KATHLEEN McCALLISTER:  Well, we've begun to do research with our membership and, as you can obviously assume with just having formed on Saturday, we have not yet had time to do any broad-based kind of research.  What we intend to do, Senator, is in the conversations that come before the committee each and every special interest group, and again you're very right when you say the taxpayers are, you know, a larger set of those individual subsets of special interest groups.  The problem is, is that the conversations that occur oftentimes before committees you don't have individual taxpayer representation because they're at home doing exactly what I said they're doing.  They're working to pay their bills and to pay their taxes, so they're not here and not being heard, and we really believe two things.  one is that if we are heard before this body, as well as heard by the other special interest types of groups that are representing their own constituency, that it will improve the kind of conversation that occurs between groups as well as between legislators about solutions to problems.  The other thing I know to be very true, Senator, is that, despite the fact you get good input from your district, that's just the tip of the iceberg.  There are many, many other constituency you don't hear from and those are the kinds of things that we will attempt to do through our research to gain that information so that we can come to you and say, in your district, Senator, we did a poll, we did some research, and here's the sum total of what's going on in your district.  The other side of that...


SENATOR HABERMAN:  I have more mail coming into my office from out of my district than in my district.  That's a fact,


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'cause these people that we're talking about do get organized.  They get phone calls--this is what the legislator's doing.  It's not good for us.  Write him; write here.  I guess I'm just sitting here thinking that, here we go, we've got another group.  Well, I wish you well.


KATHLEEN McCALLISTER:  One thing, Senator, is we have found, just in conversations with the people that are in our group that taxpayers feel like they're lacking information, the kind of bottom line analysis that they might need, and we hope to provide that.  If, Senator, we find that the response in the public is not such that it would deem this group necessary or we don't meet real needs that they have, we will dissolve the organization and won't continue.  Unlike the opinion of some of the people out there that say government never does that when they find that those things aren't necessary, so we're going to do just the opposite.  If the response isn't there and the public says we don't need it, at least we gave them an opportunity to have input into the process that, quite honestly, can be very frustrating and overwhelming for individual taxpayers.  it's going to really put people off to just even come before a body like this and be intimidated.


SENATOR HABERMAN:  I wish you well.




SENATOR HEFNER:  Any other questions?  I have one, Kathleen or Rob.  When will you ...  when will your organization come up with a proposed solution or...  ?


KATHLEEN McCALLISTER:  We hope within the next ...  in the next week to do some survey information and be able to provide that to the Legislature.  It certainly was not even our intent to come forward as early as this.  This has been something information and we wanted to bring even possibly later in the year during a nonlegislative period to make our introductions to the public and begin building the organization.


SENATOR HEFNER:  What are you hearing from your members?  Do they believe that all property should be off, or all back on, or how do they feel that we should comply or ...  with the Supreme Court's decision?


ROBERT THOMPSON:  There is about as many varied opinions on that as we have members, and I guess I wish we could come before you today and say here is a perfect solution to the


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tax situation.  Our only hope, as a taxpayers', individual taxpayer, group, is that whatever solution is made is fair and equitable to all the people of the state and that we don't go out and exempt ...  I don't want to say railroads, but special groups for pipelines or whatever; that whatever groups that everybody pays a fair share of taxes, and we are not against paying taxes.  That's ...  we know they're necessary and....


SENATOR HEFNER:  Okay, I believe both of you have sat through three hours now.  Any...  how are your personal feelings, or don't you want to reflect those to us?


ROBERT THOMPSON:  I have one personal opinion.  I wouldn't want to do this every day.


SENATOR HEFNER:  Okay.  We do it all week.


ROBERT THOMPSON:  I feel for you if you do this all week, I really do.  I have one personal opinion I think would like to share with you.  As an individual taxpayer, I don't mind paying taxes and I think the government does us a good service in everything that they do.  I would suggest one thing in that maybe if we would spend less we would need to tax less, and maybe that's part of the solution too, is to spend a little less, therefore tax a little less.


SENATOR HEFNER:  It seems like ...


ROBERT THOMPSON:  And I realize that's difficult to do too.


SENATOR HEFNER:  It seems like we're going the other way.  We keep spending more, and more, and more.


ROBERT THOMPSON:  It seems to me like we spend it and then we assess a tax to cover it, rather than have the money and then spend it.  You know, my wife does that.  She spends it before we have it.


SENATOR HEFNER:  Come on now, we can't blame it all on the women.  Senator Haberman.


SENATOR HABERMAN:  If you can suggest a method or an idea that the tax is fair and equitable to everybody, I'll send 500 dollars to you to join your organization.


KATHLEEN McCALLISTER:  We'll work on that.


ROBERT THOMPSON:  We will work on that and I'm sure you will


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SENATOR HEFNER:  Are there any other questions?  I have one more.  There's been talk, you know, about have a special election.  Perhaps we could.  I don't know what this committee will do, but do you have an opinion to that?


ROBERT THOMPSON:  We don't have one ready for you now.  I ...


KATHLEEN McCALLISTER:  We could poll our membership, Senator, and report that to you...


ROBERT THOMPSON:  Let you know.




KATHLEEN McCALLISTER:  ..within the week.  We'd be happy to.


SENATOR HEFNER:  We'd appreciate that if we could get it back in the next week or so.


KATHLEEN McCALLISTER:  Thank you, Senator.


SENATOR HEFNER:  Thank you for...


ROBERT THOMPSON:  One thing on a personal note, we're really serious about wanting to work with you on an individual as a group basis, and let you know what our group thinks, the taxpayers out there think.


SENATOR HEFNER:  I believe that this committee wants to work with everybody that we can work with to find a solution to this problem.




SENATOR HEFNER:  Thank you for appearing before us.  Do we have anybody else that would like to testify on this bill?


JOHN HANSEN:  (See Exhibit 1) For the record, my name is John Hansen.  I'm the president of the Nebraska Farmers Union.  I am a registered lobbyist for that organization.  You guys seem to let Larry Hudkins go back in one piece, so I thought I should follow up after Larry came in, and it is Ag.  Day, you know, so I'd beg you to show me a little mercy.  Like to share with you some of the perspectives of the folks that we've been meeting with these last weeks out at our district meetings across the State of Nebraska.  Some things we have identified through surveys to the folks who attend


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these meetings this problem of what we do with farmland valuations, what we do with personal property tax, and there's some things that come back and I think that they're worth sharing with you.  One is that there is a fundamental difference between the concept of uniformity and how it gets applied and what it means, and the concept of fairness.  Fairness is to each according to their need and ability to pay, and in the case of uniformity, as a livestock person, if I go out and feed my livestock in a uniform kind of way, I'll have some of my livestock, found some of them starved to death and I'll go broke.  As a teacher, is I treat my students uniformly I will not be able to take each student where they're at and move them along, according to their own particular set of abilities, and I guess that as a parent part of the trick of being a good parent is to realize that there is fundamental difference between the needs of my children.  I can't just say, well, I'm going to opt for uniformity in lieu of fairness.  Fairness is a different concept.  So as we look at the farmland valuation issue, one of the things that my members keep saying to me is that we feel it's not fair that you value farmland without regard to our ability to be able to generate income or pass along expenses to pay for that bill.  And so, in terms of the constitutional amendment, I think that there needs to be some consideration given to addressing the concept of the uniformity clause.  I can understand the need for it, I can understand the value of it, and I believe that there's some things that maybe we could do to maybe better, more fairly and equitably develop a system of taxation that is a bit more equitable and, by virtue of that, maybe a bit less uniforM. Our members, if I came in here today and said that I thought it was a good idea to put personal property tax back on for farm machinery and livestock, I'd be an unemployed president of a farm organization.  I'll tell you that there ain't no support out in the country for that.  My members, what I hear, and of course we've got all kinds of age groups and all kinds of financial situations, but by and large our folks are hurting.  They are saying very clearly, we're feeling the financial pinch, we're struggling to stay alive.  Most of my younger members are going out and doing outside jobs in order to develop enough earned income and to be able to feed their families.  It is no accident that the ten fastest growing poverty counties in the State of Nebraska, according to the Nebraska Department of Social Services' Annual Summer Report, are all 100 percent rural counties.  We have a substantial number of rural people in rural communities and in production agriculture who simply aren't generating enough earned income to be able to service their debt loads.  So when you talk about adding personal


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property tax back to those inventories, which are throwing off in a lot of cases one and less percent returns on capital investment, yes, that's a burden and, yes, that puts them out of business.  And so as I look at the economic condition of my members, it's not as good as it should be.  And as I look at the developments of the 1990 farm bill and what that means, I believe that there's going to be a substantial reduction in the amount of earned income potential through the five-year life period of that bill.  The congressional budget office said that if we fully funded a simple extension of the '85 farm bill we would be looking at around 21.7 percent less earned income over the five-year period.  We did not choose to do that.  We chose to fund the bill and structure the bill so that we're going to cover 15 percent less product than we used to and we're going to have, in my opinion, a continuing downturn of economic potential, and would share with you the United States Department of Agriculture, Clayton Yeutter's very own income adjusted inflation chart decade-by-decade, through the decade of this century, in which would indicate to you that in terms of real, spendable dollars that you have to go out and live in this world with and purchase goods with, that in the decade of the eighties that we had 2.3 billion dollars less in earned income in production agriculture than we did during the decade of the thirties.  So ...  and the prospects aren't good.  So if we go out and we load up our ag.  producers with additional personal property tax loads, yes, I think that that's a substantial probleM. I think that that will devastate our industry.  Would suggest to you that part of the uniqueness of agriculture is that we, unlike a lot of those other businesses that operate, are not in a position where we can say, I'm sorry, guys, but we're not going to be able to sell those calves at the barn today, or sell the corn at the elevator because we have hit some additional increase in our expenses and, as a result, why, we're just not going to be able to sell it for that and we're going to have to mark it up.  We take what they pay, we try to market it as well as we can, but we're not in a position where we pass those costs along.  As the farmer earlier in the day indicated, we absorb them and we have absorbed too much already.  If we are in a position where we're looking at putting personal property back on, I say that if that's the way that the Legislature chooses to go I believe that the most fair and equitable and politically acceptable way, and I don't think it is politically acceptable but at least to my members, is to say, okay, if that's a good idea that because you have 100,000 dollars worth of worn out farm equipment you ought to pay a tax on that, why shouldn't you pay 100,000 dollars worth of money


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sitting in a CD, you know, that's throwing off maybe six or seven times what that dollars worth of farm machinery or livestock is throwing off?  And that we ought to try to put intangibles back on the books to the extent possible and that we ought to try to drag those things in, broaden the base, and not....  When you look at the figures as well as I, you'll see that, I'm sure as you know, that livestock and farm machinery are the two biggest heavy hitters and will end up coughing up far and away the most money in personal property tax.  So I would suggest to you that maybe if you're going to look at the constitutional amendment that you do some thinking on how we might make some improvements in fairness and equity, as opposed to uniformity.


SENATOR HEFNER:  Okay, are there questions?  Senator Haberman.


SENATOR HABERMAN:  Am I to understand that you are supporting or would support the issue to tax intangibles?


JOHN HANSEN:  If we're going to drag them back in, I think intangibles are fair game at that point.


SENATOR HABERMAN:  So, like I say, you will probably support...  you would support that.


JOHN HANSEN:  If we're going to drag all other personal property back in, then I think that...  I don't know why we would discriminate against intangibles.


SENATOR HABERMAN:  Would you and your organization agree that we do have a problem with the property taxes and real estate taxes at the present time?


JOHN HANSEN:  Absolutely.




JOHN HANSEN:  I think my members have made that fairly clear to me on several occasions.


SENATOR HABERMAN:  How would you feel about putting a service tax on services, sales tax on services?


JOHN HANSEN:  I guess that if we get to the point where we're somehow able to do that.  Our first choice would be income, and then services, a tax on services is probably about second or third, but, yes, we'd look at that, but I guess our first choice would be income.


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SENATOR HABERMAN:  What do you have to offer the committee as a solution to this problem?  I've heard your preferences, but I'd like to hear what....  See, we're human, just like you are.


JOHN HANSEN:  That's what I was afraid of, Senator.


SENATOR HABERMAN:  And when you say you would be out of a job if you did something, well, we would be out of a job if we do something too, so we're in the same position you are.  So what do you suggest we do?  How do we handle this?


JOHN HANSEN:  Well, I...I think that the special election makes some sense.  I think that in terms of trying to develop a politically acceptable tax base has to be the goal and, you know, I mean we all know that there's going to be a substantial political problem out in the country if we go forward and do several of those options.


SENATOR HABERMAN:  We could count on the Farmers Union then to help support the special election.


JOHN HANSEN:  I think that, without polling my directors, but based on what we've talked about and we've talked about it in quite a bit of depth, at this point I'm sure that that would be looked on favorably; that, you know, we...we have never shirked from our responsibility to take the case for fairness to the Nebraska people.


SENATOR HABERMAN:  Thank you very much.


SENATOR HEFNER:  Any other questions?  John, I have one.  How many members do you represent?


JOHN HANSEN:  We're right at 3,000 farm families at this point




JOHN HANSEN; ..across the State of Nebraska.


SENATOR HEFNER:  Okay.  What do you think of this idea of taking all personal property off the tax rolls?


JOHN HANSEN:  Well, I guess that...


SENATOR HEFNER:  Would you rather have that then putting livestock and machinery back on?


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JOHN HANSEN:  Absolutely.  I mean that's our...  if that's a constitutionally doable thing, and I, as I've indicated to you in the past, I'm not a very good prognosticator really of how the Supreme Court is going to rule and tend to believe that, by and large, that you could go blind and probably have several other problems trying to outguess theM. But...


SENATOR HEFNER:  So if we do that, how do you suggest we raise the money and how do you suggest that we distribute it back to local government?


JOHN HANSEN:  Well, I think that the distribution back to local governments has been a problem and I am not ...  I haven't dealt in that sector enough to give you a good, clear, strong example of how you...  you'd do better job.  I know that that's been a problem and a complaint in the past, but our first...  I guess our first suggestion is to go back and look at the corporate income tax rate and look at the progressivity of the individual income tax rate and I think that it is a more fair and equitable and broader based tax to go after income than it is to rely as heavily as you might on personal property, if you're just looking at a trade off in that income.


SENATOR HEFNER:  The 19th Legislative District, which I represent, borders South Dakota.  South Dakota does not have an individual income tax or they do not have a corporate income tax.  What do I tell my constituents up there?


JOHN HANSEN:  I would tell them that South Dakota probably has an even more regressive overall tax code than Nebraska does.  When I talked to the folks from South Dakota, when I spoke at the South Dakota Farmers Union state convention, I had an awful lot of people come and complain to me and say that their system, they felt, was very regressive and unfair.


SENATOR HEFNER:  Yes.  Do you think South Dakota will enact a state income tax in the near future or...  ?


JOHN HANSEN:  I don't know.  There's a lot of grumbling going on and I don't know whether they're going to take that route or not, but those property taxpayers in South Dakota are not happy campers by a large margin either.


SENATOR HEFNER:  Any other questions?  Thank you, John.


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JOHN HANSEN:  I thank you very much and I wish you well.


SENATOR HEFNER:  Thank you.  Do we have anybody else that would like to testify this afternoon?  We still have a little time left, and we'll stay here as long as you folks will.


LYNN REX:  Senator Hefner, members of the committee, my name is Lynn Rex, representing the League of Nebraska Municipalities.  You've had a long afternoon and you've heard a lot of excellent testimony this afternoon.  Most 0 of the testimony, it seems to me though, has addressed the issue of what we would like the tax system to be, what we think would be politically possible and, with all due respect to those people who testified, it would seem to me that the Nebraska Supreme Court has put the Legislature in a position of now addressing what can you do legally.  I think the tax system that you have and that has been in place over a period of years has, in fact, been and reflected the policy choices that the Nebraska Legislature has made.  Therefore, I would submit to you that those are ...  that is, in fact, the tax system that this body has said that they would like to have.  There have been a lot of folks on both sides of the issue today that have said we think it ought to be on or we think it ought to be off, but I think if anyone had the choice they would probably say we'd just as soon not be here this afternoon; we would have just as soon not had the Supreme Court render that decision.  The League of Nebraska Municipalities has supported, over a period of years, the efforts to retain the tax base for local governments, and we appreciated the efforts of Senator Warner and others during the special session, which was in our view the last effort to try to preserve this systeM. it did not work.  The issue is no longer what is fair, what is uniform, what is politically feasible.  The issue is what will pass the constitutional tests set by the Nebraska Supreme Court?  I'm intrigued by the comments and the testimony this afternoon relating to the possibility of a constitutional amendment, and I personally would like to see the legal research to back that up because, frankly, it would seem to me that even those people that have suggested it, including Mike (sic) Kalb, when he testified before you earlier today, indicated that the safest option was to put everything back on the tax base, back on the tax rolls.  The second option he recommended was if, in fact, you decide to start putting in some kind of a constitutional amendment with exemptions, he said that would be a good solution, but the caveat, and I underscore the caveat that he submitted to this committee, the caveat is that this Nebraska Supreme


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Court has consistently utilized the Fourteenth Amendment in determining tax policy questions for this state.  That's a pretty big "but".  That's a pretty big condition precedent.  And so, with all due respect to those people who are advocating a constitutional amendment, I wish them the best, I wish this committee the best, I hope there's some way to structure something like that, but I do think that the most instructive testimony that you've had this afternoon came from the State Tax Commissioner, and I would encourage you to go back to that testimony and reflect upon the options that were presented.  If you put everything...  if you take everything off of the tax rolls, he suggested to you that you could be jeopardizing the rest of the property tax base.  He also suggested to you that that may be an additional 10 cents of sales tax, as an example.  What we're suggesting to you today, as an organization, is that we do not like any of the solutions, but is no longer a question of what would we like the system to be, what do we think the system ought to be.  It seems to me that you are now faced with what has the Nebraska Supreme Court given you, and what they've given you is, in our view, only one choice and that choice is to put everything back on the tax rolls and I say that to you with great regret because we have worked with the Legislature over the years and actively gone on a number of different tax educational seminars with several governors over a period of years to try to talk about why it's necessary to fight some court cases, whether it be the railroad cases, the ENRON case, whatever it may be, and we wish that we would not have to be here today and we wish that this was not your choice.  But, with all due respect, again we would encourage you to strongly look at the testimony that has been presented to you by the Tax Commissioner, because that is the most factual testimony you've had presented to you today.  I do have great sympathy and respect for the people, others, that have testified before you this afternoon explaining the problems that this will create for theM. There's no question about it.  But we do think that this is something that the Legislature has to address because ultimately what will happen is that the residential property taxpayer will have to pick up the tab once again.  So, in closing, I would just indicate to you that we wish that there were other solutions and we wish that Nebraska's Supreme Court had not ruled this way, but wishing will not make it go away.  With that, I'd be happy to respond to any questions that you might have.


SENATOR HEFNER:  Are there questions?  Senator Haberman.


SENATOR HABERMAN:  Lynn, as I understand your testimony, the


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League of Municipalities support, as a solution to theproblem, putting all property back on the tax rolls.


LYNN REX:  Our response, Senator, is that we do not see that there is another choice.  If, in fact, there is a constitutional amendment...


SENATOR HABERMAN:  Well, no, wait a minute.  No, no, wait a minute.


LYNN REX:  ..Senator, if there is a constitutional amendment that has been suggested to you this afternoon, we would be more than receptive to look at what folks think could be done constitutionally.  We don't believe that there has been the legal research done to back that up.  If there has been, we'd like to see it because we have not seen that.  We do not come to you saying that we like it.  We're saying we think that is the only answer.


SENATOR HABERMAN:  Lynn, I know what you're saying.  Is the answer "yes" or "no"?




SENATOR HABERMAN:  Fine.  I would like to commend you and your organization for coming before this body and taking a stand.  Now I may not have to like your stand, but I like the fact that you came up and sat in front of us and said, this is how we feel it should be handled.  So I thank you very, very much.


LYNN REX:  I appreciate that.  We don't like our stand either, but we think it's the only choice.


SENATOR HEFNER:  Any other questions?  Senator Warner.


SENATOR WARNER:  Lynn, I wasn't here.  I was in another meeting:  I didn't hear most of the Tax Commissioner's comment.  Was, in effect, what he ...  I'm gathering from your summary of it that he mentioned options but I'm taking that, as a practical matter, the only option was to put everything back on to be in line with the court.  Was that the Tax Commissioner's position?


LYNN REX:  Senator Warner, the Tax Commissioner indicated there would be three options, and the first option indicated was to take all property off the tax rolls and that if you do that, one, it would leave the homeowners with the burden; that you would put at risk potentially another 1 billion


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dollars of property tax base.  In other words, taking it off you put at risk the rest of the tax base.  Also, putting forth any kind of reimbursement formula he indicated you would have to, my notes indicate, double sales and income tax.  The second option was to put some portion of business equipment, livestock or farm equipment back on the tax rolls.  His conclusion was that will not pass the constitutional test.  Third was to put all forms of business income-producing property back on the tax rolls and if you do that you have no constitutional challenges, as distasteful as that may be.


SENATOR HEFNER:  Any other questions?  Lynn, I have one or it may be more of a comment.  We've heard from agriculture; we've heard from business and industry.  You're saying we probably should put it all back on, but if we do we could throw this state into a recession, perhaps even a depression.  You heard the farm groups say, we can't afford to pay any more taxes; it will put us out of business.  Some of the cattle feeders said, we can't afford to feed cattle in Nebraska because we can't afford an average of 12 dollars extra tax on each critter.  Heard industry say if we ...  business and industry, if we tax inventory we can't afford it.  So I guess what you're saying maybe will throw the state into a severe recession or maybe even a depression.  Do you think your organization wants to do that?


LYNN REX:  Do we want to have those consequences?  Of course not.  I guess the other question has to be then do we think that the residential property owner should take care of and basically pick up the rest of the shift, and I would say the answer is "no".


SENATOR HEFNER:  Won't make much difference because that homeowner won't have a job anyway.


LYNN REX:  Well, Senator Hefner, I think that there is one piece of the puzzle that we've talked about briefly today, and this was made in the opening remarks by the Department of Revenue and this deals with the 4-R Act and, essentially, a great deal ...  the catalyst for many, of course, the railroad cases came from the 4-R Act and that is not based on discriminatory treatment.  That's based on different treatment.  And when we were in Washington a couple weeks ago to talk to folks about that issue, we were told the chances of changing that did not look very favorable.  However, it might be advisable for this committee to invite our folks that represent us in Congress to come here and


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suggest some ...  provide you with some suggestions because I think there's no question that the 4-R Act has an important piece of this puzzle and is something that ought to be addressed.


SENATOR HEFNER:  That's where it all started from was when the 4-R Act was passed.


LYNN REX:  That's correct, and it was after the 4-R Act the railroads were successful and then, based on that, then others were successful.


SENATOR HEFNER:  I know, I visited with them too already and they said practically nil, practically no chance of getting that reversed, so....


LYNN REX:  Well, I guess my...  our thoughts are not simply that ...  I do not want to misstate our position.  The League of Nebraska Municipalities is not here saying that we think it's just a great idea to put everything back on the tax rolls.  We're here saying, we think the Nebraska Supreme Court has left you no choice.


SENATOR HEFNER:  But personally I know that if we put it all back on we'll have a lot of people go under, a lot of small business and a lot of small farmers will go under.


LYNN REX:  Well, the question then, Senator, that has to be addressed is if, in fact, you take off, take everything off the tax rolls and then, if I think you read the opinion the way that a lot of folks have read it to mean that it, in fact, would ultimately jeopardize a billion dollar property tax base for the State of Nebraska, is the Nebraska Legislature prepared to face that next step and that step will be that the amount of sales and income tax would have to be produced to try to provide any kind of protection whatsoever for the residential property owner.  And also, I would also submit to you that even though we're comparing ourselves to other states and we've talked about what are they doing in Kansas and what are they doing in Iowa and what are they doing in South Dakota, my understanding is that the railroads have not been idle and that, indeed, they will be filing and are in the process of looking at those states as well.  And so even though those states may today be in a different position than we are, I submit to you that they will be having hearings like this in the near future.


SENATOR HEFNER! How come they picked on us first?


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LYNN REX:  That's a very good question, Senator.  I don't have the answer to that.


SENATOR HEFNER:  okay, thank you, Lynn.


LYNN REX:  Thank you.


SENATOR HEFNER:  Is there anybody else that would like to testify?  Is there anybody else?  Senator Owen Elmer, okay, come ahead.


SENATOR ELMER:  Senator Hefner and members of the Revenue Committee, I'm here to visit a little bit about the thoughts that were presented at the special session that we had regarding this problem earlier, and I don't know if the idea I presented has been seriously looked at, but it appears, at least in my mind, very logical, very simple and very workable and could be a solution to this probleM. Everyone who deals with real estate, whether you're an appraiser, an attorney, CPA, real estate agent, recognizes real property as the land and anything that's physically attached to it.  I would suggest that we tax all real property, the land as a nondepreciable, the things that are attached to it are depreciable, and define taxable real property as everything ...  as the land and everything that's attached to it for 12 months or more, and that would include all kinds of...  all buildings, fences, feed bunks, grain bins, homes, businesses, any permanently attached fixtures to those homes, business buildings, that could be appraised or assessed by the assessors, just as they assess real property at the present time, and would include all these things, such as railroad tracks, pipelines, telephone poles, wires, cables, elevator legs, compressors, tanks, many of those kinds of items.  I think it deserves merit.  I think it deserves looking at.  I visited with the Governor about this.  He thought it sounded like it was simple and easy.  The Department of Revenue, I'm not sure what conclusions they've reached.  The difficult problem about it is to establish what the base could be and I would think that, given what's already exempt, we would have at least as large a land ...  a real property tax base as we have now.  In light of what the recent court decisions are and how it would affect this, I'm not sure, but if you tax all real property of these two classes uniformly, equally, with no exemptions, I wouldn't think that you would have any problem with uniformity.  The current personal property would be taken out completely, would none of it be taxed.  Much of what has been in the past for tax purposes deemed as personal property would become, of course, real property through being attached to


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the property for 12 months or more--printing presses, assembly lines, mainframe computers, all that type of thing.  Books, chairs, desks, livestock, machinery that moves, transported from one place to another, would not be.  Quite simple.


SENATOR HEFNER:  Any questions?  Thank you, Senator Elmer.


SENATOR ELMER:  You're all tired.  I'm ready to go home with you.,


SENATOR HEFNER:  Okay.  Is there anybody else that would like to testify?  Please come forward and state your name to the committee.


JOSEPH KNIEVEL:  I am Joe Knievel.  I live at Neligh, Nebraska, and operate a business at Ewing, Nebraska.  I've been over there on that corner for 43 years so I'm probably one of the seniors around here that I've seen all kinds of tax systems here come and go and seems like nothing's ever adequate.  Our real estate tax are up drastically in the last three years and I'm...




JOSEPH KNIEVEL:  ..that supports local governments and the schools that are being built and so on.  But here last year everyone voted 1059 on.  I thought that was going to be the answer to our school finance bill.  Doesn't seem like that come out.  So, with the issue of this 829 here, it looks to me like the biggest reason we're trying to implement that is probably to recoup the 8 million we lost in the tax law that says unconstitutional to tax the pipelines and the railroads and so on.  Am I right in that observation?


SENATOR HEFNER:  Pretty close.


JOSEPH KNIEVEL:  Okay.  Well, look what was lost when we took the tax off of groceries.  That might be a sore spot to somebody but, you know, everybody sends their kids to school and everybody also eats.  I think that's a fair tax that probably should be put back on if we can raise some revenue there.  And coming to this inventory system, I lived through that when we paid on inventories.  I seen the big race for sale bills go up, inventory sales, inventory sales, and then everybody trying to stock back up after the first of the year to avoid all that and then the shipping can't be done and dealers surely are, you know, have a hard time meeting those obligations.  I think this state's got some bad laws


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and maybe even our federal, but when I go to hire people, why, I'm running competition to the state.  State people, they get an automatic increase every year, 7 percent.  I can't keep up with it.  They get a pension and all these benefits.  I think we're outspending ourselves in many of those things, so I think there need to be some adjustments made there.  It's got a snowballing effect that, like a tiger by the tail, you can never catch up.  So if you want my opinion, I don't think the inventory tax and the machinery tax and livestock and so on is the way to go.  I'm sure that if I were to speak for the clientele I deal with, why, they'd still rather favor a tax that everybody pays on, such as income tax and sales tax.  So that's kind of my observations I have of the day here and I was just reading between the lines here of what we're trying to get done and that's my opinion .


SENATOR HEFNER:  Okay.  Do we have questions?  Any questions?  Thank you for testifying.




SENATOR HEFNER:  Did you sign in?


JOSEPH KNIEVEL:  No, I didn't.


SENATOR HEFNER:  Okay.  Do we have anybody else that would like to ...


JOSEPH KNIEVEL:  Where do you sign this?  Do you sign this here?




JOSEPH KNIEVEL:  Yes, I did sign one of these.


SENATOR HEFNER:  Okay.  Thank you.  Anybody else that would like to testify on this bill?  Does the department wish to add anything, Mr. Balka?


M. BERRI BALKA:  A couple of very brief comments.




M. BERRI BALKA:  Senator, again for the record my name is Berri Balka, State Tax Commissioner.  What I have heard this afternoon, as we have heard before, regardless of what happens here, if everything goes back on the tax rolls we are going to see some grave effects to the state.  That is


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not the wish of the Department of Revenue.  It is certainly not the wish of this administration or I'm sure of this Legislature.  It, unfortunately, may be a fact of what happens because we have to do some things that the Supreme Court has said we have to do.  I wanted to make that clear to the committee that we understand there could be some grave impacts to the state, but we also have been given some language that we have to abide by.  Thank you, Senator.


SENATOR HEFNER:  Are there questions?  Any questions?  Thank you...


M. BERRI BALKA:  Thank you, Senator.


SENATOR HEFNER:  ..for testifying.  Is there anybody else that would like to add any words of wisdom?  If not, this will then close the hearing for these two bills and close the hearings for today.  I want to thank you all for coming.


Disposition of Bills:


LB 829 - Advanced to General File as amended.  LB 299 - Held in Committee.





Chairperson                                                         Committee Clerk