LB 271 (1997)
May 7, 1997
PRESIDENT ROBAK: Thank you, Mr. Clerk. We now turn to General File and senator priority bills and LB 271.
CLERK: (LB) 271, a bill introduced by Senator Warner. (Read title.) It was introduced on January 13, referred to the Revenue Committee, advanced to General File. Committee amendments have been presented, Madam President, on May 2. At that time, Senator Kristensen had an amendment to them that was adopted. I do have other amendments to the committee amendments.
PRESIDENT ROBAK: The Chair recognizes Senator Kristensen to inform us where we are.
SENATOR KRISTENSEN: Thank you, Madam President and members of the Legislature. If you will remember, LB 271 deals with the taxation of motor vehicles. It is designed and what the committee amendments do is change the green copies so, basically, the bill is the committee amendments. We've had some changes already in the committee amendments, but they were primarily done at the direction of the committee and, at this point. in time, we feel that the present system of property taxation of motor vehicles needs to be changed to accurately reflect what we do do. Madam President, instead of arguing the merits of the hill, this is more or less an overview of where I think we're at. We are now taking amendments to the committee amendments, and the committee itself, I believe, will have another amendment coming... I don't know if it's down yet or not, for discussion. But at this point in time, I think it's appropriate to take other amendments and, hopefully, if we redraw some other amendments, that we'll make any other amendments adapt to it. And so with that, that would be my summary of where we're at.
PRESIDENT ROBAK: Thank you, Senator Kristensen. Mr. Clerk, first amendment.
CLERK: Senator Hilgert would move to amend the committee amendments.
PRESIDENT ROBAK: The Chair recognizes Senator Hilgert to open on his amendment. (See AM1832 on page 1805 of the Legislative Journal.)
SENATOR HILGERT: Thank you, Madam President, members. The last time we talked about LB 271, 1 asked a question regarding the imposition of the fees on the nonprofits which, are currently exempt from our property tax system on our automobiles. Senator Kristensen reflected and did summarize in the committee amendments just now, saying we want to accurately reflect what we do. Well, certainly, to put this fee on this ... on the nonprofits at this time, I think, is a ... is a departure from what we actually do today regarding the fees and assessments
regarding our auto motor vehicles. My amendment basically goes to page 12. 1 believe it's on the computer, wasn't on the computer this morning, it is now certainly, and can be found on page 1805. It's fairly simple. On page 12, line 10, after the underscore, period, inserts "an owner of a motor vehicle which Is exempt from the imposition of a-motor vehicle tax pursuant to subdivisions one through six of section 2 of this act shall also be exempt from the imposition of motor vehicle fee imposed pursuant to this section" which maintains, the policy that we currently have in place in the state of Nebraska that the tax exempt organizations, your nonprofits, organizations such as Salvation Army; Girls, Inc.; Social Settlement, which is in, I believe, in Senator Preister's district in particular; Salvation Army, YWCA, the YMCA. Basically nonprofit organizations that currently have motor vehicles that they own will currently retain their full tax exemption that we do not want to put a tax increase on our nonprofits and take away funds that they use to help those who are in need, to basically pay fees to the state. I think I that's a policy departure. My amendment goes back to where we are originally. I don't believe it's a substantial change in LB 271. In talking to some of my colleagues, some have remarked that perhaps this was simply even an oversight on the committee's part. I'm not sure. I'm not going to pretend to speak for the committee. But I do think this is a valid amendment. I would encourage all of you to support it, and stick to our present policy regarding our tax-exempt organizations I and, by the way, also Indian Tribes. Thank you very much.
PRESIDENT ROBAK: Thank you, Senator Hilgert. Senator Chambers.
SENATOR CHAMBERS: Madam President, members of the Legislature, and Senator "Hergert," I'd like to make a comment or two but, first,. I want to ask a question. I just had to get Senator "Hergert's" name in there. Senator Kristensen, let me ask you a question on this bill.
PRESIDENT ROBAK: Senator Kristensen.
SENATOR KRISTENSEN: Yes.
SENATOR CHAMBERS: Senator kristensen, this fee that Senator
Hilgert is talking about is something new. We don't currently do that, do we?
SENATOR KRISTENSEN: That's correct.
SENATOR CHAMBERS: So this injects a new element into the game for everybody.
SENATOR KRISTENSEN: That's correct.
SENATOR CHAMBERS: And what is the amount of this fee to be?
SENATOR KRISTENSEN: Under this amendment ... under the committee .amendment, Senator, it is...the maximum is $25.00 for cars, trucks, vans under five tons. The most it will be is if they have a large bus, and that's $50, and then it goes down. As their age goes down, so goes the fee. Most of the older ones will be about $5.
SENATOR CHAMBERS: But the maximum of any fee will be $50 on any vehicle?
SENATOR KRISTENSEN: And that's only for trucks and buses, so cars and vans and trucks under five tons, it's $25. That's the lion's share of them.
SENATOR CHAMBERS: Thank you. Senator "Hergert," I'd like to ask you a question.
PRESIDENT ROBAK: Senator Hilgert.
SENATOR HILGERT: Certainly. Thank you.
SENATOR CHAMBERS: Now, Senator Hilgert, that you've been given your name back by the one who gave you the other one, I can call you Senator Hilgert. Why should these people be exempted from paying anything since we're creating a new methodology under this bill? We're changing the game.
SENATOR HILGERT: Well, that indeed we are, Senator Chambers, and I believe that we should exempt those nonprofits who ... you referred to, because of the work they do ... yesterday, I believe,
May 7, 1597
in debate you referred to the food banks and so forth and some of the nonprofits and some of the good work they do in trying to fill up the gaps of where the government cannot afford to do some of these services. I believe that since they are doing basically charity, good work, helping people, and when people contribute to those organizations, I think that they ... their money should go to helping people and, frankly, not to paying taxes to the state of Nebraska and, thus, I don't believe we' should depart from our present policy and our view towards these nonprofit organizations.
SENATOR CHAMBERS: Well, Senator Hilgert, the only time I blow my trumpet on this that I'm going to mention is when I do it down here and nobody really pays attention to it so it's not like, you know, trying to advertise it to the world. I. shovel snow and I cut grass for old people, and I don't get paid for, it. And I drive my car from place to place, I have run errands for people who were unable to do that for themselves. So why should they put an additional $25 fee on me and every other person, but not these organizations? Do you think it will bust these organizations if they pay $25 a year or during the registration period, which I presume would be a year, for each one of their vehicles?
SENATOR I HILGERT: I believe some organizations are operating on a very thin margins. I don't believe an organization would go. bust since there are nonprofit organizations that are not a business, so if there's no profit margin.
SENATOR CHAMBERS: Is that why they're nonprofit?. I mean, is that why they won't call themselves a business because they don't know how to make a profit and, as soon as they learn how to do that, they will change the nature of their organization and then declare the profit and pay taxes?
SENATOR HILGERT: I wouldn't want to speculate. I don't think so, Senator.
SENATOR CHAMBERS: Well, what I saw in the newspaper the other day in New Delhi, they have this temple where pilgrims come and they will allow their heads to be shaved as an act of contrition and to show devotion to their religion. And what is being done
now by those who operate the temple is to sell this hair...
PRESIDENT ROBAK: One minute.
SENATOR CHAMBERS: ... right, Senator Tyson They sell it in Europe and America and it's for the purpose of making wigs. And they've been making ... clearing over a million dollars a year, so they found a way to profit from people's religious devotion. So ifthese organizations, even though they're called nonprofit, are operating on such a... in such a precarious position that $25 a year they can't afford to pay, then I'll have you explain that to me better when I turn my light on again because I think the time is up.
PRESIDENT ROBAK: Thank you Senator Chambers. Senator Vrtiska.
SENATOR VRTISKA: Thank you, Madam Speaker. I rise in support of Senator Hilgert's amendment. I do so because I understand what he's trying to do and these are, in fact, organizations that do a lot of charity work. I'm sure that all of us understand that there's a need for that kind of support in many of the communities of our state and I, like Senator Chambers, do a lot of help for people who need help in taking them places and' delivering Meals on Wheels and those kinds of efforts when I'm home, but I don't expect to be paid for it. I do it because I think it's a good idea. But these organizations have a pledge not a duty, but made a pledge to assist those who need help and they, in fact, do go out and spend a lot of their time and they, in fact, do not get rewarded for it from the people who get help from them. Therefore, I think that it's only considerate of us, as has been indicated, we've been doing this for a great long time, and I don't see any great need and why we should turn around and now decide that we ought to, in fact, make these people have to buy ... to spend that kind of money for things other than the type of work they're trying to do, which is ... benefits a great many of the ... of the... I wouldn't say poor, but the people who have other problems that need, in fact, help that are older, who don't have the wherewithal to take care of themselves as well as they could. And many of these organizations do a lot of that good kind of work and I think that's the reason why I support Senator Hilgert's amendment to this bill, and would hope that the rest of you could see fit to.
be supportive also. With that, I'll turn the rest of my time back. Thank you.
PRESIDENT ROBAK: Thank you, Senator. Senator Coordsen.
SENATOR COORDSEN: Thank you, Madam President and members of the body. I think it's important when we talk ... and by the way, I'm .not going to say Senator "Hergert" because in my community Hergert is a well-respected and honorable name of many I people,. and I'm sure that they would not want to be confused with Senator Hilgert. (laughter) So for whatever value that has, senator Chambers. But nonetheless, this is a fee that we're talking about reduction ... reducing, and I think it's important to mention that the fee goes into the Highway Trust Fund to be allocated back *;o the counties and cities for streets and highways. Now, bear in mind that these ... the nonprofits that are objecting to this do pay the registration costs on all the vehicles, in the case of the church camp bus or whatever that driver has to have a commercial driver's license certified in the passenger section. And they do pay the gas tax on that fuel which, again, goes to the same place that the fee goes. The main reason that I believe that we have the fee* in which, in fact, is fairly minimal, is that it maintains a contribution to the ... to the streets, the county roads and the city streets, from all vehicles because the fee stays at the... it starts at $25 in the case of passenger cars, goes down over a period of ten years to $5. or 20 percent of ... it says 20 percent of the $25; and then it stays at $5 for as long as, that vehicle is operated, licensed in the state of Nebraska, will stay at $5. No tax, of course, because that disappears at the end of 13 years, and the tax is not an issue here because that does not apply to nonprofit organizations. So I think it's important in this discussion to understand that this fee, be that what. it may, goes toward the same use as the gasoline tax on the gasoline that we buy. It goes to keep up the streets and the county roads in this particular case. The gasoline tax goes to state highways also, but the fee goes only to city streets a I and county roads, as the formula that we have for distributing that part of the state gas tax that goes back to the cities and counties is. used. So it's not a fee but, rather... is not a tax but, rather, a user fee to help maintain -the surfaces of the streets. So with that, thank you, Madam President.
PRESIDENT ROBAK: Thank you, Senator Coordsen. Senator Wehrbein. announces that the following guests are visiting the Legislature. There are 62 fourth grade students here from Conestoga Elementary in Nehawka, Nebraska. (Introduced teachers.) They are in the north balcony. Will you all stand and be recognized, please. Welcome to the Nebraska Legislature. Senator Kristensen, your light is next followed by Senators Wickersham, Tyson, Chambers, Hilgert and Robinson.
SENATOR KRISTENSEN: Thank you, Madam President, and members of the Legislature. Before you begin the tears to flow down your cheeks, realize that what we're talking about is all nontoxic, well, maybe they ate nontoxic...nontaxable tax-exempt entities, so we're not just talking about the poor little. cottage that. houses orphans and who has one little vehicle that that's all, they have, and now they're going to start paying this fee. Realize that this includes a variety of things which I think would probably include large hospitals, other entities, and they're going to pay this $25 on their truck or bus or van if it's under five tons, and then as it gets older, that fee's going to go down and so when it gets to be ten years. ..or eleven years old, they're going to pay a whopping $S. And it's a, matter of consistency across the board. The average ... you've got roughly, I think, 100,000 vehicles, that come into play with this that I'm aware of. I'm not sure, maybe it's a little less than that. But at the same time, the committee's attitude was, this is a fee. this is not the tax. The Most it will be is $25 for the newest, the five years, the newest ones, and then it begins to go down. And as Senator Coordsen capably pointed out, that's their contribution, small as it may be, that's their contribution for the assistance of many of these county funds. Now, yes, they do pay their fuel tax which goes towards the upkeep of the state highway system, but this goes to the counties and the cities and the highway allocation process which is basically SO percent of it goes to the cities, 50 percent of it goes to the counties and then it's weighted based on, roughly, population and the amount of rural roads that they may have or needs. So it's a different area. It's not a burdensome one. I don't even see it as a major shift in policy, but I can tell you that the committee did what they did for the purposes for consistency. The tax-exempt portion is still in place, that
is, roughly 85 percent of it. And if you factor in that the next amendment that the committee is going to put in is going to reduce the fee from a maximum of $25 to $IS, this even makes it more to ... much to do about nothing, so I can explain to you why we did what we did, would hope that you would understand our commitment that we're not trying to put poor Senator... is it Hilgert ... Senator Hilgert out in the cold, and he'll no longer have his orphanage, and that they won't be taxed out of existence by this fee that's applied to everybody across the -board. Thank you, Madam President.
PRESIDENT ROBAK: Thank you, Senator Kristensen. Senator Wickersham.
SENATOR WICKERSHAM: Thank you, Madam President. I agree that this seems to be much ado about, if not nothing, very little, a rather modest fee that is complementary to a fee that is already paid by the organizations that seem to be raising the most objection to the fee. There is, I think, an underlying philosophical issue that perhaps needs to be addressed. I became concerned about it a couple of years ago when a large nonprofit hospital was being considered for sale in Scottsbluff, Nebraska. The issue that has concerned me for some time is what happens when that large nonprofit organization sells, closes, makes some change in their operation. Over the period of time that that organization has been in a community, there has been a very, very substantial. investment in that organization by the community as a whole, and sometimes by people who did not use the services of that organization, never had any contact with that organization, never hardly even know it exists. And that happens because there is an implicit subsidy for that organization in the existing tax structure. Now I'm not suggesting we should eliminate that subsidy and that all of the. tax-exempt organizations should be treated like everyone else. I think we have an interest, as a society, in subsidizing their operations through the tax system and making sure that they can deliver services to us. But I do think that we need to ,understand that those exemptions and those exclusions from their contributions back to the community mean that every one of us at tax time makes a contribution to those organizations without even knowing it, because our tax rates are higher, our payments are greater than they would be if we did not seek some
contribution from those organizations. Now it is... seems to me to be more appropriate. to ask those organizations to provide some contribution to those things that are related to specific uses. I don't know that they need to specifically make a contribution for all the services that are delivered by the political subdivisions that they touch. I don't think that's appropriate. But for some of the services that they make a direct use of, I think it is difficult to distinguish them from other users. And for that reason, I'm willing to support the committee, amendment that suggests that they ought to make some contribution through this fee for this ... for the support and for the construction and maintenance of roads. They use roads, and if they have a vehicle, it is clear that those organizations are users of the roads, and it does not seem to me to be inappropriate to ask them to make some contribution toward the system of roads in the state of Nebraska, as they are users, like the rest of us, and it is not a very burdensome contribution that we're asking them to make back to us for the support of the roads.
PRESIDENT ROBAK: Thank you, Senator Wickersham. Senator Tyson.
SENATOR TYSON: Thank you, Madam President, members of the body. I rise in support of the Hilgert amendment. I believe that we've heard a lot about consistency today, one thing and the other. Let's be consistent. Let's tax all, the school buses. I'm talking about the school buses owned by school districts. I was headed home here a couple of weeks ago on the Interstate 80 going west. I was passed by a tax-exempt University of Nebraska at Kearney. I was going 75 miles an hour and he went around me, so that was also using the highways we hear spoken of today, except he wasn't going to use them as long as I. The tax that we're talking about or the users' fee that we're talking about here may not be a lot of money, but aurum non olit, as the expression is, gold has no smell. The Nebraska taxpayers are receiving an enormous subsidy by people who are owning these vehicles, I'm talking about the nonprofit it organizations that Senator Hilgert's amendment refers to. At the average cost-of education per child, Nebraska taxpayers are relieved of a burden of as much as $205 million to $208 million a year by nonprofit schools, stateapproved and accredited nongovernment schools. Everyone that is supporting those schools who own these vehicles
are paying their taxes for the schools. They're paying for these institutions as well, at an average cost of only 4,000. There's 41,000some children in these schools at 4,000. That's $164 million a year. This is a minor amount, maybe it's not worth a lot of time, but all of this tends to add up. Most of these organizations, all of them that I know of, are having a ,hard time. They have a hard time every day of the year maintaining these facilities. Why do, we put any kind of a burden on them in this case? I think that this is like a small crack in concrete. All concrete cracks. if you have enough small cracks, the concrete crumbles. I don't think we should add to the burden that they already have, and I urge that everybody in this body support the Hilgert amendment. Thank you very much, Madam President.
PRESIDENT ROBAK: Thank you, Senator Tyson. Senator Chambers.
SENATOR CHAMBERS: Madam President, members of the Legislature, roughly 2,000 years ago, if the mythology is true but, whether it's true or not, the story is interesting. A fellow about 5 feet S., weighing 135 pounds was walking around giving his 'point of view on various things, and somebody came to him and said, 'You say you're the Son of God." He says, "That's what others say." When you talk about God and Heaven all the time, that's right.. "Well, should I pay taxes?" So Jesus said ... oh, but I tipped my hand. I told you who he was. This fellow said, "Give me a coin." And he was given a coin. He held it up, he looked, and he said, "Whose image and superscription is on this coin?" And the guy said, "Caesar's." So then Jesus said, "Well, render unto Caesar that which is Caesar and unto God that which is God." God, Senator Hilgert and Senator Tyson, does not dwell in buildings made by human hands. God, if there be a God, dwells in your heart, if you have a heart. All of this talk of what these schools and churches do is pointless. People voluntarily go to these churches. They voluntarily send their kids to these schools, and they don't want to be told to send their children to the public schools. The state has made these facilities available to everybody who wants to utilize them, and everybody pays in common for these things that the state provides. People are free to make use of them as they choose but, nevertheless, they have to ante up. I, Senator Tyson, am opposed to all fees that really, in my mind, are taxes.
Anytime, in my opinion that you extract or exact something from a person, through the threat of force, unless you're the .government, would be robbery. But if you're the government, it's a tax. I don't care what they call it., Ad valorem, user fee, income tax, sales, it's a tax. You're diminishing those resources that people have, but that's the way things go. In this bill, I want the misery spread around. I think the fee should not be put on anybody. I think the bill out to be killed. I'm against it. Or since I'm trying to pick up on various dialects,. I'm "agin" it. I think I pronounced that right. Did I pronounce it right, Senator Schellpeper? I'm "agin" it. I hear some people say that. And when you say it like that, that means you will do anything to resist it. Now I haven't made up my mind to do just any and everything to resist this bill, but I want the misery spread around. Others who currently don't pay this fee are going to have to pay it.. This is a political bill. The ones who are going to gain the most are those who sell new, cars, and especially those who sell highpriced new cars. And people who buy those cars and want to trade them off on a regular basis are going to gain. So that's what we ought to be looking at. But maybe too many people on this floor are in that category or have friends in that category or have constituents in that category, so we can discuss $25 and we can grasp the significance of that. And there'll be a holy war on the floor about that. But then, the huge amounts and the greater injustice done by this bill will probably slide right across the board. I am opposed to the bill, but if you're going to have the bill, let these groups Ante up. I had a bill before... it might have been the Revenue Committee, where...
PRESIDENT ROBAK: One minute.
SENATOR CHAMBERS: ...they ought to tax the property of churches and these other operations. I would have allowed some kind of deduction or an exemption. for a certain amount. But they accumulate property, they not only tie up real estate, but they hinder the development of certain activities that could be revenuegenerating and benefit society at large, better than teaching people to pray to ghosts and spirits and plaster statues. Now those who believe in those things, fine, but others who don't should not have to subsidize them in the way that Senator Wickersham was discussing. There have been bold
May 7, 1997.
attempts in the past, and in some countries, successful, to tax, all these operations. I'm not talking about doing that under this bill. I'm saying that this tiny amount is not going to hurt them. And, Senator Hilgert, if you were going to join me in knocking out the fee for everybody, then you've got somebody on your side who not only will joust with the windmill ...
PRESIDENT ROBAK: Time.
SENATOR CHAMBERS: ... but will help you dismantle it.
PRESIDENT ROBAK: Thank you, Senator Chambers. Senator Hilgert.
SENATOR HILGERT: Thank you, Madam President. I know at least some members think it's dishonorable to associate with me, I suppose. You know,. be that as it may, I don't think there's any dishonor in calling a tax a tax. Some members think that, well, if you call it a fee, the taxpayers won't understand that, and that'll be okay with them. When the government is raising money on a citizen in the state of Nebraska, it's a tax. That's what the taxpayers think and that's what the truth is,. and if you call a fee a tax and the fee ... or a tax a fee and a users' fee all and this gobbledegook, Senator Chambers was right and dead on. You're taking money out of the pockets of private citizens and, in this case, charities. This bill is supposed to be revenue neutral, but now we're expanding the revenue base to include nonprofits. We've heard some testimony before and maybe the committee, with some more amendments, will clear it up, but some of those who drive older cars will have to pay more. So we're increasing the revenues on nonprofits and on charities and on the poor and the people who drive old cars. Who's getting the tax break in this revenue-neutral bill? The new car buyers? Well, maybe I'll join Senator Chambers in opposing this whole bill, but I don't think there's anything dishonorable in stating what is, in fact, a tax. That being said, there seems to be a fundamental misunderstanding about some charities and nonprofits and how they work. If Senator... if a certain senator wanted to go after hospitals, then perhaps this is a drafting error because all nonprofits are included. I don't think the American Red Cross is a hospital . I don't think Girls, Inc. is a hospital. I don't think the Jewish Federation is a hospital. I don't think the W ... the YWCA is a hospital, the YMCA is a
hospital, the Salvation Army is a hospital. If you want to go after hospitals, then perhaps there was a drafting error at some point in time, and maybe a subsequent amendment will go after that and maybe I'll support that. But ... and nonprofit Will not go out of business.. People keep on referring to this. For example, in a hypothetical situation, let's take, for example, a nonprofit supplies a thousand meals at a food bank. They get $2,000 in contributions, so for every $2 of a contribution, they can supply a meal. If they have to pay taxes or fees... if the senator certainly wants to say that, of $50, then that's 25 less meals. There's not a point when a nonprofit will "go out of business.". They're not in business. They're in to supply a service that the government currently is not, regarding food banks, regarding substance abuse services in this state. And it is kind of surprising that some of the people that I respect the most for their intellectual capacity at times seems that they're confused somewhat about charitable organizations, at least these that I have mentioned here. I would encourage the body to adopt this amendment. If there's a subsequent amendment regarding hospitals, we can certainly take a look at that, but to impose this fee ... certainly it's not a tax, it's only money taken out of the someone's pocket, so it's not a tax, I guess ... this fee, on a group of individual organizations that is currently not paying it, that's a tax increase. That's a change in policy...
PRESIDENT ROBAK: One minute.
SENATOR HILGERT: ... and it's one which I resist. I resist. If you didn't have these nonprofits and the state of Nebraska or the counties or the cities or even our schools had to do some of the good works that these organizations do, talk about budget-busting. We do a lot that government doesn't have to ... the charities do a lot that the government currently doesn't have to do. And just take a look at ... look in the budget, look at some of the individual ... some of the organizations that are receiving funds from the state of Nebraska, from your counties, from your cities, from your health and human services regions. These organizations do a job that the state currently isn't doing, and I think we get a great return on our funds. I support charities and I call a tax a tax when I see it, and I don't think there's anything dishonorable in that. Thank you.
PRESIDENT ROBAK: Thank you, Senator Hilgert. Senator Robinson, your light is next, followed by Senators Schellpeper, Vrtiska, Lynch, Jones, Hillman, Chambers and Kristensen.
SENATOR ROBINSON: Madam President, members of the body. Senator Kristensen.
SENATOR KRISTENSEN: Yes.
SENATOR ROBINSON: When a person has a priority bill, he doesn't have to believe it one hundred percent, does he or she?
SENATOR KRISTENSEN: Let me just ... there's...
PRESIDENT ROBAK: Senator Kristensen.
SENATOR ROBINSON: Don't take it...
SENATOR KRISTENSEN: There's a rule...
SENATOR ROBINSON: Just say yes or no. Just say yes or no.,
SENATOR KRISTENSEN: It's Rule 7, Section 15...
SENATOR ROBINSON: That's enough, that's enough, t hat's enough..
SENATOR KRISTENSEN: ...and if...
SENATOR ROBINSON: This is my priority bill, and I support the amendment. What are we doing? We're taking away from people. We're going to end up paying it anyway, and it has a little to do about nothing. That's what Senator Wickersham and to paraphrase Senator... it's a little ado about nothing, so let's not... let's not do the amendment. Not... let's do the amendment but let's keep it out of the bill. You know Reverend Bob Timberlake down in Omaha? You ever hear him? Runs the Open Door Mission? You want to take ... you want to take money away from those poor souls that go down there? I can't believe it, Senator Kristensen. Now Wickersham, maybe, but not you, not you. I...I belong to the YMCA, and you can probably tell that I need it, but their van and their car, what they do, they up my
fee. I end up paying it. As Ernie ... as Ernie would say, it's a fee, it's a tax. What happens to the ... what happens to the private colleges or any other private hospitals? Their people are going to have to support it with more money. Why do it? We shouldn't have to do it. And the same with churches. You got to get more money. You got to up your pledge to the church, increase that ... increase that check every month, because of this. So I just can't believe that this is in the bill, and I do want to say a word about Senator Hilgert. Senator Coordsen in here? I want you to know he's a fine upstanding young man because he was in our Government Committee and we're ... we were proud to have him in our committee. I think he does a good job, and he's right on target here. And I have a question, Senator Hilgert.
PRESIDENT ROBAK: Senator Hilgert.
SENATOR ROBINSON: Will the...
SENATOR HILGERT: I yield to my good friend from...
SENATOR ROBINSON: ... will the University of Nebraska pay this fee if this bill passes?
SENATOR HILGERT: Geez, I don't...no, I don't think they would, to my knowledge. Would they?
SENATOR I ROBINSON: Okay. Say there's another thing. Just have to pay more taxes, have to ... Senator Wehrbein would have more trouble coming up with that money for the ... they.. I don't know how many vehicles they have, but they...boy, that's up in the thousands. I So this is a good amendment ... good amendment. Should have never been put in the bill, but I still like the bill, if we put this amendment in. Thank you.
PRESIDENT ROBAK: Thank you, Senator Robinson. We announce that the following guests are visiting the Legislature. There are students here, from Sheridan Elementary School in Lincoln. (Introduced teacher and sponsors.) They are seated in the north balcony. Will you all stand and be recognized,. please? Welcome to the Legislature. Senator Schellpeper.
SENATOR SCHELLPEPER: Yes, thank you, Madam Chairman and members. LB 271 is a bill that's been around this body in some form or Another for probably the last ten years. It's been a bill that has always been designed to raise a lot of revenue, if we needed revenue., Each year it runs into problems because this body does not want to raise anybody's taxes and with $400 million this year, or estimated surplus, we shouldn't have to raise taxes. This should be a revenue-neutral bill. We discussed a long time in the committee about the nonprofits. And, yes, it does affect cities, counties, schools, university, every nonprofit in this state. Basically, there's very few vehicles there, from what Senator Hilgert is talking about, that are actually nonprofits, what he considers nonprofits, because basically most of them are in the other entities, in government entities, that are also nonprofit, and they would pay this small fee, too. We talked about, in the committee, what would be a fair thing to do.- We're talking about probably' a little over $1 million. We don't really know, but we think in that area someplace. And we thought that they should pay something. All these entities out there drive all these roads. We have to supply the law enforcement, everything else, for these individuals that drive all these here vehicles. They should pay something. Another thing I think this body needs to consider is that very few of the really nonprofits that Senator Hilgert talks about purchase new vehicles. They're ... most of them purchase used vehicles. Now schools and the university, that's a different issue, but they would also pay this small fee. And we thought it was fair that they should pay something, and that's why we came up with this small version that they would actually pay. But in order to get away from the high tax that this state currently has on our motor vehicles, the fee is where all the other states Are at. And you can go to any state in the Midwest and find out that Nebraska has the highest fee that you pay- We call it tax now, but we're going to move to a fee schedule like all the other states do, and make it revenue neutral, hopefully, even though this amendment would take away some of that revenue, if it passes. But anyway, that's where this body would be heading to, and I think the time has come. I've always opposed this type of bill in the past, but I think the time has finally come that we need to move in this direction, get where all the other states are, make our automobile fee more fair, more equitable, and then move on. I
think it's ... we finally got it down to revenue neutral, and if you have an older vehicle, which most of them do in the rural areas, you're not going to pay basically any more anyway. it's the second to the fourth or fifth year older car that will be paying a small amount more, but it's basically revenue neutral and, once again, this amendment will affect all entities that are considered nonprofit, and you see that on your license. So I think this amendment does very little. I think it's fair that they do pay something, and this body needs to consider that when they vote on the Hilgert amendment. Thank you.
PRESIDENT ROBAK: Thank you, Senator Schellpeper. Senator Vrtiska.
SENATOR VRTISKA: Thank you, Madam President. I just- want to echo some of the words that Senator Schellpeper just alluded to. One of the real problems that I guess I ... where's Senator Hilgert at?
PRESIDENT ROBAK: Senator Hilgert.
SENATOR VRTISKA: I guess he's gone. Well, I'm going to turn to Senator Kristensen and ask him a couple of questions.
PRESIDENT ROBAK: Senator Kristensen.
SENATOR VRTISKA: Senator Kristensen, as I understand it, this bill would eliminate the fee from ... this amendment would eliminate the fee from schools, from the state, from the counties, from hospitals, from almost every nonprofit corporation in the state, is that right?
SENATOR KRISTENSEN: Anyone who is tax-exempt now would be exempt from the fee, right.
SENATOR VRTISKA: But the bill, the way it's originally designed would, in fact, assess that fee to every one of those ... every one of those?
SENATOR KRISTENSEN: Yes, to all vehicles.
SENATOR VRTISKA: And as I understand it, and you can correct me
if I'm wrong, with that in place the way the bill was designed, .it would be what you would consider revenue neutral as far as the amount of money collected as opposed to a tax.
SENATOR KRISTENSEN: Well, the goal of the committee was to make the bill as revenue neutral as possible, and my guess is the committee would err on the side of losing and not collecting as much money, as opposed to collecting more money. So the goal is to be revenue neutral and I suppose we'll err on the side of losing a little.
SENATOR VRTISKA: One of the things that I just wanted .... and I guess with this amendment on there,, and when I spoke originally, I didn't recognize that we were taking all of these other nonprofits. I thought we were talking about charitable organizations, but we're actually talking about everybody who, in fact, has a taxexempt status and so they would, in fact, not pay this fee. Is that correct?
SENATOR KRISTENSEN: Yes.
SENATOR VRTISKA: I think that"s something everybody has to understand and that would, in fact, probably change the revenueneutral aspect of this because we're talking a considerable amount of money, as I understand it.
SENATOR KRISTENSEN: Well, I think you're probably talking ... and I'm going to look at staff, I think a million dollars or so, maybe two million at the most. And I know that that's a lot of money to any one individual, but if you're looking at the total here of property tax on motor vehicles, it's probably $152 million or $153 million, so in terms of percentage, it's a small percentage of the pie.
SENATOR VRTISKA: Well, the only thing that I want to finally address that I think is important to understand, and Senator Schellpeper discussed it, one of the problems we have in Nebraska is that states around us do have a different type of system of taxing automobiles. Now I know that some people are going to say, well, you buy newer cars so you're in favor of it. That has nothing to do with it. I think the issue...if you take a look ... and I ... and I called and talked to my treasurer about
the way our taxes are now and we do, in fact, the first year have a high tax and then it goes down dramatically and goes down through steps. As I understand it this, in fact, for a new car, will be less money but it won't go down as drastically as the present system. So in the fact that somebody that buys a car and keeps it for any number of years is probably going to end up in paying about the same amount of fee as the tax would amount to, the way I was explained ... to me. Is that anywhere near right?
SENATOR KRISTENSEN: Depending on how long you keep it, that's right. I mean, what this is designed to do is phase it over a period of time, based on age...
SENATOR VRTISKA: Right.
SENATOR KRISTENSEN: ... rather than it is on the value which drops dramatically. So if you buy a car and keep it. for a substantial period of time, you're probably even going to pay more.
SENATOR VRTISKA: That's ... that's the way I was ... explained to me, in going over with my county treasurer, we'd actually end up paying more than you do now,, if-you kept it for a period of so many years. The point I guess I'm getting at is, and it's interesting to me because down where I come from, we have a lot of what we call snow birds who go to Texas and spend the winter down there, and they have a residence down there. And every one of those people has a Texas license, and they do not license their vehicles in Nebraska and, in fact, under this ... the way I understand it, they're not...
PRESIDENT ROBAK: One minute.
SENATOR VRTISKA: ... required to because of the fact they do have a residence down there and they consider that as their winter home, and so they all end up paying their license and their tax down there because they're so much cheaper. They have an altogether different system. And I guess all we're saying now is we're trying to someway set our system up that somewhere .is similar to the states Around us that have, in fact, a different system of taxing, and as Senator Schellpeper said, we
do have one of the highest systems of taxation. And I guess that's why the whole bill came up. It's been around for along time, so I would hope that the bill could be supported in whatever form it goes through and we could, in fact, get this in place. So I support the bill, and I still continue to support. the amendment. I have some problems with taking all of the nonprofits out of it but if that's the will of the body, I guess that's the way it'll go. With that, thank you.
PRESIDENT ROBAK: Thank you, Senator. Senator Jones.
SENATOR JONES: Madam President and members of the body, I was going to stand and support Hilgert's amendment and I ... I've been hearing all of this other discussion about taking all the nonprofits out of it. I was concerned about the parochial schools because we got a lot of people out there that sends kids to parochial schools and they also pay tax on the public schools., so actually they're taking a load off of the public schools by doing this, and so now we're going to put a fee on them and they'll have to pay that. And so they are making a big savings for the taxpayers because they don't have to buy the books and everything in the public schools for them. So that was the reason I was concerned about it. But they just keep talking about taking all the nonprofits out so that ... that is a concern, but I'm still going to support Hilgert's amendment, and maybe we can make some adjustments down the line on it, but I think... I think we don't want to put another fee on somebody that's, really helps saving tax dollars in this state, for other taxpayers, so that's where I'm coming from. So thank you again.
PRESIDENT ROBAK: Thank you, Senator Jones. Senator Hillman, your light is next, followed by Senators Chambers, Kristensen and Robak.
SENATOR HILLMAN: Madam President and members. First, Senator Kristensen, I want to thank you because of the first part we had on this bill, for me anyway, you gave a good explanation and I can finally determine what the process of the bill is, with the motor vehicle tax, and the license tax, the registration fee, so I think I have a pretty good understanding of what's going on in that part. Some of the-questions that I've had that I ... and I know you've mentioned them some, but it's kind of a
justification is why the Revenue Committee feels that this is important, and the other is what the benefits would be by passing this particular legislation, which you usually try to look whenever there's something passed. But before I ask Senator Kristensen that question, I do want to also call on Hilgert's amendment that I'll be supporting the Hilgert amendment, and the reason for that, I think we will find in the future more and more times where tax ... nonprofits that are currently tax exempt that perhaps the Legislature is going to look at more and more ways to tax them, and this is the first step, I'm going to say, if it's testing the waters or going. towards that goal.. And I will be one that will not be supporting taxing what are currently tax-exempt entities that are nonprofit. Having. said that though, Senator Kristensen, would you yield to a question here for me, please?
SPEAKER WITHEM PRESIDING
SPEAKER WITHEM: Senator Kristensen, will you respond?
SENATOR KRISTENSEN: Gladly.
SENATOR HILLMAN: This has been said in different ways in little 'parts that if you'll take the rest of my time, I'm not sure how much is left, but to explain, number one, why the Revenue Committee thought it was necessary to come up with the bill, to advance this bill, and then secondly, who and what are the benefits of LB 271?
SENATOR KRISTENSEN: Okay. I'll try to do that in the remaining time and maybe I'll...it'll be cursory to begin with. The purpose, Senator Hillman, of the bill is that we can't continue to maintain the present system because we claim that our present system of taxing motor vehicles is an ad valorem property tax. That system just ... you can't defend it, and so what we're doing is recognizing what we really do and that we're now going to tax motor vehicles based on their age, to support a property tax system that we currently have in place. In beginning to wean ourselves off of that type of system, we are now moving to also putting a factor of a fee which is the distinction between keeping the existing tax. That tax goes, by constitution.- to the political subdivisions pro rata, based on their levy. The
fee portion goes back through the Highway Allocation Fund to cities and to counties in an effort for a distribution formula that we started last year to assist them to live within. levy limitations. That's the reason the bill is part of the property tax package. It's about 80-85... I think it's about 85 percent of this is still the tax. The 15 percent of it's the fee. if you'll look at this particular amendment, it is not... it's not a financial decision. This is a policy decision, and the reason that the amendment was put in the bill ... and I'll tell you, there's a split in the committee. Okay? The committee was split on whether to do this but this is the ... this is the will of the committee, is to support doing this. And that was if you're going to have this fee, it's across the board, that everybody contributes, to it, everybody has to make some contribution towards the municipalities and the county roads. They make their contributions, obviously, to the state roads through payment of the fuel tax that they pay when they buy a gallon of gas. So from that ... you know, from that point of view, that's a thumbnail sketch of why to have it. The current system is arbitrary because you just ... every year the property tax administrator just puts in what the manufacturer's suggested. retail price is for the new ones, and that's what the tax level is every year.
SPEAKER WITHEM: One minute.
SENATOR KRISTENSEN: She, then, Just arbitrarily assigns values. There is really no rhyme or reason how those values occur. Obviously, they start high and then come down from there. We're going to try to even that out a little bit more and say the tax ought to be based on the age. And so you're going to start with what its value was at the very beginning, and the reductions are going to be based on the age of the vehicle, not putting up the charade that we're doing it because that's what the fair market value of the vehicle is, because there's no way you can go out And individually assess or appraise every vehicle like we do with pieces of property. So that's...the system's at risk, so we can kill two birds with one stone. we can solve out constitutional problems we think we have with motor vehicles, and we can also begin to. assist counties and cities to live within the levy limitations by distributing that fee.
SPEAKER WITHEM: Time. Senator Chambers.
SENATOR CHAMBERS: Mr. Speaker and members of the Legislature, I'm so thankful that Senator Hillman asked the question she did, because I can tailgate on it now. Senator Hillman, is the HaleBopp Comet. I'm one of the tails. Senator Kristensen, you're going to be the second one and I found out that there are three, now, that they've discovered. But here's what I wanted to ask you. It's a forthright question, I'd like as forthright an answer as you can give. Isn't this bill, in effect, a tax shift?
SENATOR KRISTENSEN: To the extent of the fee, Senator. We are distributing the Lee money differently than we would distribute the tax money, so...
SENATOR CHAMBERS: Now, I'm not just talking about distribution. I, meant those who are going to be paying more and some others will be paying less under this bill.
SENATOR KRISTENSEN: Oh, yet who is....
SENATOR CHAMBERS: We're shifting who is going to paying the amount of the tax.
SENATOR KRISTENSEN: That's ... that's true, Senator, yes.
SENATOR CHAMBERS: Okay, now...
SENATOR KRISTENSEN: I don't know that that's the intended purpose of it. I would disagree with those that say we're doing it to help somebody out. I can tell you from...
SENATOR CHAMBERS: (laugh) Well, Senator...
SENATOR KRISTENSEN: We're going to disagree on that.
SENATOR CHAMBERS: Okay. Now, Senator Kristensen, here I am. I'm ... you're the grand inquisitor.
SENATOR KRISTENSEN: No, I'm not. I'm the answerer.
SENATOR CHAMBERS: No, I'm using an example.
SENATOR KRISTENSEN: Oh.
SENATOR CHAMBERS: And Shawn there is your familiar.
SENATOR KRISTENSEN: He's my intellectual backup.
SENATOR CHAMBERS: So here I am, stretched out on the floor and Shawn is piling stones on me to force from me something or other like they used to do. And I feel that you're torturing me, and You say, no, Ernie, I'm trying to save your soul. Well, it doesn't matter what we call it, it's the effect that it's having on me. So no% with that example...
SENATOR KRISTENSEN: Okay.
SENATOR CHAMBERS: ...let me ask the question.
SENATOR KRISTENSEN: Okay.
SENATOR CHAMBERS: Does it really matter what the intent of the committee was, when we look at what the actual impact is? The impact is going to be in this form. Some people are going to be in a category where they have to pay more through these taxes than they would have to pay under the current system, and some buying these high-priced vehicles are going to pay less than they'd have to pay under the current system. Isn't that generally true?
SENATOR KRISTENSEN: Yes. Well, I was with you till you said the word "generally". That is...what you said is true and then when you say "generally"...if, for example, someone buys that highpriced car and hangs on to it...
SENATOR CHAMBERS:. Uh-huh.
SENATOR KRISTENSEN: ... ultimately They're going ... they could pay more because if they hang on to it longer ... to make that more correct, if they buy a new car, keep it for two years, buy another new car...
SENATOR CHAMBERS: Right.
SENATOR KRISTENSEN: ... those are the people who, under this, will pay less.
SENATOR CHAMBERS: Okay.
SENATOR KRISTENSEN: Then I would* agree with you with that caveat.
SENATOR CHAMBERS: Okay. That's the point. Because like I said earlier, they ... these big shots buy the big cars and trade them off regularly. But here's...
SENATOR KRISTENSEN: That's true.
SENATOR CHAMBERS: ... here's what I want to ask now, and I know the answer, but for the record. The value of this car, in terms of what it will bring on the record ... on the market, means nothing to this bill, does it?
SENATOR KRISTENSEN: I'm sorry. I was listening to staff. I'm sorry, Senator Chambers.
SENATOR CHAMBERS: Okay. The value of this car, in terms of what it will bring on the market, has no relevance to this bill whatsoever, does it?
SENATOR KRISTENSEN: That's correct.
SENATOR CHAMBERS: So we all know that as soon as you drive this thing off the lot ... and some cars will lose value quicker than others, it's going to drop in value much faster than this system that we have in this bill, for determining the rate that a person is going to pay in taxes. Isn't that true?
SENATOR KRISTENSEN: I ...
SENATOR CHAMBERS: I'll ask it again.
SENATOR KRISTENSEN: Yeah, I'm sorry, Senator. I'm been trying to carry on two conversations. I'm sorry.
SENATOR CHAMBERS: No, you're only carrying on one conversation .because I'm... I'm giving you a chance to do it so I don't want you to think you missed anything.
SENATOR KRISTENSEN: Okay.
SENATOR CHAMBERS: I'm going to ask the question now. As far as the value of these vehicles, when you buy one new, it's going to drop much faster than the way we do it...
SPEAKER WITHEM: One minute.
SENATOR CHAMBERS: ... incrementally, for the purpose of setting this tax. Isn't that true? Okay, you...
SENATOR KRISTENSEN: Well, I ...
SENATOR CHAMBERS: ... you reduce the value by what? For the purpose of taxing one point... I mean, point something or other...
SENATOR KRISTENSEN: Right.
SENATOR CHAMBERS: This doesn't correlate to the rate in which a vehicle loses value on the market, does it?
KRISTENSEN: No, it has nothing to do with... it has nothing to do with market value reductions.
SENATOR CHAMBERS: So what we could do is select some of these lines on page 4, if that's the one ... and they do this for other purposes on another page, I guess ... we could go into some of these years and decrease that figure as we choose, couldn't we?
SENATOR KRISTENSEN: Oh, sure.
SENATOR CHAMBERS: And when we talk about revenue neutral on this bill, we just mean the total amount in the pot, not that it's going to be revenue neutral on each individual who owns a car.
SENATOR KRISTENSEN: Oh, that's correct, yes.
SENATOR CHAMBERS: So we can manipulate these figures any way we want to, and arrive at the same amount in the pot and still say the bill is revenue neutral?
SPEAKER WITHEM: Time, Senator.
SENATOR KRISTENSEN: That's correct.
SPEAKER WITHEM: Senator Kristensen.
SENATOR KRISTENSEN: Thank you, Mr. President, members of the Legislature. And I don't know, Senator Chambers, I wanted to say a few things in regards to Senator Hilgert, and I assume you'll take your time. This is a policy choice. This is not a watermark or a line in the sand, whether you support nonprofits and charitable organizations. And to the extent that it's portrayed, if you vote to put a $5 fee or, at the maximum, a $25 fee or, in the next amendment I have, a $15 fee on these vehicles, and if you're going to write or portray that people are against nonprofits because they want to impose uniformity, I think that's seriously wrong and I think you're misleading people. This is not a financial decision in terms of it doesn't make or break the amount of dollars in the bill. What it does, it's an issue of fairness. And you've got to decide the policy, should I be fair and be uniform across the board or do I give exemptions to people who have got current exemptions? And if you vote for this, you're not against charitable organizations. If you're going to support Senator Hilgert, that doesn't mean that you're a lifelong member in support of the charitable organizations. Believe me, they all do wonderful things. We have listened for hours upon hours, upon hours, with property tax and payment in lieu of taxes for charitable organizations. They have the support of the committee but in this one small instance, the committee has voted, as a. group, that we were going to put this uniform across the board. Some members disagree with that, some members strongly agree with that policy. But the majority of the committee ruled and that's what we're ... that's the reason you're seeing the committee pretty firm in standing with what we did. So I think it's... I think it's unfortunate to label people who would vote for this to be
tax-mongering nonsupportive of charitable organizations. That's not true. This is merely a policy choice that you have to make. Do you be uniform or do you give some exemptions? It's nothing. more, it's nothing less because it's not going to impact the total amount of dollars that much. So with that, I'd hope the record would be set straight and that we'd focus this debate for what it really is, and that's a matter of uniformity of tax policy in this particular instance. With that, I would yield back my time, Mr. President.
SPEAKER WITHEM: Would like to pause one second and introduce some guests we have here in the Legislature from Senator Vrtiska's district. There are 30 third graders from Tecumseh Public Schools. (Introduced teacher and principal and guest teacher from Japan.) Would you please stand and be recognized. Senator Robak. Senator Hartnett.
SENATOR HARTNETT: I'm a member of the Revenue Committee, and I think when the bill was first introduced, it also had a.. . in the registration part, it also had the nonprofits paying that tax, and it...we struck. that out. I thought, as a member of the committee, we had also struck out the fees, and BO I guess, as a member of the Revenue Committee, I support Hilgert's amendment. I think we're starting a ... you know, why should schools help counties out if that's... if I understand what Senator Kristensen said. You know, you're kind of taking out of one pocket and putting into, you know, somebody else's pocket, but I thought that we took care of the nonprofits in the committee, and so for that reason, I'm going to support ... going against my colleagues on the Revenue Committee, but I'm going to support the Hilgert amendment. And Senator Chambers, if you would like some of my time, you may have it.
SENATOR CHAMBERS: How much time do I have,- Mr. Speaker?
SPEAKER WITHEM: You have four minutes.
SENATOR CHAMBERS: Thank you. Mr. Speaker and members of the Legislature, as I stated, I'm opposed to the bill, but I want-to spread the misery around. I do think these outfits ought to pay this fee if everybody else has to pay it. I'm the one who, down through the years, have fought more successfully than anybody
else, because I'm the only one who will do it, in reducing fees and preventing others from being imposed in the first place, on occasion. But on this one, I think when we're making a new departure and starting a new approach, in terms of how vehicles ought to be taxed, and we don't take into consideration anybody's ability to pay, we're just making arbitrary determinations and putting it on everybody without regard to anything else. To me, that's not a good approach, and maybe somebody would say, any other approach would raise a constitutional problem. I'm not convinced that that's true. What was being done under the old system ... that's what, I would refer to the present system as being, is going to be done here under a different name. So, Senator Coordsen over there raises chickens, and Senator Coordsen, your district has a county where there are a lot more chickens than anywhere else so they pass ... your city council or county board or village board, whoever, passes the ordinance ... ordinances, passes an ordinance making it against the law to steal chickens. Then a very powerful politician comes along, and he gets a definition ... a definitional change in the law, so what used to be called chickens are now called stones, and it's not against the law to steal stones. So although it will cock-a-doodle-doo when the sun comes up, it will lay eggs and do all of the other things chickens used to do, since it's now defined as a stone, it can be stolen without violating the law. If LB 271 does what the current system does, it is the same, in my opinion. Calling it by a -different name does not change it. we've all seen those cartoons where the poor little skunk called Pepe LePew tries to be accepted, and never does he really quite succeed. But on occasion, he's been able to make some people think he was an ordinary house cat, and when they thought he was something different from what he was, he was accepted...
SPEAKER WITHEM: One minute.
SENATOR CHAMBERS: ... not for what he was but for what people thought that he was. When they found out what he was, he was rejected once again. These systems of taking people's money under a different name are not, in my opinion, a fair way to do business. If we feel that a certain level of taxation is necessary, we should state that, then raise the tax if it calls for an increase. Once the committee's position has been put
into a bill and the way it has here, I don't think we ought to start exempting out individual groups. That changes our focus from the overall principle to taking care of this little fiefdom, that little earldom, this little dukedom, and by the time it's over, the ones who've got the clout have gotten themselves out and others who have no voice are going to pay more, and that's what I object to greatly. So I'm opposed to Senator Hilgert's amendment, but I will offer one to strike all reference to the fee.
SPEAKER WITHEM: Time, Senator Chambers. Senator Hilgert , there are no further lights on. You are recognized to close. Good closing, Senator Hilgert. I'm sorry, Senator Hilgert. That was purely unintentional. Go ahead.
SENATOR HILGERT: Thank you, Mr. Speaker, members. I think we've had an extensive debate on this amendment. It was... I think it also helped a few members understand the bill a lot better. I maintain that this is a departure from policy. I agree with Senator Hillman's comments regarding that this is the first bite at the nonprofits. I do maintain that when you ... the governmental entity takes money, it's a tax. By any other name, it's a tax. When they call it a fee, it's a fee. I don't buy into that Argument. I don't think most taxpayers in the state,; of Nebraska do. I think if the body understands the true nature of charities and nonprofits, I think they realize that the terms of I going out of business really don't apply. You're just basically saying, we're going to just do that much less aid in our community; we're going to supply that many fewer meals to people; we're going to supply that much less counseling; we're going to supply that fewer beds to the homeless, to the abused; et cetera. I think...in fact, the AIDS project ... Senator Kiel, thank you. I would encourage the body to adopt this amendment. We've heard from even some of the people that do not support the amendment that this isn't that big of a deal. Well, if it's not that big of a deal, why do we need this huge departure from our policy? I asked a few people when was the last time it was attempted, when dealing with vehicles, to increase taxes on the vehicles owned by nonprofits. And the people that I asked couldn't even remember it. This is a departure and I would encourage the adoption of this amendment. Certainly, if the Senator wants to amend the committee amendments at some future
time, regarding the hospitals, I think that's certainly a separate and debatable amendment if the Senator chooses to do that.. But remember, we're talking about the YWCA, the YMCA, the Salvation Army folks. You know, with a $390 million surplus,, why does the state need to get charity from the charities? Please adopt the amendment. Thank you.
SPEAKER WITHEM: You have heard the closing.
SENATOR HILGERT: Mr. Speaker, I'd ask for a call of the house.
SPEAKER WITHEM: The question is, shall the house go under call? All those in favor vote aye, opposed vote nay. Record.
CLERK: 26 ayes, 0 nays, to place the house under call.
SPEAKER WITHEM: House is under call. Members, please return to the Chamber, record your presence. Members, please report to the Chamber and record your presence. If you are in the Chamber, please check to see that your light is illuminated. Senator Wesely, please check in. Senator Landis, Senator Cudaback, please check in. Senator Witek. Senator Wickersham is here. Would the ... all members are present. We will proceed with the vote then on the Hilgert amendment to the committee amendment. A roll call vote has been requested. Mr. Clerk, please call the roll. There had been a request in reverse order.
CLERK: (Roll call taken. See page 1871 of the Legislative Journal.) 30 ayes, 10 nays on the amendment, Mr. President.
PRESIDENT ROBAK: The amendment is adopted. The call is raised. Mr. Clerk, anything further pending to the committee amendments to LB 271?
CLERK: Senator Kristensen would move to amend. (See AM1994 on page 1872 in the Legislative Journal.)
SENATOR KRISTENSEN: Mr. President, members. I just want to verify with the Clerk, if I may. Is this AM1994?
CLERK: Yes, sir.
SENATOR KRISTENSEN: Thank you. And we are beginning before lunch, I'm going to do the opening and then perhaps we can do a little more right after lunch, as to what this dodo. This is the amendment. It's signed, I believe, by several I members of the committee. I don't know if we've got everybody, but I don't know of anybody that told us "no" on the committee, but it does ... and it shifts and changes several things. It maintains the proposition that we will have part of this being a tax, part of it being a fee. It would lower the fee from $25 down to $15 for a good share of those vehicles. I t also puts in more brackets. So if you remember what we had in the committee statement and what we had handled out earlier, there were only about four or five brackets. In order to address the issue of deductibility, we've just created some more brackets. So on the second page of the amendment, you will see more brackets. To adequately describe that I've got a handout, and I'll go over that in a little bit more detail later, but it begins to assist us in making it a more of a progressive tax so as you have more, or in tax and the fee, you're going to pay a little bit more. It also lessens the amount of the fee. Now that we've taken the fee out for toughly 100,000 vehicles, it may throw off a little bit our bottom line, but substantially it'll still be the same. I'm also handing out to you some examples. Not that I like Fords more than Chevrolets or Hondas or anything else, it was .Just easier to pick out the Ford line and show you some examples of what would happen as we have it in the committee amendment now, and what this amendment would do in terms of how it affects a car that. was done in 1983, that was a lower value car, and then a newer high value car. This is not meant to be exhaustive. This is for illustration purposes. There could be many things, and this just talks about what there is for differences, and hope that that's easier for you to look at. We put more classes of values in here to address the deductibility issue, and I think Senator Hilgert had raised the deductibility issue the other day. In response to that, this is how we, I think, will solve that problem,. maintain the tax base ad a deductible item, but it does put a number of those things out here for you to look at. I would take the one that's got all the numbers on it. Let me just help walk you through that. When you see at the very top corner of it, it says MSRP, that Manufacturer's Suggested Retail Price. That is a price that you
get for those vehicles.. That is something that you can ascertain, and that comes with every vehicle. You look at the base year, we keep the base year in there, and then you'll see the price range, and so the price range is fairly tight. The. tax goes up, the more expensive the vehicle, when you begin it's price. We've made that more of a gradation so, in other words, we're not lumping so many things together. So that's the next line over that you'll see the first year of tax. You'll see that come down. Across the top lines, then you're going to see your one, two, three, four, out to fourteen. As the tax years go along, the base tax gets reduced, so the next year it's only .9 of $100. The third year it's only .8 of $100, for example, if we're dealing with that first vehicle. Then we put in the fee amount. That's the next line below. As the tax declines, you'll see the line of fee amount. That's the amount of fee because we reduced that fee now down to $15 for most vehicles. For the first five years, you have a $15 fee, then you'll go year 6, 7, 8, 9 and 10 ... or excuse me, 6, 7, 8 and 9. That's a $10 fee. Finally, you get down to the $5 fee for the out years. Then, given this parameters now, you can take any vehicle that you have and begin to plug into this-and get some idea. I'm going to work on trying to give you. what a bottom line is in terms of total fee and taxes. I think this is pretty close to keeping ... and Senator Chambers is absolutely correct. When I talk about revenue neutral, I am not taking, for example, Senator McKenzie, and saying, I guarantee that you're going -to pay the same under this system. That's not true. It's not true that maybe anybody will pay exactly the same. You may pay a little less, you may pay a little more. Depends on how long you take to pay this. But I would like to begin. the discussion after lunch, Mr. President, of what the policy is and how it fits. I think this a little better system, and would be happy to take any of those questions. I would hope that we could, since it is the noon hour, probably would not be good for us to, go much further in terms of questions and so on. After lunch, I'd like the opportunity to field those questions and begin the policy discussion on this issue. Thank you, Mr. President.
SPEAKER WITHEM: Thank you. Mr. Clerk, do you have any items for the record?
CLERK: Mr. President, bills read on Final Reading this morning
have been presented to the Governor (re: LB 317, LB 363, LB 398, LB 526, LB 550, LB 746, LB 788, LB 66, LB 119, LB 173, LB 173A, LB 193, LB 274, LB 279, LB 352, LB 437, LB 452, and LB 263). 1 do have proposed rules change by Senator Will to be referred to Rules Committee; Senator Bromm amendments to (LB) 232; Senators McKenzie and Witek to (LB) 798. That's all that I have, Mr. President. (See pages 1874-75. of the Legislative Journal.)
SPEAKER WITHEM: Senator Bohlke.
SENATOR BOHLKE: Yes, Mr. President. I move to recess until one-thirty.
SPEAKER WITHEM: You've heard the motion. All in favor say aye.. Opposed. We are in recess.
SENATOR COORDSEN PRESIDING
SENATOR COORDSEN: Good afternoon, ladies and gentlemen. Welcome to the George W. Norris Chamber. Roll call, please.
CLERK: I have a quorum present, Mr. President.
SENATOR COORDSEN: Thank you, Mr. Clerk.. We were on 271 on, I .believe, the Kristensen amendment.
CLERK: Yes, sir. If I may, one item, Mr. President.
SENATOR COORDSEN: Item for the record, Mr. Clerk.
CLERK: Senator Wickersham would like to print an amendment to LB 806, Mr. President. (See page 1876 of the Legislative Journal.) That's all that, I have, thank you.
SENATOR COORDSEN: Thank you, Mr. Clerk. Just a second, Senator
Kristensen. We are on the Kristensen amendment to LB 271. On the list of lights, Senator Kristensen, you're first.
SENATOR KRISTENSEN: Thank you, Mr. President and members of the Legislature. I want to begin to discuss the amendment in its practical effects and while I'm speaking, I'm just going to make one reference ... can I have a copy of the grid with, all the various issues on it? Thank you. What does this amendment do? I think this amendment makes it more palatable and I know there are certain members of the body who are interested in how this actually works and why we're doing what we're doing with this whole process. And I'm going to probably repeat this a couple of different times, but I think maybe to start us off this afternoon, it's important for us to go back and understand why we're doing what we're doing again, and that the problem with property taxes, particularly with vehicles, everybody agrees taxes ... property taxes are too high. A good example of that is average levy in the state is about $2.50. In some areas, you have somebody who's paying $1.25, in another part of the state somebody is paying almost, maybe even in excess of, $4.00. The state average is still there but you've got people higher, and you've got people lower.. There's a big swing in there. What we've tried to do in the Revenue Committee for the last three years is try to accomplish, one, less property taxes and less reliance. That's been goal number one. The second goal is to try to make it somewhat even. In other words, try to have this property tax so that it's more fairly spread out in terms of where people are paying. Take a good example of these motor vehicles. Tell me why it's fair if you live on the outside of the city of Omaha, for example, that you're going to pay 30 percent less than someone who lives right across the borderline in the city of Omaha, for the same vehicle. You're going to pay drastically different. You may pay 30 percent less by living outside of the city of Omaha than if you live inside of it, for a motor vehicle. That vehicle is very, very mobile. The goal that the committee had was to try to make this. more even across the state. That's the reason we went towards* putting part of it tax, part of it fee because, as you will see in these handouts I have, you've evening these out more. You're making it more uniform across the state. we can't control property tax because of the Duis amendment, because of the uniformity clause and so on, with real property, but our
constitution does let us do different things with motor vehicles, and that's the reason we're doing what we're doing today, is to try to gain less reliance and some greater equity across the board with that. I'm going to probably come back to this two or three different times, but that's the purpose of what we're doing, how do we get that job done. The fee in this particular amendment goes from $25 down to $15. That's the first one. So we're going to take a little less reliance on that fee which means that it doesn't take as big a bite at this point in time. We also wanted to put in more brackets so if you saw before, in the old handout that we had, we probably had six brackets of value. 'Now you'll see, and this is the chart that's got all these numbers, and we knew that everybody could probably, see these numbers and, hopefully, somebody will get Senator Vrtiska a magnifying glass because we know he probably has trouble seeing all those little numbers, but we put the reason for more brackets is so we can get to the issue of making it more acceptable for deductibility on your federal income tax, not deductible as a business expense. So when Senator Cudaback writes off his vehicle for business purposes, that's not what we're talking about. We're talking about if...
SENATOR CROSBY PRESIDING
SENATOR CROSBY: One minute.
SENATOR KRISTENSEN: ...you itemize. So if you're an itemized taxpayer, under this system we've tried to address the problem the Department of Revenue had with deductibility. We think that at least for the tax portion of this, we are now making it deductible because we have more brackets here. And you'll see, as the value of the vehicle goes up, so goes the base amount of the tax. So the old argument, if you can afford more, you are paying more, comes more into play here because thereto less reliance on the fee, more reliance on your ability to pay. This chart will help you find ... and let's just pick out a car. Let's say that you've got a car that in that, $30,000-$32,000 range when you start it. The base tax amount is $540. Now that's a fairly expensive car and that's way above the average. Most people are averaging below that. I think the average for new cars in this state is about...
SENATOR CROSBY: Time.
SENATOR KRISTENSEN: ... $20,000. That you.
SENATOR CROSBY: Thank you, Senator Kristensen. On the Kristensen amendment, Senator Brashear. Senator Brashear. Senator Vrtiska.
SENATOR VRTISKA: Thank you. I'll yield my time to Senator Kristensen so he can continue explaining this because I'm getting my eyes in focus now and I can read it.
SENATOR CROSBY: Senator Kristensen.
SENATOR KRISTENSEN: He's a kind gentleman, isn't he? Thank you, Senator Vrtiska. Madam President, members of the Legislature, I do appreciate it, Senator Vrtiska. If we go across, you'll see that that ... the average cost of a new car, they tell me, is about $20,000. Used cars, the average purchase price is about half of that and a little less than $10,000, but so I'm picking one of the more expensive ones. It's $540, and if you add on to that $540, and I'm going to my right now, in year one, you put on that $15 fee. That's $555. And then each year, you'll see, based on the age, it goes down a little bit every year until finally you get out here to the end and in the 12th and 13th year, they're only paying $43. Where before they would have a much larger tax in the first year or two, a dramatically larger tax, and then trials off towards the end. This makes it more uniform, spreads it out and makes it based on the age of the vehicle and not so dependent upon the arbitrary numbers that the property tax administrator today, because what she would do is every year just assign a value and say, well, they're worth about so much. It has no relationship to that car at all. The only time we use value is to start the initial running and set some initial values. So, yes, there is some relationship to the value but only in the first year to get us started and then age takes over. And the reason that this works so much better is that, as you go across the state, there's less reliance on the tax end of it, so we begin to move this system and so if you're in a western county in Senator Elmer's district or whether you're in the eastern part of the state, you're more likely to begin to pay similar amounts of tax rather than having
wide swings from one county to the next one. I also have handed out to you this sheet that has the various Ford products on it and I tried to take those values. You can see that I take and use a .1983 Ford Escort, a 1994 Ford Taurus, and then a 1997 Lincoln Town Car. I took a cheaper car, mid-sized, and then a more expensive vehicle. You'll see under the current system what their tax would have been. For example, and this is an example if they were registered in the city of Omaha, that's where I used the current tax rates. But in the current system, that Ford Escort would pay $7.76 for property tax. Under the amendment we have proposed here, it'd pay no tax but would pay the $5 fee. That same county, if you'd be under the current system, they'd pay $205 of tax today for their 1994 Ford Taurus, but if you come down under this amendment, they'd pay $225. The tax would be $5 more to $10, plus the fee of $15, so their total payment and I ... you know, I don't think you'd want to hide the ball with anybody, whether you called it a fee or a tax may not, to the end payer writing out the check make a difference, but it makes a difference for the way that the system operates. So here it'd be $225 instead of $205, if you had a '95 ... or a '94 Ford Taurus. If you're going to go out...
SENATOR CROSBY: One minute.
SENATOR KRISTENSEN: ... and have the more expensive Town Car, then there is a bigger difference because the tax rate would have been $982 in that first year. What's going to happen is it's going to be $675. As you go along, though, that Town Car is going to spread out more because you're not going to have the dramatic drop in the second and third year. So depending on how long they keep that Town Car, they're going to* pay that $675 . That's ... that proportionately they may, if they keep it a little longer, they're going to probably pay more tax under this system if they keep it. If they trade it frequently, I, can't... I can't not tell you that that's going to be a savings for them. They will have a break under that. But those types of cars are relatively small. If you'll look at what people call the luxury cars, the more expensive ones, they're less than ... they're one percent of the system. So we're not ... you know, maybe ... maybe they make good examples...
SENATOR CROSBY: Time.
SENATOR KRISTENSEN: I ... but they don't have a huge impact in the system.
SENATOR CROSBY: Thank you, Senator Kristensen. Senator Coordsen.
SENATOR COORDSEN: Thank you, Madam President, members of the body. Senator Kristensen, did you need any more time to finish your thought process on that? I can renew my light, if you want to finish your line of thought.
SENATOR KRISTENSEN: Go ahead, Senator. I'm... I'll take over...
SENATOR COORDSEN: Gosh, I didn't have a line of thought to go on. I think Senator Kristensen pretty well explained the reasons for the change. I just wanted to indicate to the body that I am supportive of the changes that are brought about in the Kristensen amendment. We've worked on this for some period of time in Revenue Committee staff. I think it addresses at least some of the problems that were brought about as a result of the wide ranges of valuations that we had in the original committee amendment, and provides a more orderly process and doesn't provide what may ... what was viewed by many people as a low drop-off on valuation that was not reflective of the amount of money that was being spent on the vehicles that had list prices of more than $48,000. So it ... or more than $40,000, so I believe that this amendment is wellcrafted and well thought. out. Bear in mind that this system, because we are changing a system,' does have varying impacts across the state of Nebraska, depending of where the tax situs of the vehicle, where the garage is. One thing that it will do, and I don't think this has been mentioned ... excuse me, is that under our current system, there's a great temptation for many citizens of the state of Nebraska to register their vehicles at some other place other than where they. live that might be in a lower taxing district, simply for the purpose of saving whatever money that might be coming to them from doing that, not maybe... if not illegal, certainly a shady activity, but one that has been practiced fairly broadly, I think, in the state of Nebraska, certainly from people living in the population centers. So I given that the fees and
taxes, primarily the taxes, will be the same without respect to where vehicles are located in the state of Nebraska, that it may, in fact, have different effects that some individuals are protecting ... are projecting that it would have on our larger cities. It doesn't ... there's no windfall for registering any particular county, any particular city, in the state of Nebraska, so you just go ahead and do that wherever it is that you happen to live, and be open and above board and pay the same fee In any corner of the state, anyplace in the state, for an identical vehicle. So with that, I would encourage your careful attention to the further debate on what could be classified as a committee amendment, although it is known as the Kristensen amendment to LB 271. Thank you, Madam President.
SENATOR CROSBY: Thank you, Senator Coordeen. Senator Lynch. Senator Lynch. Senator Wickersham.
SENATOR WICKERSHAM: Thank you, Madam President. I was anxious to see if Senator Lynch might appear someplace in the wings because I think he's always had something to say about these particular kinds of bills and the methodology for taxing motor vehicles. Senator Kristensen, this morning alluded to one issue that I think it might be worthwhile to bring up again this afternoon, and that is the creakiness and the potential for constitutional challenge to our current system of valuing motor vehicles. And notice that I say valuing motor vehicles, not the taxation of motor vehicles because that's simply on an ad valorem basis. But the valuation system that we currently have for motor vehicles may not be defensible on a constitutional basis., It purports to be an ad valorem basis, but if you've ever worked your way through the system, you quickly see that there are substantial defects in the system. The schedules for the valuation of the automobiles are not updated on a frequent enough basis. For example, if you have bought a program car and that was a new car on January 1, for example, of last year, and you bought it on December 31 of last year, you would find out that the vehicle, when you went to the county assessor, had a value as of the January 1 value, probably the manufacturer's value. It's one year old... it's almost a year older. You probably paid a discount of anywhere ... well, I don't know, maybe I need a used car dealer here. Would you pay 30 or 40 percent discount, maybe that much? But when you go to
the county assessor, they will tell you that it's worth the price of a new car. You're astonished, and you have a, substantial tax burden. That is only one example of how our .current valuation system does not work. There are others. I believe that Senator Kristensen mentioned a car that is well-maintained as opposed to one that is not well-maintained. When we're valuing real estate or we're valuing improvements to real estate, at least we will take condition into account. If you have a residence, for example, and it's not been maintained ,for 20 years, it'll be listed in poor condition on the assessor's records, and the valuation will be reduced for that condition. We have no similar system for ,i-otor vehicles. Senator McKenzie brought a bill to the Revenue Committee this year. She indicated that we had a problem with automobiles with salvage titles that we weren't valuing those vehicles appropriately, and we weren't. That bill was incorporated in another proposal. We have had bills brought to the Revenue Committee saying that the way we taxed automobiles wasn't fair for leased vehicles, fleet vehicles, and it wasn't, and we've attempted to change that. All in all, it has gotten terribly creaky and unworkable, that is, the valuation system that we are currently using for motor vehicles. The valuation and taxation system that we're now proposing in the amendment makes as much sense as anything I can think of to replace it. And in addition to the virtue of providing a valuation system that we can live with, it provides a taxation scheme that I think we can also live with, so that it doesn't mean that you're taxed differently if you live in Omaha as opposed to living in Harrison, that your vehicle is treated the same no matter where you are within the state of Nebraska. There is no incentive, as there occasionally would be if we did not pass this proposal, to register your car in a different county...
SENATOR CROSBY: One minute.
SENATOR WICKERSHAM: ...than the one in which you generally live, or if you have another vehicle, maybe some county where it isn't even garaged as opposed to where you actually do use it. All kinds of abuses as well as even some potential for cross-border abuses, this doesn't solve the cross-border abuses but it does potentially solve the cross-county or cross-municipality problems that we have frequently seen in the
past. For example, I know people-who live in the metropolitan Omaha area but have their vehicles licensed in Harrison because we have a lower motor vehicle tax in Harrison due to our ad valorem rates. That isn't really appropriate, and occasionally you see the sheriff go around sniffing around in parking lots, trying to find those kinds of cars and cite them, but it is just a... it's a system that we don't need and I believe it is appropriate that we do away...
SENATOR CROSBY: Time.
SENATOR WICKERSHAM: ... the current valuation system and adopt the one in the committee amendment.
SENATOR CROSBY: Thank you, Senator Wickersham. Before continuing with the debate, Senator Robinson announces that he has guests in the north balcony, 55 fourth grade students from Blair Middle School. (Introduced teachers.) And under the south balcony, Senator Hillman has as her guests, six eighth grade students. (Introduced teacher and parents.) They're from Lake Minatare School. Would all of you under the south balcony and in the north balcony please stand and be welcomed by your Legislature. Thank you for being here today. Continuing on the Kristensen amendment, Senator Vrtiska.
SENATOR VRTISKA: Thank you, Madam President. If we, in fact, want to change... if the idea is that we want to change the tax .system, I think that Senator Kristensen has come with an idea that is certainly acceptable, I would think, to the majority of people. In listening to some of the discussion earlier, the thought came to my mind, they were talking about people, who license. their cars out of Omaha and out of Lincoln, out of metropolitan areas. You know where I live in a small town, there are an awfully lot...and quite a large number of farmers who live in town who, in fact, own property out in the country and so they tax their cars ... they register their car out on the farm because then they can avoid the city tax. And nobody really does anything about it because they do use that pickup probably to check out their crops or haul their hay or whatever but, basically, where they store that vehicle is where it should be taxed but ... or should be registered, but nobody really does anything about it. It's been going on for years. We even had
one man who was putting it in another county because he owns some land up there so he ... registered his vehicle and people. said, why is his ... why does he have a plate from other county? Well, it was very obvious. He owned land up there and he wasn't paying ...he wasn't paying the tax in the village which amounted to about 50 cents or whatever the village tax was. So I think this, in fact, does away with all those kinds of things that we've been dealing with for a long time. And as I said, if we, in fact, think that the time is ripe, and I happen to think it is and we make a change, then I think this... I can look at this as I had some problems with the other original bill but, looking at this, I can't see how anybody could be very objectionable to what we're doing because it's not giving the big break. And Senator Kristensen alluded to the fact that somebody with a really high-priced automobile may get a break if he trades every year, but I think that is very rare. It probably does happen but in the amount that maybe people might think, because people that buy those cars, certainly most of them don't trade every year and I would guess, I think he said probably one percent is all that would amount to and that's not a great deal to worry about. What we're really talking about, in my opinion, is the' people in that middle area who have those used ... who buy those cars that are not brand new are, in fact, getting a break right off the bat that seemed to me to be fair. Based on what I look at what some of the cars are being assessed at now, and particularly some of the areas, they'd actually be getting a break on this plan. So then that brings a question I have for Senator Kristensen.
SENATOR KRISTENSEN: Yes.
SENATOR VRTISKA: Senator Kristensen, is this ... as near as you can tell, is this going to be again pretty much revenue neutral, or is there going to be any loss in revenue for the entities that depend on this?
SENATOR CROSBY: Senator Kristensen.
SENATOR KRISTENSEN: Thank you, Madam President. Senator Vrtiska, the best that I can do right now, we're trying to run more of those numbers, but I project that this will raise in tax about $146 million of tax, and then there'll be about
$15 million of this fee that's going to go over. Right now,, we're probably in the neighborhood, and I'm looking, maybe $153 million. I mean, we're close. The trouble is that we may want it, as we go along, we need to factor in what Senator Hilgert's amendment did this morning. But we're close. We're within the ballpark of being revenue neutral.
SENATOR VRTISKA: Okay
SENATOR KRISTENSEN: And that ... that's our goal. We know we can't get it exact*, and some people are going to want us to be to the penny. That's impractical, but if we could be within a few percentage points, I would consider that revenue neutral.
SENATOR VRTISKA: We 11, 1 understand that, and I have no problem with that. I just want to make sure that we weren't too far off the mark so there wouldn't be some uprising of some of the people in the counties and villages and cities that think that they're being, you know, hurt that much because, again, this takes away from their ability to provide the services that are provided through the highway allocation monies.
SENATOR CROSBY: One minute.
SENATOR KRISTENSEN: Right.
SENATOR VRTISKA: So, you know, if you can... if you have some assurance that that's pretty close. Then the other one, one other question that I have, quickly, and that has to do with the collection fee. Do you know at this point, in fact, whether there's going to be any allowance for the collection fee for the county treasurer or is that taken out of this altogether?
SENATOR KRISTENSEN: No, we keep the collection fee for the tax portion and for the fee portion. It's a one percent collection fee that the county will get to keep.
SENATOR VRTISKA: So again then, the county is not going to have to supplement those funds then that they're normally using for that county's use?
SENATOR KRISTENSEN: That's correct. As you point out, there's
been an ongoing ... we've had a bill every year that I can remember, in Revenue Committee, that's wanting to do away with the one percent collection fee and the schools want a part of it. We've. not changed that policy. We've kept a consistent Policy.
SENATOR VRTISKA: Okay. I appreciate that, and thank you for your time, and that concludes my remarks.
SENATOR CROSBY: Thank you, Senator Vrtiska. Senator Engel.
SENATOR ENGEL: Madam Chairman, members of the body, I just want to rise in support of the Kristensen amendment, and give ... most of these reasons have already been given. I find if you wait long enough, everything's fairly well been said. But living in a...on a border town next to, like Iowa and South Dakota, one thing about this new fee system, it does make it much more competitive as far as our licensing costs, because in our area, you talk about going from different counties to save taxes on your vehicles, when you live on a border like I do, many people go across the state and license their vehicles, like in Iowa or South Dakota. And I have many, many examples of that. I happen to be in the business of insuring vehicles and I've had many young people that come to my office to find out what it costs to insure a new vehicle and then they find out what it costs to license a vehicle, and if they're not homeowners in the town, they say we don't have to live here. And so they move back across the border. So in that respect, I believe this is a very good bill. -I think it will keep more money in the state of Nebraska, and many, many people are also discouraged from buying new cars. Like I say, I insure a lot of Vehicles, and it's not just the rich people who are buying cars, it's the average working person that's buying these cars. And so many of them, they will say, we would buy a new car but when it costs you $1,000-$1,500 just to license the vehicle, it's just a little too steep for the average person. I think if we get this down where it's more equitable, I think we will...they probably will sell more cars and I think, in my case, I might even buy a new one if this goes through. Thank you very much.
SENATOR CROSBY: Thank you, Senator Engel. Senator Elmer.
SENATOR ELMER: Thank you, Senator Crosby, members. I've always been a person who has felt that taxes that are fees that are paid should have some relation to the services returned. We apply this to automobiles. Let's exclude big trucks and those kinds of things that obviously wear and tear more on our roads. But we have cars, vans and pickups. It takes the same amount of road space, it takes the same amount of traffic controls, it takes the same number of stop lights, stop signs, whether you're .driving an old Corvair, and some of you may remember Corvairs, .or a brand new Cadillac Five Start or North Star or whatever it is. It takes the same number of patrolmen, no matter how many, how big, how small, how valuable a car is. The kind of bill I'd like to see here is one that had a flat maybe $25 or $30 fee in tax, something to pay for your license plate and registration, and that's it. Everybody pays the same. The services are the same. I recognize with the system that we have that that's too much of a change. Anything to get away from taxing personal property. Personal property tax is the most unfair tax ever created by a governmental entity. There shouldn't be a personal property tax in my opinion. So therefore, of course, knowing that this isn't going to be able to go near as far as I'd like to, so we can compete with the Kansas and Colorado and down in ... as Senator Engel and I have, we take turns being the anterior and the posterior of the state. I'm not sure which position each of us are in at this point, but being just the opposite situation, there's a lot of people in my district that license their vehicles, pay their taxes, have all their farm equipment and their legal residence in the state of Colorado or Kansas. Yet all of their property that they farm is in Nebraska, purely because of the way we handle personal property tax. We're losing many, many citizens and their votes and their participation in our government because of personal property tax. There has to be something done about this. This is a start, not as much as I'd like, but I'll support and continue to support, always have supported, changing registering vehicles to a fee schedule rather than a taxation schedule. Thank you, Madam President.
PRESIDENT ROBAK PRESIDING
PRESIDENT ROBAK: Thank you, Senator Elmer. Senator Robinson.
SENATOR ROBINSON: Madam President, members of the Legislature, Senator Kristensen, I'm going to ask you a question.
PRESIDENT ROBAK: Senator Kristensen.
SENATOR ROBINSON: I think I know the answer probably but I don't know if you were listening to Senator Elmer. You know, we hear... I guess South Dakota is $25, 1 don't know what Missouri is, and I was... I would have asked Senator Engel but he left. The reason we won't have those low rates is we just ... we would lose the revenue. Is that the...would that be the answer?
SENATOR KRISTENSEN: Well, the answer is that we've always in the past included those items as a part of our property tax base, and so if you already have a high levy county, you have a higher value...or you have a higher tax because you have a higher levy.
SENATOR ROBINSON: Sure.
SENATOR KRISTENSEN: And so we've never made the distinction, and our constitution talks about motor vehicles, so being a property, part of the property tax base.
SENATOR ROBINSON: Yeah, but the reason South Dakota, they just don't take in as much money as we do on a car tax then, is it...
SENATOR KRISTENSEN: Yeah, and they probably...
SENATOR ROBINSON: Yeah.
SENATOR KRISTENSEN: ... they get it from somewhere else. I mean, it's...
SENATOR ROBINSON: From gambling and some other places.
SENATOR KRISTENSEN: That's possible, they...
SENATOR ROBINSON: That's not their...
SENATOR KRISTENSEN: ... they may spend it...
SENATOR ROBINSON: Yeah.
SENATOR KRISTENSEN: ... they may provide less, quite frankly...
SENATOR ROBINSON: Yeah.
SENATOR KRISTENSEN: ... I got to tell you, I like the...I like the roads in Nebraska a whole lot better than I do in South Dakota.
SENATOR ROBINSON: Sure.
KRISTENSEN: They probably offer less services. I mean, it's a matter of what do you want?
SENATOR ROBINSON: Uh-huh. Thank you very much. I stand to support the committee amendments and would encourage all of you to do the same. Thank you.
PRESIDENT ROBAK: Thank you, Senator Robinson. Senator Will.
SENATOR WILL: Thank you, Madam President, members of the body. I'd like to ask Senator Wickersham a couple of questions if he's available.
PRESIDENT ROBAK: Senator Wickersham, will you yield?
SENATOR WICKERSHAM: Yes.
SENATOR WILL: Senator Wickersham,, I was... I only caught a portion of your argument with respect to the possibility that the current method of valuing motor vehicles, not taxing but valuing motor vehicles, might be unconstitutional. Is that correct?
SENATOR WICKERSHAM: Yes.
SENATOR WILL: Is that the argument that you're making? Could you reiterate that for me because I know we ... my impression, at least, is that we have carved out an exemption for motor vehicles in the revenue portion of the constitution similar to that that we've done for personal property in general for ag.
land, things of that type.
SENATOR WICKERSHAM: Yes, I ...
SENATOR WILL: And I was wondering if you'd run that ... run that by me again, please.
SENATOR. WICKERSHAM: Okay. I think, though that the ,constitutional language actually says, if I can paraphrase is, we can set up any method of valuation that we choose. And I see you're nodding your head, BO you must have gotten out your constitution and agree that that's what...
SENATOR WILL: Yes.
SENATOR WICKERSHAM: ... the language that we have.
SENATOR WILL: Yes.
SENATOR WICKERSHAM: That language is there but, Senator Will, I guess my impression is that it creates such substantial disparities between what actual value is and what the method value is that it's really indefensible in some respects, so if you want to suggest that it is somehow defensible, I'd be happy to listen to that. It's been suggested by others that it's indefensible. I think as a matter of equity, it's probably indefensible if for no other reason.
SENATOR WILL: ... and how do you differentiate that, from a legal perspective, from the way that we value agricultural land as opposed to other real property?
SENATOR WICKERSHAM: The rationale for the valuation of ag lands, I think, has to do more with a different valuation that is related to its productive use and is designed to squeeze out the speculative value of the real ... of the land as opposed to its production value.
SENATOR WILL: Although the way we've done that statutorily is simply to land at 80 percent. We've simply said...
SENATOR WICKERSHAM: Yes, and I ... you might be able to make some
arguments, Senator, that that's an arbitrary number that we have set that says you're going to get a 20 percent discount against the speculative value of real estate, but the issue with automobiles is different because we're purporting to value those at full value, in essence, and we're doing it in a way, it just doesn't work.
SENATOR WILL: And I assume the argument then becomes that we've set up the schedule, and the schedule is arbitrary because it takes a vehicle ... two similar vehicles that ... and it values them the same whereas there might not be a reason for valuing one vehicle the same as the other, and basically, this is numbers on a page.
SENATOR WICKERSHAM: That's correct.
SENATOR WILL: And I guess I understand the argument. I don't know that the constitutional question exists. I ... although I understand the argument, I guess I want to get in the record that I think that question probably exists when it comes to the valuation of ag land, and the way that we're doing it statutorily, if not constitutionally, the uniformity clause is something that has been a bone of contention for years. I think it's something that ought to apply. I support this amendment. I may not support the bill, but I certainly support this amendment. I thank you, Senator Wickersham, for responding to my questions. And I would urge the body to adopt this amendment. I think this is an improvement on where the bill is right now. Again, I'm not sure about the bill as a whole. I hate to break up the Revenue Committee party, but I might be opposing this.
PRESIDENT ROBAK: One minute.
SENATOR WILL: Thank you.
PRESIDENT ROBAK: Thank you, Senator Will. Senator Dierks followed by Senators Jones, Chris Peterson and Robinson.
SENATOR DIERKS: Thank you, Madam President. I'd like to ask Senator Kristensen a question, please.
PRESIDENT ROBAK: Senator Kristensen, will you yield?
SENATOR KRISTENSEN: Yes.
SENATOR DIERKS: Senator Kristensen, if I buy a used car that costs, say, $20,000 and yet the price on it on the book is $25,000, what will my taxes be based on?
SENATOR KRISTENSEN: Okay. I was having a little trouble hearing you, but I think what you said is if I buy a used car for how much?
SENATOR DIERKS: $20,000.
SENATOR KRISTENSEN: And how much did it cost when it was new?
SENATOR DIERKS: $25,000.
SENATOR KRISTENSEN: Okay. We would take the...go down the chart here to $25,000 and find the range that that was in. That would be in that range of $24,000-$26,000. And what year car did you have?
SENATOR DIERKS: Let's say it's a current year car but it's used.
SENATOR KRISTENSEN: Okay. You bought a '97 in the year of '97?
SENATOR DIERKS: Yeah.
SENATOR KRISTENSEN: You would pay the full amount of the* first year tax, which would be $420, then plus the $15 fee, for a total of $435.
SENATOR DIERKS: That's based on the price of the car? That...
SENATOR KRISTENSEN: It's based on the manufacturers' suggested retail price.
SENATOR DIERKS: Right. Okay. Suppose I bought a '96 model, a '96 model and now it's '97?
SENATOR KRISTENSEN: Okay. Then you would move over one year on this chart and that would then be $429. Tax plus the fee would be $429.
SENATOR DIERKS: Okay, thank you. And then the other question I have is...
SENATOR KRISTENSEN: If I'm looking at the... it might be $393. I got off one line, I'm sorry, the numbers. It's $393.
SENATOR DIERKS: Yeah, I think it is..
SENATOR KRISTENSEN: I'm sorry.
SENATOR DIERKS:- Or $395 maybe. one ... the other question I have is, are these fees deductible as a tax deductible?
SENATOR KRISTENSEN: That's a good question. That's the reason the ... as you'll see in the green copy and the committee amendment, we only. had about four or five, six brackets. Now that we have all of these additional brackets, we think that answers and makes more clear that they are deductible if you are an itemized filer. We're not talking about deductibility of using them in your business because that would have nothing to do with it because you'd use those vehicles in the production of income and so they're completely deductible. But if you're an itemized filer...in order words, you've got...your real estate taxes you pay on your home, medical expenses, those things, this, we believe,. will be deductible, that portion of it. The fee won't be but the tax will be.
SENATOR DIERKS: Thank you.
PRESIDENT ROBAK: Thank you, Senator Dierks. Senator Jones.
SENATOR JONES: Mr. President and members of the body, I'd like to continue that discussion with Kristensen just a little bit if I could.
PRESIDENT ROBAK: Senator Kristensen.
SENATOR KRISTENSEN: Yes, Senator.
SENATOR JONES: Right now your personal property tax that you pay on your vehicle is a deductible item?
SENATOR KRISTENSEN: Yes.
SENATOR JONES: On your state and federal?
SENATOR KRISTENSEN: Yes.
SENATOR JONES: Now, since we got this tax, well, it's Just deductible if you itemize?
SENATOR KRISTENSEN: No, no. Let's back up. What do you use the vehicle for?
SENATOR JONES: Everything, personal.
SENATOR KRISTENSEN: Do you write it off on your federal income tax?
SENATOR JONES: Not on personal, no.
SENATOR KRISTENSEN: Okay. If you don't, then you can ... if you itemize today, let's use the current system, and you are an itemized filer, you're going to deduct it under today's current system. Okay?
SENATOR JONES: Okay.
SENATOR KRISTENSEN: Now, what we're attempting to do with this amendment is to make it so that that portion of the tax now will be deductible again. Now there was some question, and you might have saw a letter here running around the last time we had General File debate that there was some issue as to deductibility. We think this amendment goes to that deductibility. It fixes that problem.
SENATOR JONES: That is, if you itemize.
SENATOR KRISTENSEN: Yes, it's an itemized filing, right.
SENATOR JONES: Right.
SENATOR KRISTENSEN: But if you use that vehicle for your ranch or your farm, you're going to write that off...
SENATOR JONES: Yeah.
SENATOR KRISTENSEN: and that's going to against your self-employment tax, that's going to go on your Schedule C or your Schedule F, depending on what you file.
SENATOR JONES: Yes, thank you. I'd like to make some other comments. They was talking about if you live close to another state. I've got some interesting situations in Valentine. A lot of the ranchers, that had ranches in South Dakota and came down into Valentine, and they still have their plates and numbers and everything from their ranch. But also there's along the border that a lot of people don't realize, there's a lot of people that live in Nebraska with South Dakota addresses. And when you got a South Dakota address, well, you can go into South Dakota Court House and they don't question you at all. You can go ahead and license your ... register your vehicle up there and something... I don't know if that could be corrected, but I think that's something that I wish we could correct because I think we're losing a lot of tax dollars there. But again, I want to stand in support of Senator Kristensen's amendment. I think it's really a big improvement over the bill, and I don't know for sure about the bill yet, but I think this is a good improvement. Again, thank you.
PRESIDENT ROBAK: Thank you, Senator Jones. Senator Chris Peterson.
SENATOR C. PETERSON: Thank you Madam Lieutenant Governor and members of the body. Senator Kristensen, could I ask you one more question?
PRESIDENT ROBAK: Senator Kristensen.
SENATOR KRISTENSEN: Oh, sure. You can ask more than one.
SENATOR C. PETERSON: Okay. Following up on what Senator Dierks
said that if you had a car that was valued at 25,000 and you purchased it for 20,000, according to this you would still pay the tax on the 25,000 even though you purchased it for less?
SENATOR KRISTENSEN: You would ... you ... no...
SENATOR C. PETERSON: A used car..,
SENATOR KRISTENSEN: It's tax and fee.
SENATOR C. PETERSON: ...maybe from a private...
SENATOR KRISTENSEN: If you bought a new new in that current year, you bought the '97 in '97 and its manufacturers' suggested retail price is... if you bought it for $20,000, yes, you're going to pay that tax and fee for that year. That's correct.
SENATOR C. PETERSON: Okay. If you bought it from a private party, what do you use for the ... and there's a valuation on it but the valuation is significantly higher than what you paid for that car, where does that fall under the fee that you pay, or the tax that you pay?
SENATOR KRISTENSEN: That's a good question. You always start with the manufacturers' suggested retail price because that's what the ... that's what the manufacturer puts out And so that is...that's going to be uniform so it doesn't matter if you buy it from a car dealer or somebody privately. To get started on this system, we've got to start you somewhere...
SENATOR C. PETERSON: Uh-huh.
SENATOR KRISTENSEN: ...so we use the manufacturers' suggested retail price.
SENATOR C. PETERSON: And you would have that for like, say, a three year old car or a four year old car?
SENATOR KRISTENSEN: We've got that for many years. I'm looking for what end we have. I was under the impression we've got those for 20 or 30 years, I think.
SENATOR C. PETERSON: Okay. I had a gentleman call me from my county that had purchased a car in that situation and when he went in, he had to pay the taxes on the full valuation, even though he paid less.
SENATOR KRISTENSEN: And that...
SENATOR C. PETERSON: That would still happen under this, but you probably wouldn't have that great...
SENATOR KRISTENSEN: Well, it's much less. That's the Senator Cudaback example.
SENATOR C. PETERSON: Uh-huh.
SENATOR KRISTENSEN: Now, Senator Cudaback's fairly thrifty and probably has never paid what a car is worth, but ... that...but that's really... I mean, that's the unfairness of the-existing system and we're trying to lessen that. But that's an excellent example of how the current system is a mess.
SENATOR C. PETERSON: Okay. Well, I just rise in support of the Kristensen amendment. I think the spread that they have offered certainly gives a qualify and divides it more evenly across the state, and I hope that the body will approve the amendment. Thank you.
PRESIDENT ROBAK: Thank you,. Senator Peterson. Senator. Robinson. There's no need, Senator. There are no further lights. Senator Kristensen, to Close on the amendment.
SENATOR KRISTENSEN: Thank you, Madam President and members of the Legislature. I do appreciate the questions. There are ... there are things that many of the speakers brought out that I had not thought of. Well, I had thought of them, but I just wasn't able to put them all out in my thoughts, so I appreciate people bringing those out, particular things like tax situs where they're registered in one place or they do it for advantages. This will take away all those sorts of problems. Again, the committee amendment is refined by this amendment, puts in more brackets. That's done to make this more of a value-based and, thus, more deductible for itemized deductions.
It's done to lower the fee and to give us, I think, a more equitable way of collecting fees for motor vehicles.. And I would urge the adoption of this amendment and then urge the adoption of the committee amendments.
PRESIDENT ROBAK: Thank you, Senator Kristensen. The question before the body is the adoption of the Kristensen amendment to LB ... to the committee amendments to LB 271. All those in favor vote aye, all those opposed vote nay. Please record.
CLERK: 26 ayes, 0 nays, Madam President.
PRESIDENT ROBAK: The Kristensen amendment to the committee amendments is adopted.
CLERK: I have nothing further of the committee amendments, Madam President.
PRESIDENT ROBAK: Is there any further discussion, on the committee amendments? Seeing none, Senator Kristensen, to close on the committee amendments.
SENATOR KRISTENSEN: Thank you, Madam President and members of the Legislature. Although they put it on the board as a Kristensen amendment, it was signed by almost all of the Revenue Committee members, so it really was just a rewrite of the committee amendment. It's the ... now the bill is what you just adopted, and I'd urge the adoption of the committee amendments. Thank you.
PRESIDENT ROBAK: Thank you, Senator Kristensen. The question before the body is the adoption of the Kristensen amendments to LB ... excuse me, the committee amendments to LB 271. All -those in favor vote aye, all those opposed vote nay. Please record.
CLERK: 25 ayes, 0 nays on adoption of the committee amendments.
PRESIDENT ROBAK: The committee amendments are adopted. Is there any further discussion on the bill? Seeing none, Senator Kristensen, to close.
SENATOR KRISTENSEN: Madam President, I think we've had a very
thorough discussion, at least of the concepts and some of the specifics that are in the bill. We're going to try to work and crunch some more numbers between now and Select File so you can see some more of this. Again, the Revenue Committee staff has been extremely helpful in providing this for us and they'd be very glad to work with you. And I would urge the advancement.
PRESIDENT ROBAK: Thank you, Senator Kristensen. The excuse me, Senator.
SENATOR KRISTENSEN: Madam President, could I just have a moment, please.
PRESIDENT ROBAK: Certainly. Senator Kristensen, you are completed with the closing? The question before the body is the advancement of LB 271. All those in favor vote aye, all those opposed vote nay. Please record.
CLERK: 25 ayes, 7 nays, Madam President, on the advancement of LB 271.
PRESIDENT ROBAK: LB 271 advances. LB 271A.
CLERK: (LB) 271A by Senator Coordsen. (Read title.)
PRESIDENT ROBAK: The Chair recognizes Senator Kristensen to open on the bill.
SENATOR KRISTENSEN: I'm sorry, Madam President. This is the A bill that would go and help implement this, LB 271. At this point in time, I'd urge the advancement to E & R Initial the A bill.
PRESIDENT ROBAK: Thank you, Senator Kristensen. Senator Chambers.
SENATOR CHAMBERS: Madam President, members of the Legislature, I didn't get up here in time to work on the bill itself, but I'm going to have some amendments when we get to Select File. I intended to battle the bill extensively on General File, and it's nobody is fault but my own that I had not gotten here, so I. want that clear. There was enough time, even as quickly as the