Transcript prepared by the Clerk of the Legislature

Transcriber's Office

Committee on Revenue

February 7, 1997


Page 2


LB 493 401 410


SENATOR WARNER:  Thank you, Senator Coordsen.  Jerome Warner, 25th Legislative District, and just briefly touch, at least, on the two bills.  LB 401 was introduced by the Governor to put into place a permanent reduction in the collection of income tax.  According to the fiscal note that has been submitted to us, it would result in an approximate reduction, I believe, of $63 million of receipts and allow $63 million then to ...  or $64 million, actually, to remain in the taxpayers' pocket as opposed to government's pocket.  The proposal here is consistent, I think, with what has been occurring through a number of states.  As economic conditions have improved, why, we have seen other states making a reduction generally in their income tax rates.  I'm of the opinion that reduction of income tax rates does have the impact of probably greater than what most of us have given it credit for, of attracting additional job opportunities, additional economic development, perhaps even more than some of the gimmicks of tax incentives that we tend to rely on around the country.  But I've kind of come to a personal conclusion that a reduction in some of these income tax rates in particular, and even in, particularly at higher rates or higher brackets, which is politically contradictory to what usually is the thought, but I am becoming convinced that that is more and more, as we go along, as being an effective way to attract expansion in economic development within the state.  The second bill I introduced, which is, of my own, LB 410, is also a reduction in income tax rate; however, it's only for a one-year duration.  It's approximately $30 million of reduction as introduced.  And the reason for introducing it on the basis that ...  that I did was my concern that, with increased


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receipts, that there'd be a great tendency to spend those additional funds which, I believe, would be inappropriate, and that at least for a one-year period, there ought to be an income tax reduction.  And I was anticipating, with the entire property tax issue that we've been addressing and restructuring of government, the likelihood of government...  state government taking over some projects, but not till 1998, that a reduction in the income tax on a permanent level, while being more desirable, might be useful to delay in order to review in a year whether those same funds could be used more effectively in this whole process of trying to restructure state and local government, particularly with the state taking over some activities but, at that, we clearly ...  the objective of both of these bills is to reduce the income tax, one on a permanent basis.  The one I propose is not a permanent basis, but the concept is that the citizens of the state are better off with retaining those funds rather than the state collecting them, at a time when there is not actually any dire need for the state to retain them.  With that, I'd be glad to respond to questions, Mr. Chairman.


SENATOR COORDSEN:  Questions of Senator Warner?  Seeing none, thank you, sir.  Now...


SENATOR WARNER:  With that, we will ask Governor Nelson to please follow me.


SENATOR COORDSEN:  Thank you.  Governor Nelson, to speak to LB 493 or either of the other two.


GOVERNOR NELSON:  Senator Warner, members of the Revenue Committee, my name is Ben Nelson.  I reside at 1425 H Street here in Lincoln, the Capitol City.  First, I want to thank you for this opportunity to appear before you today in support of LB 401, the economic growth income tax reduction, and LB 493, the resident homeowners property tax credit.  My proposed state budget for the biennium takes care of the state's needs and is based on my budget philosophy of spending only what we must to take care of state needs.  We must also save what we can and I'm pleased that we've been able to rebuild our state's Cash Reserve Fund which just a year ago was depleted.  After we have funded the operation of state government and we've put funds in reserve, I believe that we should return what's left to Nebraskans.


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February 7, 1997

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Because of our strong economy, we have an excellent opportunity this session to do just that.  Nebraska is growing in manufacturing, exports, employment, and population statewide.  Projections show that we'll have a surplus of more than $200 million over the 1997-99 biennium.  Many want to use that money on new spending but as I said in my State of the State Address last month, that money should be off the table.  I believe it's our responsible to give that money back to taxpayers, to cut back on taxes and give back the surplus.  My cutback, giveback plan includes two initiatives.  The first initiative is LB 493, a property tax credit for or every resident homeowner in Nebraska.  It's clear that property tax relief remains a major priority for Nebraskans.  As you know, property taxes are based on local spending and, as Governor, I cannot directly control the amount of those taxes.  And as senators, you know that you cannot directly control the amount of those taxes.  However, the Executive and Legislative branches can work together to provide some property tax relief.  We proved that last year when you passed and I signed into law legislation designed to restrict and, in many cases, reduce local government spending.  My property tax credit of $160 per homeowner per year is another step in that right direction.  The money would not be funneled through state aid, but would be 'direct relief., About 350,000 Nebraska households would be eligible for the credit which they would claim when they filed their state tax returns beginning next spring.  Whether we're talking about the elderly couple in Dawes County who don't quite qualify for the homestead exemption or the Kearney County farmer or the Cedar County teacher or the Sarpy County businessperson, this tax credit provides real meaningful relief to those paying property taxes on their homes.  Providing this as a credit is the easiest and simplest way to provide immediate and direct tax relief.  We can give the average homeowner relief of about ...  give the average homeowner relief of 12 percent of his or her property tax bill without creating another bureaucracy.  My second initiative will sound familiar to you.  For the third year in a row, I'm proposing an income tax cut for Nebraskans that would take effect this year.  LB 401 calls for an across-the-board income tax cut of 5.5 percent for the average Nebraskan.  This averages about $55...$65 annually per filer.  Nebraska taxpayers have made a huge investment in our infrastructure, our educational system and our economy and it's about time that they received a


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prosperity dividend on that investment.  Together, the property tax credit and the income tax reduction allow us to cut back and give back $106 million to Nebraska taxpayers.  That's $225 in tax relief to the average Nebraska homeowner taxpayer per year.  Continued spending restraint and positive economic performance will sustain these tax cuts and provide the true long-lasting tax relief that Nebraskans want and need.  There may be additional efforts and proposals to provide property tax relief in conjunction with the LB 1114 lids, but my property tax credit and income tax cut focuses on the economic dividend that's available now, a dividend that should be returned to taxpayers instead of going for new spending.  Nebraskans want to see local governments cut back.  They want to see real cooperative efforts to meet the levy limits of LB 1114 before there's any talk of replacement revenue.  We're not the only state in a position to cut taxes.  In some states, all surplus revenue over a certain percentage must, by law, be returned to taxpayers.  I It's essential that Nebraska remain competitive with our neighboring states, and I agree with Senator Warner that having competitive tax rates is certainly an important way of doing that, and that it's not only competitive with the neighboring states, but the rest of the country as well.  We can have quality education, quality services and tax relief.  These tax cuts are the key to our economic development efforts and to the future of our state.  Again, I'd like to thank you for the opportunity to address you, and I'd be more than happy to take any questions 'that you might have.


SENATOR COORDSEN:  Are there questions of Governor Nelson?


GOVERNOR NELSON:  And I do have some charts in case it becomes important to provide a little bit more explanation.


SENATOR COORDSEN:  I see none.  Thank you, sir.


GOVERNOR NELSON:  Thank you very much.  I appreciate it.


SENATOR COORDSEN:  Now, for the purposes of proponents or opponents' testimony on these three bills, Senator Warner has indicated to me that it would be proper for those who wish to provide proponent testimony to do so on one, two or three of the bills at the same time, simply indicate that in your testimony, and that will be recorded by the


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transcribers.  So we will take proponents' testimony on any one of the three bills or all of the three bills.  And the same thing will follow if there is anyone who might be in opposition.  Mr. Balka, good to see you, sir.


BERRI BALKA:  Good to see you, Senator.  I'm Berri Balka, Tax Commissioner for the State of Nebraska, and as Tax Commissioner, I have a unique view of the state's economy and the growth of the economy, being able to witness firsthand the rewards of a strong economy, as the tax revenues continue to grow due to this economy's growth and expansion of our job base.  We are fortunate in this state to have created jobs, people have moved into Nebraska and tax revenue has grown swiftly over the past few years.  In fact, in this recent six-month period of this fiscal year, we are already over the original projections by $38 million.  It is expected that this growth of tax flow should continue into our treasury.  We, as the administration, project there'll be well in excess of $200 million in the upcoming biennium, and much of that growth will come from the revenue side.  Unemployment is low and the Nebraska economy is expanding, and it is reasonable to project that these things will continue, and there are no economic storm clouds on the horizon at this point.  The Governor's tax-cutting initiative proposal would share the benefits of that strong economy with the taxpayers in a fair and balanced approach.  The Governor has emphasized the need to cut taxes and to give back to Nebraskans a portion of that revenue, and I agree with that decision.  I would like to explain very briefly how the proposed changes would be implemented.  LB 401, the economic growth tax cut, would reduce individual income taxes and return $50 million to Nebraskans, an average return of about $65 or about a 5.5 percent reduction in the rates.  This cut would be effective January 1, 1997 and the first time that the taxpayers would actually see that money coming back into their hands would be when they file their 1997 returns and that would be an increased refund.  Another provision and specifically designed to make sure that school districts do not suffer would be to increase the percentage that is going back to the school districts.  Right now it is 20 percent of the income tax dollars go back to the district that those monies are raised from as part of the school aid.  That percentage would be increased to 21.02 percent as a hold harmless measure.  The second proposal, LB 493, the resident homeowners property


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tax credit, provides a $160 refundable credit to Nebraskans who both own and live in their own home.  The homeowners would be able to claim that credit on their income tax return and the credit would cost the state approximately $56 million in the first year and about $58 million in the second year.  Every homeowner now eligible for a direct...would be directly receiving a property tax credit, and this would enable our taxpayers to pay for their property taxes as they become due.  The persons who are now receiving a homestead exemption would have to choose between the credit and the exemption.  They could not use both.  The average Nebraska homeowner pays approximately $1,300 in property taxes and, while this $160 is helpful, an additional benefit is that the credit assists the homeowner but still allows them to deduct the full $1,300 on their federal income tax return.  If enacted, the credit would be effective January 1 of this year, and the homeowners would be able to deduct the $160 refundable credit on their 1997 Nebraska income tax return.  If a particular homeowner did not have a tax liability, they would be able to file and receive that credit on a simplified form very similar to the one that used to be used for the food tax credit when a sales tax applied to food in the State of Nebraska.  In conclusion, LB 401 and LB 493 give Nebraskans approximately $106 million in direct tax relief this year, and in time of economic prosperity and budget surpluses, this proposal is fair and balanced and the benefits will flow directly to the taxpayers.  If there are any questions, Senator Coordsen, I would attempt to answer them.


SENATOR COORDSEN:  Yes, Senator Kristensen has a question.


SENATOR KRISTENSEN:  Berri, you were talking about the hold harmless for the school districts.




SENATOR KRISTENSEN:  We passed LB 1050 last year where the amount of the income tax rebate was capped at a prior level.  How does this ...  does this now take that cap out and adjust upwards to 21 percent?


BERRI BALKA:  What the intent is here is that the overall base would be going down, the amount of dollars in the whole base because of reduction in rate, but the rate would be


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that faction or that factor would be changed so that the school districts would not Buffer a decrease in the dollars flowing to them.  It would equalize it.  If they were getting a $1.00, they would not get 90 cents on the dollar at this point.


SENATOR KRISTENSEN:  Well, my question is, we take the money that comes from the income tax rebate.  Some of that money is put over into the Equalization Fund, the rest of it is rebated right back directly to the school districts.


BERRI BALKA:  On the rebate side.


SENATOR KRISTENSEN:  That's been capped.  Okay?  That's somewhat now less...


SENATOR HARTNETT:  $102 million.


SENATOR KRISTENSEN:  Okay.  But it's a set figure of $32 million.


SENATOR HARTNETT:  $102 million.


SENATOR KRISTENSEN:  Excuse me.  What I'm after is the concept, and numbers aren't here.  You're going to raise the entire...  I mean, I'm asking mechanically, I'm not asking impulsively.  Mechanically, are you undoing the cap that we put in on LB 1050?


BERRI BALKA:  The intent here is to ensure that the schools would not get less money because someone was paying only .95 percent in their school district rather than the 100 percent as they were before this bill went into effect.


SENATOR KRISTENSEN:  Do you have a spot in the bill where it describes that because that's a very crucial point here of, if you're going to undo the LB, 1050...  it's okay, keep going, Berri.  I'll find it.


BERRI BALKA:  Well, we can find it.


SENATOR KRISTENSEN:  The other ...  and while you're hunting for it, the other question I have is what impact do you foresee that the loss of federal subsidies in agriculture will have on the Nebraska economy.  Will that have any


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February 7, 1997

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impact at all?


BERRI BALKA:  Of the impact of more money going into the economy?


SENATOR KRISTENSEN:  Less money coming in from the federal government in terms of agricultural payments.


BERRI BALKA:  That will certainly have some impact on the economy, yes.


SENATOR KRISTENSEN:  Can you quantify?


BERRI BALKA:  I couldn't at this point, Senator.  We can attempt to find that answer but, no, I could not.


SENATOR KRISTENSEN:  But we probably don't know.




SENATOR KRISTENSEN:  Agriculture is the largest economic sector in the state.


BERRI BALKA:  It is a very large and important sector of our economy.


SENATOR KRISTENSEN:  And if there is going to be a major shift in Congress and a reduction in federal subsidies, wouldn't it follow that in our largest economy that there's a huge uncertainly there?  Wouldn't that be true?


BERRI BALKA:  There would certainly be uncertainty there, Senator.


SENATOR KRISTENSEN:  And so when we talk about a number of millions of dollars that may be sustainable, how can you, with any certainly when we don't know, say that's true?


BERRI BALKA:  To the degree if we're going to rely upon past statistics and the projections into the future, I think you will find, at least as the ...  the numbers show here on the charts behind us that the numbers into the future are projected on a much lower rate than they are already the past four or five years.  We're approximately six percent.  I believe the numbers going forward are projected at


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slightly over four, so it already is taking into account some of the things that you're talking about here, the reduction in the growth rate.


SENATOR KRISTENSEN:  Well, what abut the reduction in the amount of, for example, block grants, less money that the state's going to receive.  We've had figures that have shown us that we're going to receive millions of dollars less from the federal government in return for our freedom to handle our own programs, which the Governor needs to be applauded and congratulated for pushing it, the ideas of devolving federalism and trying to return some flexibility back to the states, but with that comes the responsibility of the states.  What factor do you have built into your projections in your growth rates that we're going to have to take over some of these programs and the loss of money?  Do you have a figure on how much that is?


BERRI BALKA:  I don't believe it is broken down specifically into figures of that nature.  We're looking at taking what has been a historical past, projecting from this point at a lower rate, but not giving specific numbers to which you're talking about, Senator.


SENATOR KRISTENSEN:  Well, when you say a lower rate, how much...given your lower rate, what do the numbers show?


BERRI BALKA:  Well, as I've said...okay, the past four or five years, we're talking growth rates in somewhere in the average of about 6.5 percent.  We're talking about going forward at approximately somewhere around 4 to 4.2 percent growth on into the next bienniums.


SENATOR KRISTENSEN:  In terms of dollars, how many less dollars is that?


BERRI BALKA:  That I couldn't tell you exactly, Senator.


SENATOR COORDSEN:  Senator Warner.


BERRI BALKA:  One additional.  The answer to your first question is on page 4 of the bill, at lines 10-13.




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BERRI BALKA:  It does not affect the overall cap rate is my understanding, from what I was being given to say.


SENATOR KRISTENSEN:  If it doesn't affect the cap rate, then is this just a separate fund then?


BERRI BALKA:  To make sure that, if you were going to pay out 20 percent of the dollars, and that would be $10,000, it's saying you will still pay the same $10,000 to that particular district, that it will not go down because of this bill, the amount that would go to any one specific district because of the amount that's flowing to it.


SENATOR KRISTENSEN:  I'll read while you answer other questions..  Thank you.


SENATOR COORDSEN:  Senator Warner has a question.


SENATOR WARNER:  On LB 493, the definition of those who are eligible is to own and occupy, and I assume ownership would only be...would only qualify if the residence was in the individual's name.


BERRI BALKA:  That is correct, Senator.


SENATOR WARNER:  Now, I don't know how wide spread it is, I've talked to a few ...  not a few, a couple, of accountants or attorneys outstate and to try to get a feel for how many in agriculture probably have put their holdings, because of estate reasons or a variety of reasons, a subchapter S.  it may be one of those limited liability-type partnerships, companies, a whole variety of things, and at least it's my impression that there are substantial numbers of agricultural residential property that in every respect is an individual's home, but for legal advice, have been incorporated into some other form of ownership but, in fact, they would not qualify under this, I take it.


BERRI BALKA:  I believe that is correct, Senator.  They would not qualify as that stands, unless there was some change to be made.


SENATOR WARNER:  By the same token then, if there was a change, I don't know how...  let me ask.  Do you know if anybody looked into the possibility of making that ownership


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different or a different definition?


BERRI BALKA:  No, I do not know, Senator, if that was considered in that fashion.  I do not believe it was considered in that fashion.


SENATOR WARNER:  Okay.  Thank you.


SENATOR COORDSEN:  Senator Hartnett.


SENATOR HARTNETT:  Mr. Balka, you said that it's not...  it's hold harmless as far as the school.  The fiscal note we get, or I have in front of me, shows it reduces the total amount to.  school aid $9.6 million in 97-98 and $7.9 million in ...  you know, that's the information that's provided to us, that'll have an impact on schools which I have some, you know, concerns with.


BERRI BALKA:  It was my understanding that the factoring, by putting it back in, would take care of that situation, Senator.


SENATOR HARTNETT:  Yeah, I saw where it was raised, the factor, so...


BERRI BALKA:  That was my understanding where the purpose was to take care of that consideration.


SENATOR HARTNETT:  Well, we probably need another...




SENATOR HARTNETT:  Have you considered ...  giving it to people that rent, has that been consulted in the administration...


BERRI BALKA:  It does impact the overall numbers.  I believe, in looking at the rental units, there are approximately 200,000 additional households that would have to be considered, Senator, so that would either increase the total cost to the package, or the cost of the credit ...  or the amount of the credit would have to be reduced in that fashion.


SENATOR HARTNETT:  But in the bill right now, it's...


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BERRI BALKA:  No, it does not cover it in the bill as it's drawn.




SENATOR COORDSEN:  Senator Kristensen.


SENATOR KRISTENSEN:  Berri, I had a chance to go back and read that.  You were talking about hold harmless.  How does ...  how do you hold them harmless in this measure?  All you do is increase the factor rate.  What language is there that's going to guarantee that they're held harmless because you just put more money into the fund.


BERRI BALKA:  Well, there is no absolute guarantee from that standpoint.  The theory was to, if you adjust the tax rate downward, to put this additional factor money to bring the dollar flow back to them in a very similar amount.  Now, it may not go dollar-fordollar in a particular district, but the intent is to put the dollars back to the districts.


SENATOR KRISTENSEN:  So it wouldn't be accurate to call it a hold harmless?


BERRI BALKA:  Not if you're talking about a dollar-for-dollar hold harmless, no.


DAVE NEWELL:  Hold harmless, is the fund.


BERRI BALKA:  The fund.


SENATOR KRISTENSEN:  The total amount of dollars is going to be increased.


BERRI BALKA:  Yes, that's correct.


SENATOR KRISTENSEN:  But you're not ...  you're not holding those districts harmless.


BERRI BALKA:  On a particular district-by-district basis, no, it probably would not, Senator.




SENATOR COORDSEN:  Other questions?  Berri, I would have


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one.  You mentioned that the taxpayer, and this is in LB 401 on the tax rate change...




SENATOR COORDSEN:  ...  would have the opportunity to see that show up in '97, in the return for the '97 year.


BERRI BALKA:  That's correct.


SENATOR COORDSEN:  Have you made plans to adjust the withholding or are we going to ...  would we continue to withhold the current rate until December 31 of this year or how is that going to work?


BERRI BALKA:  Okay.  Well, Senator if you were to vote the.  bill out of Committee, and we could pass it with an emergency clause, perhaps we could make the adjustment in this year.  Usually it takes approximately six months after the time that the bill is actually passed into law to be able to do that.  So we would anticipate if this were passed by this session, of adjusting the rates through the procedures, probably January 1, 1998.  So the current withholding tables and withholding amounts would stay in place; however, individuals could adjust their withholding individually and take that into account in advance of that time.


SENATOR COORDSEN:  Or the other side would be a refund.


BERRI BALKA:  Well, the refunds will be larger if the total liability would be down by, say, 5.5 percent.


SENATOR COORDSEN:  Any other questions?  Seeing none, thank you, sir.  Next proponent, please.


BERRI BALKA:  Thank you.


SENATOR COORDSEN:  How many are there who wish to testify in support of these three measures?  Two, four, six, eight, ten, 12, 14, 20, 30, 40, 50.  For the purposes of the attention level of the members of the Committee, if it is possible for you to not be unduly repetitive, that action on your part, I'm sure, would be appreciated in a fairly significant amount by certainly our younger colleagues here


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who have not the patience.  Mrs.  Moul, please.


MAXINE MOUL:  Chairman Warner and Vice Chairman Coordsen, members of the Revenue Committee.  I'm Maxine Moul, Director of the Nebraska Department of Economic Development.  I am testifying in support of both LBs 401 and 493.  My first remarks address LB 401.  As Governor Nelson has said, for the third year in a row, he has proposed rewarding Nebraskans for the major economic gains made in the state in the 1990s through a personal income tax cut, appropriately called an economic growth income tax reduction.  This bill recognizes and adjusts for the greatly expanded income tax base that has resulted from the positive population, employment and income trends that have occurred in recent years in Nebraska.  Nebraska's population grew by over 73,000 people, or 4.7 percent from 1990 to 1996, according to the U.S.  Bureau of the Census, a healthy increase resulting from both net immigration, more people moving into the state than moving out, as well as natural increases, more births than deaths.  But more impressive than population gains have been job increases.  Total nonfarm employment in Nebraska, according to figures from the Nebraska Department of Labor, grew by nearly 100,000 jobs from 1990 to 1996.  Much of that increase is due to a higher percent of our adult population working than earlier in the decade.  Women in particular have joined the state's work force in record high numbers, and by most any relevant measure, including the unemployment rate, labor force participation rate and employment population ratio, we are now probably coming closer to having a fully employed working age population than any other state in the nation.  In such circumstances, where demand for workers is increasingly exceeding supply, wages and salaries also rise at a faster rate.  Average hourly earnings of manufacturing production workers, for example, have, according to the data from the Department of Labor in Nebraska, increased faster since 1990 than in the overall U.S.  A state economy where jobs and incomes are expanding at a much faster rate than the population is obviously a good setting for lower income taxes.  At no other time in the history of Nebraska's state income tax has the real or Inflation-adjusted tax base grown more, so there is considerable logic in lowering income tax rates now.  It is, in a sense, a way for state government to distribute the surpluses and tax revenues already earned as a result of Nebraska's currently healthy economy.  Asthe


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Governor said, in his State of the State Address, the reduction in taxes recognizes the investments Nebraska taxpayers have made to our economy, and gives them a return on that investment.  We also think the tax cut contained in this bill can stimulate even more savings and investment in Nebraska which will, in turn, help extend the long run of employment and income gains that we have enjoyed in the 1990s.  According to the Nebraska Tax Research Council's 1996 publication on state tax comparisons, Nebraska ranks 25th among all states in the per capita burden of state individual income taxes, calculated by dividing the state's total individual income tax revenues by its total population.  However, two of Nebraska's neighbors, South Dakota and Wyoming, have no state individual income taxes, and two more neighbors, Kansas and Missouri, have per capita state individual tax burdens that are comparable to Nebraska's.  Such comparisons are increasingly made by businesses and individuals when assessing the economic climate or quality of life of one state versus another.  In other words, the tax cut in LB 493 would certainly contribute to enhancing the image of Nebraska for economic development.  It would send a positive message to businessowners as well as their employees, reinforcing the view that Nebraska is a good place to live and work.  I will now provide testimony in support of LB 493.  1 believe I misstated what I said in the previous testimony, but...


SENATOR COORDSEN:  Fine.  It will be recorded forever that you made a mistake.


MAXINE MOUL:  Okay, thanks.  Nebraskans have a relatively high incidence of homeownership, with 68 percent of our households living in houses they own, compared to a national percentage of 64.  But owning a home is an increasingly expensive proposition in this state.  For many years, the growth and average earnings in Nebraska outpaced increases in housing prices.  However, that is no longer the case.  In the last couple of years, the cost of constructing a house has been rising faster than wages, and the combined burden of mortgage payments, homeowners insurance, utility costs and property tax is consuming a rising share of the household budget.  Consequently, Governor Nelson is calling for adoption of a resident homeowners property tax credit in this bill.  It is an effort to provide some relief to a growing problem.  In his State of the State Address, the


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Governor said that the refundable annual income tax credit of $160 in this bill, combined with the income tax cut in LB 401, would provide much deserved tax relief to Nebraska's taxpayers.  The property tax savings would be most welcome in our ongoing efforts forts to try to find ways to make -housing more affordable for Nebraskans.  A house is generally considered affordable if the necessary down payment, the monthly mortgage payment plus utilities costs, are less than 30 percent of household income after taxes.  But a- growing number of Nebraska households are paying more than this 30 percent for housing-related costs.  It is, thus, not surprising that Nebraskans are increasingly asking state government to provide property tax relief and other solutions to this housing expense problem.  In the Nebraska Annual Social Indicators Survey, conducted last fall by the Bureau of Sociological Research at the University of Nebraska-Lincoln, answers were given by Nebraskans to questions that revealed the magnitude of the housing affordability problem.  The survey results, obtained by telephoning 1,800 adult Nebraskans around the state, indicate that less than half of the state residents now believe that the supply of affordable housing is sufficient in their communities.  And of the persons who think the .local supply of affordable housing is deficient, over 60 percent also believe that it is a problem important enough to hurt populations and economic growth in their communities.  We have unquestionably had significant population and employment growth in Nebraska in the 1990s.  But to maintain this momentum, we need to build and maintain a high quality and affordable infrastructure, of which housing is one of the most important components.  A high incidence of home ownership strengthens, we think, the ties and involvement that Nebraskans have with their communities.  So the income tax credit in LB 493 for homeownership is .logically a part of the Governor's proposed comprehensive package to stimulate more economic and community development in the state.  I do have copies of my testimony for the members.


SENATOR COORDSEN:  Page, please.


MAXINE MOUL:  And I would be most happy to answer your questions.


SENATOR COORDSEN:  Questions of Mrs.  Moul?  I see none.  I


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have one, and I am not sure that it's on point on the bill, but it references a comment you made in comparison ...  comparing Nebraska to some of our surrounding states, and for the purpose, I believe you mentioned Kansas and Iowa have about the same burden on, I would assume to be a per capita basis.  Now, if it is true, as Dr.  Roy Frederick has indicated that Nebraska imposes the fourth highest tax in the nation on agricultural real estate,.  we have a total property tax burden that places, depending on who you're talking of, on all property of 13th, 14th, which would indicate that, since agricultural property is about 40 percent of what it's ...  the valuation base is, that centrally-assessed commercial, industrial and residential are somewhere below that in order to average that.  Wouldn't it indicate to you that if our total tax burden on a per capita or a per thousand dollars of personal income, however you want to measure it, is about the same, that given the high dollar attachment to agricultural property in this mix of taxes that are levied, that we are, in fact, much lower in income tax, sales tax, residential and commercial, industrial centrally-assessed taxes when compared to Iowa or Kansas?  We have kind of the same mix of taxes.  South Dakota has a different mix.  Wyoming has a different mix.  If we were to follow a statistical trail, wouldn't that be an indicator that we are, in fact, already lower than the surrounding states, in collections of...and I've seen the other statistics that break those things out.


MAXINE MOUL:  The statistics I have available to me here are in terms of income tax collections per capita.




MAXINE MOUL:  And it does show that Colorado for...


SENATOR COORDSEN:  I misunderstood that.  I thought you were talking about total tax burden, and there are those...


MAXINE MOUL:  Let me make sure that I quoted correctly.


SENATOR COORDSEN:  ...  I would withdraw my question because I was under -the understanding ...  under the impression you were speaking to total tax burden.  Okay.  Thank you.


MAXINE MOUL:  Yeah.  What I'm citing now is state income tax


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SENATOR COORDSEN:  Seeing no other quest ions, thank you.


DENNIS LAUVER:  Good afternoon.  My name is Dennis Lauver.  I'm the President of the South Sioux City Area Chamber of Commerce, and I'm also representing the Nebraska Economic Developers Association, which is a group of about 250 professional economic developers from across the state of Nebraska.  I'm pleased to be here today in support of LB 493 and LB 401.  1 want to share with you three real quick observations, as relates to the bills that are before you, and then share what I think are some real compelling reasons, and I have a unique perspective from anybody else in the room as I approach this issue.  First of all, I think I'm fairly comfortable in saying I'm the only individual in the room.  that lives within two miles of two different states, and one of which has no income tax.  And I can walk out on the back deck of my house and I can see into South Dakota, I can see into Iowa.  I am impacted on a daily basis with how the public policy decisions that you make here affect my job, because everything is multiplied in light of being so close to two other business climates, two other economic development climates.  Therefore, my second observation would be we are in a constant struggle to compete, not only as a state, but certainly as a community and a county in South Sioux City and Dakota County.  It's a constant struggle enough to attract new jobs, to help retain the jobs that are already in our community.  IBP announced last year they're moving corporate headquarters to South Dakota, done in part because of their ability to, in effect, give everybody a pay raise without having to give anybody a pay raise because people would be able to keep more money of what they had earned.  We've got a corporation that is headquartered in South Sioux City that has offices and plants in nine different nations, and operations in four different states, and they're going to consolidate those plants and a lot of those operations into one significant.  facility in South Sioux City.  And when the president of the, firm comes to me and says, why.  should I build and put millions of dollars of investment here when I can be


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two miles away in a place with no personal income tax, no corporate income tax?  You know, I'm already behind the eight ball and have to argue from a very defensive position.  Luckily, we've been able to overcome that and really make some strides.  We got a print shop in town right now, just 20 working people, working men and women.  They've grown to the point that they need more room, and we're put back behind the eight ball.  Well, now we've got two other business climates to compete against, so it puts us in a really difficult situation but also puts us into a unique situation because everything you do impacts us to a much greater extent than it would a community that was in the middle of the state of Nebraska.  My third observation is this.  Over the last eight years, the South Sioux City area, and the Sioux City area, have experienced significant growth, and that growth has caused some problems that are very relevant to the topic before you today.  Thirty-three percent more people have jobs now than they did eight years ago, in South Sioux City.  That's a stronger rate of growth than what the state of Nebraska has been.  It's a faster clip of growth than either Lincoln or Omaha have experienced over the last eight years.  We've got a significant employment problem.  Our unemployment is, in Dakota County, below two percent, and the legislation that's before you will help us address that issue.  So those are my three observations, how I come at this topic.  I urge you to support and pass these bills out onto the floor for a couple of different reasons.  There...  in my mind, there's a few compelling reasons.  One., it takes money off the table but, second and I think more important than just taking money off the table, is that you're going to put money into the hands of working men and working women across Nebraska.  And that makes a significant difference in my ability and in the ability of the other members of the Nebraska Economic Developers Association to attract growth and jobs into this state.  Image is certainly an important issue and really plays into our ability to position Nebraska's economic development climate.  This past December's issue of Money Magazine did a profile of the 50 states and the District of Columbia, and listed the tax burden on the average citizen in those states.  Nebraska ranked 47th highest tax burden.  Again, that puts us in such a defensive position, right from the get-go, that we've got to work to address.  I can tell you this.  Our neighbors are set to cut their income tax.  Governor Branstad proposed cutting the income tax in Iowa


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15 percent.  The majority party in both the I House and the Senate in Des Moines have said, no, we re going to cut income tax 20 percent.  Tuesday, Governor Branstad announced, we're going to cut income tax 20 percent.  So I can look a mile out the front door or my window and I can see again a business climate that I have to compete against, cutting their income tax.  And labor availability continues to be an issue.  We've got to make living in Nebraska as much of an appealing proposition as possible, and I can't imagine anything better than giving money back into the hands and pockets of the working men, working women, in Nebraska.  It would help us to do that.  This would address the ...  and help us with our image when we have national publications that paint a picture that's not very attractive for Nebraska.  And when our competitors are making moves to strengthen their hand, we need to step forward.  LB 493, LB 401 are going to give myself and give my colleagues across the.  state of Nebraska, their professional economic developers, another effective tool to help increase investment, job growth and business opportunity in the state.  Thank you.  Any questions?


SENATOR COORDSEN:  Questions of Mr. Lauver?  As I understood your testimony, Mr. Lauver, if we would repeal the state income tax, all of your problems would go away?  Is that an accurate statement?


DENNIS LAUVER:  No, that's not a true statement.


SENATOR COORDSEN:  Well, that seemed to be the ...  that all of the problems in economic development in South Sioux are related to too high of income tax in the state of Nebraska.


DENNIS LAUVER:  No, it's just ...  my point, Senator, was that it puts us at a competitive disadvantage right away because a...


SENATOR COORDSEN:  Isn't it true that Iowa has a significantly higher personal income tax...  I don't know about the corporate one-certainly in the higher income end than Nebraska does?


DENNIS LAUVER:  Yes, they do.


SENATOR COORDSEN:  Yes, I know South Dakota has none.


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DENNIS LAUVER:  Yes, that's a true statement but, you know, as Iowa is set to cut that, but where it puts us behind the eight ball is that a third grader can understand the personal income tax situation in South Dakota, and...


SENATOR COORDSEN:  But the only way we could compete with that would be to repeal our state income tax.


DENNIS LAUVER:  Or at least make strides to cut the income tax.  That certainly improves our ability to position the state as an attractive location.  There are other programs and other things that we have that differentiate us from South Dakota.  And I think, you know, we stack up well against South Dakota, but the measures before you are certainly going to enhance our ability in a side-byside comparison.  It could really strengthen our case.


SENATOR COORDSEN:  Thank you.  Any other questions?  Seeing none, thank you for being with us.  Next proponent, please.


DENNIS LAUVER:  Thank you, Senator.


LYNN REX:  Senator Warner, Senator Coordsen, members of the Committee, my name is Lynn Rex, representing the League of Nebraska Municipalities.  We appear before you this afternoon in strong support of LB 493, and we do so because we think that, first and foremost; it recognizes the issue that property taxes are an issue in the state of Nebraska and, obviously, all of you know that.  They are not a federal issue, they are a local issue.  But in terms of the state of Nebraska, the state Legislature, as you know, sets the base, you set the lids, you set, in essence, the levy limits with LB 1114.  But we think this measure is a very important part of the solution when it comes to property taxes.  We recognize this is not the Bole solution, but we think it's an extremely important part of the solution.  We're very I pleased that this goes, and that this relief would go directly to the taxpayer, and the reason for that is not that we do not trust local governments, but because we do.  With LB 84, which was approximately $100 million that was distributed to the local governments some time ago, there was a great deal of, we think, misinformation about what the impact of that would be.  There were local governments, in fact, that for a variety of reasons, had to


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address property tax needs.  That was their main source of funding, and they had to address other issues.  And so there was a great deal of confusion, and I don't know who was responsible for that, but there's a great deal of confusion.  I would assume the League of Nebraska Municipalities also has to take some responsibility for not clarifying with the public what the purposes of LB 84 would be.  This bill is fundamentally different.  The tax relief, goes directly to the taxpayer.  It is clear, it is concise.  They understand what they will receive.  We think this is extremely important.  As I indicated, I think it's extremely important to recognize that this is part of the solution, not the total solution.  This fits into, we think, an integrated package that looks at several factors.  Those factors include, fundamentally, school finance reform.  Secondly, we think it has to look at the issue of the consolidation efficiency standards which you folks have been looking at for some time, and we hope that that constitutional amendment will be placed before the voters again.  We are also hopeful that there can be some minor modifications to LB 1114, not major ones, but minor modifications to that effort.  And fourth and finally, we think it is extremely important that the Legislature address the issue of the CIR .because if you're going to address property taxes, when you have up to 75-80 percent of a municipal budget directed by the state of Nebraska because of decisions of the Commission of Industrial Relations, it is very difficult to impact property taxes when you are taking 80 percent...  75-80 percent off the table.  We do think that there does need to be CIR reform as well.  So in closing, we strongly suggest that you advance this bill out of 'committee.  We think it's extremely important in terms of its overall package, and it's an important part, and an important part of the solution.  We are not addressing the other bills at this time, but we will get back to you in terms of what our position will be.  And I don't want my lack of statement on the other measures to assume that we don't support them, but at this time our board has not taken a position regarding those measures.  I I'd be happy to respond to any questions that you have, and I appreciate the opportunity to be here today.


SENATOR COORDSEN:  Senator Kristensen.


SENATOR KRISTENSEN:  Lynn, on the CIR reform, and I realize


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that's not the bill before us, what is the League's position on what that reform should be?


LYNN REX:  I really appreciate you asking that question, Senator Kristensen.  Over a period of years, approximately ten years, there have been measures introduced.  on behalf of our organization by state senators.  Senator Coordsen has been carrying this battle for some time, to address the issue of comparability in the state of Nebraska.


SENATOR KRISTENSEN:  Okay.  So it's a comparability reform.


LYNN REX:  It is a comparability issue.




LYNN REX:  And, Senator, it is not the repeal of the CIR.  It is the issue of.  what constitutes comparability and, fundamentally...  I know you don't want the long version.




LYNN REX:  I know you don't, but I can't control myself.  I must tell you the short version, and the short version is this, that there has to be some way in which players on both sides of the table understand what the rules will be when they go to the CIR.  The way in which to do that is to codify principles which the' commission has used in prior decisions, but they do not use them consistently.  It is a new ball game every time you go to the CIR, and our view is that geographic proximity ought to mean something.  For example in the most recent case, the city of Lincoln is more like, more comparable to other cities closer to Lincoln than they are, clearly, to Minneapolis and Peoria.  And secondly, we think that the state of Nebraska itself would have a much more acute understanding of comparability issues in the event that the Nebraska Supreme Court had rendered a decision that would impact the state's budget directly.  You have not had to have that pleasure ...  or that misery, I guess, is the better way of expressing it, because you have been able to settle out of court with the State Patrol and others.  Misery does love company once in a while, and we are hopeful at some point that you don't have to experience that, however.  We hope that the Legislature this year will take this opportunity to address CIR judgments.  And,


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Senator Kristensen, I may be wrong, but I believe you were one of the senators, at least, that amended LB 1114 and LB 299 under the lid laws and the levy limits, to ensure that CIR judgments are part of, and within, the context of the levy limit and the lid.  And with due respect, it's very important that it isn't possible to have it both ways.  One cannot be in a position of saying, here are the levy limits, here are the lid limits, you must stay within those and, oh, by the way, we have taken 80 percent of your budget off the table.  And I know you're very knowledgeable of this issue, and we appreciate the question, and we hope that you'll be willing to vi-)rk with us on CIR reform.  But that being said, this measure, LB 493, is critically important.  It's an important part of this solution, and we hope you advance it.


SENATOR COORDSEN:  Senator Warner.


SENATOR WARNER:  Just one comment.  Lynn, the state has addressed the CIR order in one case and set...  1 don't .remember, in 78 or '79, and we simply appropriated no dollars for ...  to meet their order and the agency involved ate it or they did a reduction in force, and that's what we did.  It was my first year as chairman of Appropriations.  Interestingly enough, they never came back.  To my knowledge, they've never gone back to the CIR either.  All I'm saying is that at least in one case where the state was faced with it, we did nothing.  We forced the agency to eat it, they had to reduce people, and it seemed to encourage repetition not to occur.


LYNN REX:  Your point is well taken, Senator.  The only concern with respect to reduction in force is that because of lid laws that have been in effect over a period of, gosh, well over 15 years, a variety of different kinds of lid laws, we've had a lot of reduction in force already in many of our cities.  And some of our smaller communities like Fairbury, Nebraska, that has also had an experience with the CIR, not unlike the one that the city of Lincoln is now experiencing with the CIR, they have very few employees, so reduction in force doesn't really work for them when they only have, a handful of employees to begin with.  But the CIR comes back with a judgment that requires them, in essence, to pay them much more than they would have done, and part of the reason is because...  and, Senator, I'm not familiar with the case involving the state of Nebraska, but with respect


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to Fairbury, as well as Lincoln and many other cases before the CIR, if a public employee in the state of Nebraska gives $1.00 to a public employee on the fringe benefit side, pension, insurance benefits, that sort of thing ...  and in many instances those are bargained-for negotiated agreements ...  that does not preclude them from taking that to the CIR.  And, in fact, the CIR has historically not valued that on a dollar-per-dollar basis.  So the reduction in force, you're exactly right, is the ...  you can reduce force or you pay the amount with interest.  Unfortunately, Senator, we have not had the experience where people quit going to the CIR.  I wish that was the case.  We think that if the rules...  if there was some predictability in the process, that would occur.  And the state of Nebraska is in a fundamentally different choice, we think, than local governments when it comes to the Commission of Industrial Relations' decisions, and that is simply this.  The Legislature calls the shots.  You ultimately decide.  You really don't have to deal with some of the same considerations, I think, that local governments do in this way.  If the CIR and, ultimately, the Nebraska Supreme Court says, this is the way it is, that is the way it is.  Local governing bodies don't have the opportunity to change state law.  So we really do appreciate Senator Coordsen in introducing LB 519.  We think it is time to have some reasonableness in this issue, and that needs to be addressed, but I don't want to take away from this hearing which is the focus of the need for property tax relief and direct property tax relief, and we think that LB 493 does accomplish that.


SENATOR COORDSEN:  Seeing no other questions, thank you, Ms.  Rex.


LYNN REX:  Thank you, Senator.


SENATOR COORDSEN:  Next proponent, please.


DAVE HEINEMAN:  Senator Coordsen, Senator Warner, and members of the Committee, for the record, my name is Dave Heineman, State Treasurer, and I will be brief and to the point.  I'm hearing strong support of tax relief for Nebraska's taxpayers.  I want to discuss this issue from their perspective.  The taxpayers are the shareholders of state government.  They pay the bills, and the state surplus


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is similar to a corporation with increased profits.  When that happens, the company increases its dividends to their shareholders, and why shouldn't we do the same for our shareholders by providing them tax relief.  Let's be candid.  The surplus is growing as we sit here.  It's likely to be $200 million to $250 million.  I.  urge you to support the Governor's proposal for permanent tax relief for the working men and women of this state.  Don't spend it, give it back to the taxpayers or, as the Governor says, cut back and give back.  Thank you very much.


SENATOR COORDSEN:  Questions?  Senator Kristensen.


SENATOR KRISTENSEN:  Dave, from your point of view, do you support LB 493?




SENATOR KRISTENSEN:  And do you support that as a solution to property tax, as a solution or the solution to the property tax problem?


DAVE HEINEMAN:  No, I doubt it's the total solution, but I think what we hear out there, Senator Kristensen, as I travel the state.  Taxpayers want tax relief.


SENATOR KRISTENSEN:  And do you believe that this will, in any way, calm the waters for property tax problems in the state of Nebraska?


DAVE HEINEMAN:  That's probably always in the eyes of the beholder.  Calm it, I'm not sure exactly what you mean.  I think the...


SENATOR KRISTENSEN:  Do you think that people would stop circulating petitions if you gave a $160 rebate back on property tax for homeowners?


DAVE HEINEMAN:  There's always going to be some group that's going to circulate tax petitions but I think, by and large, if we can pass income tax and some sort of property tax credit, many taxpayers in the state will be very happy.


SENATOR KRISTENSEN:  But I ...  in particular, how does this help the agricultural tax problem, the property tax problem?


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Has does LB 493 do anything for that problem?


DAVE HEINEMAN:  That is ...  I've talked with Senator Coordsen before about that.  That's a much more difficult solution.  I think I understand what you're saying there in the sense that their property tax burden is much greater, and I- think that's an entirely, another issue that needs to be addressed.


SENATOR KRISTENSEN:  And, in fact, don't you believe that LB 493 hurts that solution towards property tax?


DAVE HEINEMAN:  Not necessary.  No, I don't.


SENATOR KRISTENSEN:  Would you agree with me that if I give back $160, that there may be a number of people who say, well, my property taxes went down.  There really isn't any need for property tax change, but the people who really have the outrageous burden, being the agricultural people, lose allies by this bill, and that the statewide impetus to change property tax is diluted significantly and, in fact, that hurts...


DAVE HEINEMAN:  I can't answer for everybody.  They won't lose me as an ally.  I strongly support that we need to address this whole issue of property tax and government spending, and we're spending too much money.


SENATOR KRISTENSEN:  And how ...  what government spending would you reduce at the local level then?


DAVE HEINEMAN:  I've served on the Fremont City Council and I can tell you from experience, when we used to have a group come in front of us and ask for additional spending, usually the first question we asked was, are you willing to support higher taxes today in order to get that right away?  And most taxpayers understand the situation and they will tell you, no, we're willing to wait our turn.  We're willing to wait until we have that money unless it's an urgent need.


SENATOR KRISTENSEN:  But statewide, you talk about the property tax solution is to cut local spending.  I assume that's the sum and substance.


DAVE HEINEMAN:  Spending in general, not just local.  I'd


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say state spending, too, although state doesn't impact on property tax, I understand that.


SENATOR KRISTENSEN:  How does ...  right, we're talking property tax...




SENATOR KRISTENSEN:  ...  because my impression is that...  and I hear that from the Governor and I hear it from you, my impression is that the understanding of the property tax problem is shallow.


DAVe HEINEMAN:  Well, I don't...  I don't necessarily agree with that at all.  I mean, if you want me to give you some specific proposal, I'm glad to suggest a few things.  I think we've got to look at the whole area of can school districts, counties and cities share certain services, be that a purchasing unit.  I think the time has come to look at, do we really need sheriffs and chiefs of police in cities?  Can we have one law enforcement area per county, per whatever area you want to look at, administrative positions in the same way.  So I think we ought to put it all on the table.


SENATOR KRISTENSEN:  And the key is it's been on the table for a long while.  The real key is, what's the answer?


DAVE HEINEMAN:  I suppose the answer to that is elected officials willing to make tough decisions to move this forward.  Look at the 911 consolidation that occurred between.  the city and county in Douglas County.  The taxpayers knew that was a no-brainer long before elected officials ever got together and got moving on that.  And so I think we ought to listen a little more closely to the taxpayers out there who are willing to make tough decisions, .and they know that's what we have to do, and we have to be willing to stand up and try to do that.


SENATOR KRISTENSEN:  Well, I know there's a number of other people that are...  I suggest to you that it's easy to stand up and complain about property tax.  I suggest to you that it's incredibly difficult to come up with a meaningful plan, and I see very few people that come before the committee with a plan on how to overall reduce property taxes.  It's a


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lot easier to stand out on the court house steps and out in front of the Capitol steps and take in after the Legislature, take in after local governments, who offer no solutions and plans.  And what we're doing is a process of trying to come up with a solution to it, and it's a lot harder to come up with the answers than it is to throw the stones, and I know you appreciate that as well as I do, and I would just hope that the, people come up with those plans and come here and try to find the answers instead of perpetuate the problem.


DAVE HEINEMAN:  I agree with you.


SENATOR COORDSEN:  Senator Hartnett.






SENATOR HARTNETT:  In a couple of weeks I'm going to have a bill to do away with all police chiefs.  And since you mentioned police chiefs and county sheriffs, I would like to have somebody for the bill.  So if you'd like to come over, I'll be glad to give you notice of when the hearing is.  (laughter)


DAVE HEINEMAN:  I'll take that under advisement.


SENATOR COORDSEN:  I see no other questions.  Dave, I hadn't intended to get into this, but since you purport to represent the taxpayers of the state of Nebraska, I might.  It is unfortunate that, for all of government in Nebraska, we have a system that does not allow many people to support the services of primarily local government in the manner that they may wish to.  Senator Kristensen mentioned the agricultural community.  I would suggest that there are many in the community, some who may be members of this panel, who pay property taxes that, were those to be converted.  to state income tax, would take several hundreds of thousands of dollars of more net income before the state income tax would approach what they are currently paying on the business property of their agricultural business.  And until we recognize that problem, we're going to have a significant amount of unhappiness in Nebraska.  An interesting thing on LB 493, 1 would suggest that there may be people, perhaps


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even in -this room, who may live in an apartment, and their children may be on the farm and are paying the full amount of property tax and would receive no credit whatsoever, simply because of investment on their part to ensure that the major economic force in Nebraska goes ahead.  So while it may seem to be a good solution, it presents more questions, I believe, to the overall tax problems that we have to address than what it would appear on the surface.


DAVE HEINEMAN:  Well, I certainly think you make a good point, and I think with the experience of this committee, hopefully you'll be able to develop the bill into an even better bill but, hopefully, it will go forward with tax relief.


SENATOR COORDSEN:  Thank you, Dave.  Did you have a question?  Senator Schellpeper has been trying to contain himself.


SENATOR SCHELLPEPER:  I wasn't going to get involved with this issue.  Dave, do you agree that our current property tax system is unfair, we have in this state?


DAVE HEINEMAN:  How do you mean, unfair?


SENATOR SCHELLPEPER:  According to the ability to pay.


DAVE HEINEMAN:  I guess I'd still like you to illuminate a little bit in terms of what you're trying to...


SENATOR SCHELLPEPER:  Well, the people that pay property tax, the majority of it, basically are in agriculture.




SENATOR SCHELLPEPER:  And the ability to pay is not there.  That's what I'm saying.  Do you think that's fair?


DAVE HEINEMAN:  In that sense, it's probably unfair.  I ,think most Nebraskans think we have too high of property taxes.


SENATOR SCHELLPEPER:  Well, I won't argue that at all.  I think everybody agrees with that.  But do you think it's unfair to have agriculture pay the unfair burden part of it?


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DAVE HEINEMAN:  I think we need to find a way to distribute the burden fairly.  I do want to make one point that I try to frequently make to taxpayers regarding property taxes.  In this state, we have a very strong desire for local control.  Part of the price for local control is higher property taxes.  The more we ask the state to do, I think it's reasonable to assume the state is going to attach some strings to that.


SENATOR SCHELLPEPER:  Education, basically, takes 70 percent of the property tax bill that you pay, about 65-70, some a little bit over.  If the state was going to pick up more of the educational cost, that would help property.  In order to do that, it would cause a shift in sales and income taxes.  Do you favor 'something like that?


DAVE HEINEMAN:  I don't necessarily favor a shift until weirs willing to look a lot more closely at how we spend our money.




SENATOR COORDSEN:  Seeing no other questions ...  you had a question, Eric?  Senator Will.


SENATOR WILL:  Just very briefly, and I apologize for not hearing your testimony, and I apologize to the committee that I wasn't able to be here for the beginning of the bill that I sponsored, but I guess my one question, Dave, and if you've addressed this then, again, I apologize.  But the fact is when it comes to property tax relief, I've always favored a homestead exemption which is a flat amount of the value of a homestead that is exempted.  And the reason that I've favored that is that it tends to be...  it directs it at homeowners and it directs it in a way that accomplishes that in a progressive manner in that an individual with a lower valued home presumably has lower ability to pay.  It gets a greater bang for their buck, as it were, from that.  And I guess I look at this, and the reason I introduced the bill is, in essence, this probably does the same thing.  Would you agree with that?


DAVE HEINEMAN:  It seems to be, as I understand the bill, yes.


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SENATOR WILL:  Thank you.


SENATOR COORDSEN:  Any other questions?  Seeing none, thank you, Mr. Heineman.  Next proponent, please.


GORDON MCDONALD:  Senator Coordsen, members of the Committee, I'm Gordon McDonald, President of the State AFL-CIO and I'm here today in support of LB 493 only.  Our organization does not have a position on the other two bills that are up today.  I won't eat into much of your time here.  I just want to say that I think this is a fairly progressive bill in that not only does it give a little relief to those people who own homes, but you also have to occupy them in order to be able to get this tax relief.  A suggestion that I'd like to pose to you is that I wish you'd look to broaden it a little to include renters who, I think, are being charged in proportion to the amount of rent they're paying, as to what the property taxes are anyway.  And I think those people are certainly paying the property taxes for the owners of that property.  It's a, I think, a fairly progressive legislation, and could be made even more progressive by including renters in it.  That's about all my comments on that subject.  I'm going to mention one other thing that was brought up here by a testifier a couple ahead of me, and that has to do with LB 519.  Senator Coordsen, I believe it's your bill that's going to be heard by another committee involved with the CIR.


SENATOR COORDSEN:  Well, one's going to be heard, yeah.


GORDON MCDONALD:  Yeah, but I tell you.  There's a lot of noise made when some cases come out, giving workers some adequate increases, I think.  And you're seeing that now in the City of Lincoln here, for or one instance.  But it's very interesting how this Legislature, back several years ago when they created the Commission of Industrial Relations, didn't give any authority to workers.  When they come to an impasse with employers, there's no authority given to workers at all or no leverage as to withholding their labor or being able to strike here, but yet they're expected to go to the Commission of Industrial Relations to process these wage cases when they reach an impasse and, quite frankly, even though you call it collective bargaining for public employees it's, in fact, collective begging is about the


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best that can be said of the legislation.  I'm not going to bore you very long on this thing, but who is Omaha to compare with in Nebraska?  Who is Lincoln to compare with in Nebraska, for or those workers who are.  doing those jobs?  I happen to think personally in our organization that LB 519 is a terrible bill for workers, and I know it's going to be heard in another committee, but if any...  if anything needs to be done, I think legislation needs to be introduced and approved here that would give workers a fairer shot at decisions coming out of the CIR.  They don't like it as well as employers do, quite frankly, and I think the things that the other testifier was talking about, and LB 519 in particular, is terrible legislation insofar as workers are concerned.  Those are my remarks.  Thank you.


SENATOR COORDSEN:  Any questions of Mr. McDonald?  Oh, yes, sir.  Senator Warner.


SENATOR WARNER:  Gordon, you suggested expanding it to renters and I gave a speech a couple days ago in which I was branching around about things that are likely to occur, and that was one of the things that I said would immediately follow because it's logical.  I assume there also could be a few people who don't ...  wouldn't pay enough income tax to get the full benefit either.  I suspect that they ought to be given a benefit of a homestead exemption.  They probably need it worse than somebody that paid income tax, or had the ability to pay it.


GORDON MCDONALD:  Do you mean by not being able to file because...  is that what you're saying?


SENATOR WARNER:  I'm assuming there are those who own a home that don't file for income tax, or don't pay enough to even qualify for the $160.  1 guess what you're saying, it ought to be expanded to everyone who lives in residential property.


GORDON MCDONALD:  Yeah, because I think they are paying it indirectly anyway.


SENATOR WARNER:  All right.  Thank you.


SENATOR COORDSEN:  I believe that LB 493, is that not-yeah, LB 493 is a refundable credit, isn't it?  I


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think that to be true, which raises an interesting question that perhaps I'll ask someplace else, with regard to homeowners who are eligible for homestead exemption.  Is this a credit on top of homestead exemption, so...  I think that's something else we'll cross, I hope.


GORDON MCDONALD:  Well, I don't think you can draw both, can .You?


SENATOR COORDSEN:  I don't know.


GORDON MCDONALD:  I understand it's either/or, but...


SENATOR COORDSEN:  But anyway, so that's ...  oh, you had a question.


SENATOR WILL:  No, you can ask me.


SENATOR COORDSEN:  Oh, all right.  You just have your name on this, Eric.  Are there any questions for Mr. McDonald?  Seeing none, thank you, Gordie.


GORDON MCDONALD:  Thank you, Senator.


MIKE BACON:  Senator Coordsen, Senator Warner, and members of the Committee, my name is Mike Bacon.  I'm the Legislative Chair for the Nebraska Diplomats.  We are an organization of 425 business executives throughout the state of Nebraska who volunteer our time and our money to make business calls, internationally and nationally, to try and grow business in Nebraska, and work as an adjunct to the Department of Economic Development.  I will be brief.  The board has considered both of these bills.  They believe those to be broad-based, return of revenue to the shareholders in Nebraska who are the taxpayers.  We would ask your consideration in returning those.  One particular item we do bring to the table that may not be there.  Every year we run a CEO Round Table and we invite the chief executives from multinational corporations to come to Nebraska and talk to us about what it is that's good and what it is that's bad about Nebraska.  Invariably every year, one of the tags that comes up, it's not only the property tax but it is the level of state income tax, that ,provides a disincentive to bring highly paid individuals into the state, and that has been a repetitive comment.  We


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believe it's good tax policy to return these funds, and we believe that this is a fairly broad-based manner in doing it, and we would urge your reporting of these bills out to the full Legislature.  Thank you.


SENATOR COORDSEN:  Thank you.  Questions?  Thank you for being with us, sir.  Next proponent, please.


KELLY HOLTHUS:  Mr. Chairman and members of the Revenue Committee, my name is Kelly Holtus.  I'm from York, Nebraska, and President of the First National Bank of York and immediate past board chairman of the Nebraska Chamber of Commerce and Industry.  On behalf of the State Chamber Board of Directors, I would like to enter on the record the State Chamber's support for the general concept of providing income tax relief for all Nebraskans.  Consistent with our position in support of previous legislation sponsored on behalf of the Governor and heard by this Committee last session, we support the concepts contained in LB 410, LB 401 and LB 493.  Now I have prepared written testimony here (Exhibit 1) and I think, for the time and for your convenience, I'll just hand that out to members of the committee rather than go through the testimony that I have available, but in summary I'd just like to say, we believe this is a good concept and that it gives people of Nebraska more confidence in government.  It shows them that we are responsive to what they think.  And I really appreciate the opportunity to testify on this issue, and I'd be happy to answer any questions you might have.  And I will have copies here if we could hand those out.


SENATOR COORDSEN:  Senator Warner.


SENATOR WARNER:  You're in support of LB 493 as well?


KELLY HOLTHUS:  Yes, all three, LB 410, LB 401 and LB 493.


SENATOR WARNER:  In your discussion of arriving at support, did you have any discussion that the likely thing to occur...  in fact, it's inevitable, that once this is reinstated, then it'll be, no doubt, expanded to renters as has already been proposed, which was to be expected?  I mean, for as a practical matter as a political fact, you could very easily take care of in excess of 50 percent of the voters through this process and, in essence, it leaves


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commercial, industrial and agricultural property paying the load, and in a minority.  You probably have no concern about the ag part, but you don't see that as a problem for commercial or industrial, or did you even discuss that issue maybe?


KELLY HOLTHUS:  Well, I think what we're doing primarily here is approving the concept.  As far as my personal interest in agriculture, that's really the way I make my living as a banker in Nebraska is off of agriculture, so I do have a lot of concern.  But as far as the State Chamber is concerned, to answer your question is, we like the concept of giving some ...  when there's a surplus of funds, we think the Legislature is taking some bold action in the last session, we'd like to see if that's going to work.  We'd like to continue on to ...  to be responsive to the taxpayer.  We think this is a good move.


SENATOR WARNER:  Okay.  Thank you.


SENATOR COORDSEN:  Any other questions?  Mr. Holtus, I would have one.  In LB 401, the benefits that accrue to the highest tax bracket are nearly 2.5 times the benefits that accrue to the lowest tax bracket.  Do you have any problem with that.


KELLY HOLTHUS:  Well, we discussed that, as far as the percentages and how that changes and, again, we felt we were not the ones to get into the percentage that...  refer that to your Committee for that decision.


SENATOR COORDSEN:  Okay, thank you.  Seeing no other questions, thank you for being with us.  Next proponent, please, and this one is really in trouble.  We've been saving up all afternoon.  Remember, Senator Fisher, I'm the ...  was the promoter of the flag amendment when that was due, and I've got to take a look at this tie here.


DAN FISHER:  Yeah, isn't that...


SENATOR COORDSEN:  I don't know.  Is that desecration or not, that's the question.


DON FISHER:  No, this is not a flag, it's a print.


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SENATOR COORDSEN:  Senator Fisher.


DAN FISHER:  Good afternoon, members of the Revenue Committee.  A little more quiet in here today, isn't it, than yesterday.  Well, it's a pleasure to be here and testify before you, and I rise in support of LB 401, LB 493, the Governor's refund tax.  I think that it's money that ended up on the table as a surplus and I think it ought to go back to the taxpayers.  I think it'd be a bold step on your part, and I ask you to do it, but I think it's worthy enough to be sent to the floor.  Now I do think, and after hearing some testimony here, that perhaps there are some flaws in some of the formulas for redistribution that should be looked at, but knowing all your abilities and your sincerity about it, you will look at it.  And I'm sure if Senator Will introduced it, he will look at it, and make sure that those are as fair as they can be.  I know it's always rather difficult to get everything as fair and that old saying, who promised a rose garden for everything, but we don't have it, but I think it's important.  I think it's important that the people in Nebraska see the integrity of the legislators to send something like this back to the floor out there so the people could understand that there was a surplus, and we are going to send it back.  And, Senator Kristensen, no, this is certainly not any form of solution to our tax problem that we have, far from it.


SENATOR KRISTENSEN:  Ditto, and with emphasis on any.


DAN FISHER:  Yeah.  Just urge you to do that.  If there's any questions you'd like to ask of me, I am a taxpayer, and I might might mention to you, Senator Warner, I do have some rental property and if I were to get some refunds back, I might consider ...  well, I would consider if they were private individuals renting that property.  Because it's U.S.  Government renting from me, I don't think I'd give them money back.


SENATOR COORDSEN:  Seeing no questions, even though you left ample leads, Senator Fisher, you are thanked for being with us and we ask for the next proponent, please.


DAN FISHER:  Well, I do appreciate it and I do wish you well in this.


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SENATOR WARNER:  Thank you, Dan.


N.P.  DODGE:  Mr. Chairman, members of the Committee, my name is N.  P.  Dodge, Jr., and I'm Chairman of the Greater Omaha Chamber of Commerce, representing over 2,500 members, and here today to testify in favor of both LB 401 and LB 493.  In the Greater Omaha metropolitan area, the two issues that pop up most from our membership are not enough labor and taxes are too high.  National rankings conclude that all Nebraska's taxes are high.  Companies and their new recruits are not the only ones that are telling us that these taxes are high.  Nebraska has sent...  or Nebraskans have sent the message loud and clear most recently with the overwhelming defeat of 411 and 412.  All taxes are high and we feel a shift is unacceptable.  We know this is a tough thing to do.  There is only one way to accomplish it.  Take the money off the table, give it back to the taxpayers, demand more efficiencies from government.  Not only will it put money back in taxpayers' pockets, it also takes spending off the table.  And as history has shown repeatedly, it doesn't matter how good the intentions are, when there is money there, it's usually spent.  Let's not let history repeat itself.  Governor Nelson does have it right.  Cut it back, give it back.  It's no secret that we have lost expansions here in Nebraska due to the labor shortages and high taxes.  Yet, at the same time with Nebraska's low unemployment rate, we are being touted as fast becoming the best place to work and live in the country.  Let's seize that opportunity and capture the momentum we have gained from our low unemployment, and the good press.  Let's live up to the claim.  To actually cut spending at the state and local level and help Nebraskans keep more money in their pockets and keep our young people in the state, we urge this committee to support LB 401 and LB 493, and to move it to the floor.  We thank Governor Nelson for bringing the bills forward, and thank the Committee members for the opportunity today.  I would just like to add that Senator Kristensen asked probably one of the key questions and the really tough question that we're all facing, and that is, if we lower taxes and lower spending, how do we do it?  I am not here today to tell you I have a magic formula as to how to do that, but I am here today to tell you that the Omaha Chamber would be very willing to help put together a group, a study group, to look at it from a local standpoint where we can.  in fact, lower those taxes.  Thank you for listening to me


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this afternoon.


SENATOR COORDSEN:  Thank you.  Questions of Mr. Dodge.  Senator Warner.


SENATOR WARNER:  Is the Omaha Chamber involved ...  you know, we made rather elaborate efforts with LB 1114 for a lot of local involvement.  I was not aware that Omaha Chamber was involved with the...  locally.


N.P.  DODGE:  It is not now, Senator.  I said we would be happy to become involved if you would like us to be.




SENATOR COORDSEN:  Any other questions?  Seeing none, thank you, sir.  Next proponent, please.


JOHN JORDISON:  Senator Coordsen and members of the Committee, my name is John Jordison, appearing on behalf of the Nebraska Tax Research Council, and I would like to offer support, albeit qualified support, for LB 401 and LB 410.  And if you would allow me to register as neutral for LB 493, I could do all of this at once.


SENATOR COORDSEN:  Given the lateness of the hour, I think we will allow the transcribers to sort that out.


JOHN JORDISON:  Thank you.  I appear here also as the father of Nick and Nancy Nebraska and, if it would save time, I suppose I could just reiterate my...  if we could dig up the transcripts in 1995 and 1996, and we could do that.  We did look at all three bills.  We used four criteria to evaluate all three bills that ...  those criteria included a philosophic viewpoint, the issue of fairness, the issue of constitutionality, and permanency.  One of the biggest issues that we came across, from a philosophic-standpoint, was the fact that we're not at the time we're seeing slogans and we're seeing a move to give back taxes to taxpayers, that we have no focus, no road map.  We are still preparing to spend money at a rate that is greater than the rate of inflation.  We have no breaks for taxpayers except in times of a budget surplus.  I wrote.  in 'one of our earlier newsletters this year that the only thing worse than a budget surplus ...  or I'm sorry, a budget deficit is a budget


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surplus.  If we ::an propose to cut income taxes and then if the surpluses don't continue, we can give money back, we can cut spending, why can't we cut spending now?  Those are the philosophical concerns we had.  From an issue of fairness, these bills don't necessarily give dollars back to the taxpayers who contributed to the surplus.  They do give taxpayers dollars back who did not necessarily contribute to the surplus.  That is a concern to us.  On the matter of LB 493, we continue to see the specter of constitutional problems with trying to give property tax refunds back, and we would urge you...  I am not here today to cite specific case law, to say that it is or is not unconstitutional, but we would urge you to look at that issue.  And finally, on the issue of permanency, I guess, we would lend our support more readily to Senator Warner's approach.  There is no absolute guarantee that the surpluses would continue.  If they did, the Legislature obviously has the option to renew on a year-by-year basis any kind of income tax cut or giveback.  With that, Senator Coordsen, I appreciate the time.  If there are questions, I'd try to answer them.


SENATOR COORDSEN:  Any questions?  Mr. Jordison, interesting proposition you raised, through your organizational meetings that this did not necessarily return to those who had created the surplus, the benefits of the return; i.e., LB 493.  Following that line of reasoning, would or would not it be an accurate statement to Bay that because of the heavy reliance that we place on property to support many of the local government services, that there are people who are paying higher rates to the state because someone else is carrying their burden on the local level?  Example:  A community that has 80 percent of its valuation, as Senator Schellpeper mentioned...


JOHN JORDISON:  Outside the city limits.


SENATOR COORDSEN:  ...  in ag land valuation.  If that community had the same property mix that Lincoln does, which is 65 percent residential, what, 20 or so commercial, industrial, and the balance centrally assessed and all of that stuff, rather than the tax rate being $1.23 for the school and whatever the rest of them are..  the tax rate would probably be $6 or $7 for the same service.  Now, with that not being a deductible item, that person is paying much more state income tax than what they were ...  what they would had


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they been allowed the opportunity to support their local government services in the manner that other people who live in the community do, simply a factor of what people do for a living.


JOHN JORDISON:  Exactly.  That carries -through throughout local government that there is not necessarily a direct benefit between the people that enjoy the service and the extent that they enjoy the ability to pay for those services, and needs to be remedied.




SENATOR WILL:  And at the same time, that also, that changes when you classify land in a certain manner, such as an 80 percent classification for the valuation of agricultural land as opposed to valuing at actual market value, as we do the residential property.


JOHN JORDISON:  And that's the concern that we've expressed over the years, and if the way to resolve our state's tax woes, the fact that a landowner, an agricultural businessperson in Nebraska pays more than all of the commercial and industrial taxpayers within a small town in that school district; if that's the approach, the only approach that's necessary to resolve that dilemma, then perhaps we'd have to reevaluate our position.


SENATOR WILL:  Senator Coordsen, I could probably tape this exchange and play it back just like your testimony from 1995 and 1996.


SENATOR COORDSEN:  We're going to go on the road with this act, aren't we, Senator Will?  Thank you, John.  Next proponent, please.


BOB CARHART:  Senator Coordsen and Senator Warner, I'm Bob Carhart from Wayne, Nebraska, President of Carhart Lumber Company and today I'm here to testify in favor of LB 401 and .LB 493.  As a businessman, I'm very familiar with the multiplier effect of funds placed back in the economy.  And I'm going to skip over the bulk of my remarks, considering the hour.  Most of them are philosophical in nature, and just give you the last couple of remarks that I have.  Does the disposal of excess income in real estate revenue fund


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find the trickle down effect ...  does it really go to those who need them?  And fairness aside, are the refunds and tax rate reductions going to have an impact on those receiving them?  Some data which was published during my term as Mayor, by the University of Nebraska, Bureau of Economic Research, indicate that seven of the nine counties with the lowest average individual incomes in Nebraska were in northeast Nebraska where I come from, including Wayne County by the way.  There are a great many minimum wage jobs in our rural Nebraska communities.  My conclusion, as a businessman operating in rural Nebraska, is that there is a significant need among our typical rural residents for the funds.  The manner in which these tax reductions or tax credits are being made through these bills will have a positive impact on rural Nebraska.  Last point, what do the tax credits or reductions do for the credibility of the system by which we finance government?  Naturally, the hope of most northeast Nebraskans is that the Legislature will not ask for more funds to be raised from income tax than is required to provide the minimum services needed by the state.  We realize that setting tax rates is not an exact science.  This creates the situation we are in today with the surplus of tax funds.  Estimates are necessary for projected income, and no one has that crystal ball to hit it right on the numbers.  The idea of refunding taxes raised in excess of the minimum required to operate planned programs when the rates were set, can go far in the eyes in the taxpayer to establish a level of trust in this process.  Criticism arises in most communities when legislators come forward with projects to spend funds that take on the nature of spending windfall tax collections.  Citizens rightfully become watchful and wary as a result of these actions, and well they should.  I believe that the bills proposed will serve Nebraska well.  They are not a solution to the problem, by the way, particularly from the perspective of the return of property tax.  My conclusion is that returning a portion of the excess revenue in the form of tax credits is not only the right thing to do, but it's the right way to get it done.  I thank you for the opportunity to appear here today and I appreciate the Committee's indulgence.


SENATOR COORDSEN:  Any questions?  I would have one.  There are all sorts of ways of achieving what you indicated you think is a good idea.  Would not a change in the sales tax rate have a greater impact on the lower income areas because


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they tend to spend a greater portion of their income on sales tax, and affect more people, owners, renters, old, young, everyone?


BOB CARHART:  I have to answer your question as being, yes, it certainly would.


SENATOR COORDSEN:  Thank you.  Any other questions?  Seeing none, thank you.  Next proponent, please.


AL WENSTRAND:  Good afternoon, Senators, Senator Coordsen.  I'm Al Wenstrand.  I'm the Executive Director of the Sarpy County Economic Development Corporation.  Recently we've been able to have two outsiders come to us and look at our competitiveness from an economic development standpoint.  And I can't Bay that income taxes are the only area that we're noncompetitive in, or at a competitive deficiency, but it's one of the areas that has been brought up to us as part of our overall tax burden.  Dennis Donovan from the Wadley-Donovan Group looked at specifically what the strengths and weaknesses were in our area.  And one of the areas that he identified was that our overall per capita tax burden was high compared to our relatively proximity states.  His comment was that if we were between New York and New Jersey, we would be competitive, but in the Midwest we're not, and we're at a disadvantage to that.  His other comment was, don't do shifts because the shifts may have an impact inside Nebraska but they don't have an impact on the businesses from outside Nebraska that are looking at you, and they don't have an impact on the individuals that are our future labor force that we may be able to attract.  The other individual that we had an opportunity to have look at, at Nebraska, was Ross Boyle through the Omaha Chamber of Commerce's "Target Omaha" program.  And Ross' conclusion was that our tax structure is one that encourages low.  investment, low capital investment, labor-intensive type industries, and relatively moderate to low income job creation.  While our vision for the future is a high technology area that has high capital investment, a moderate demand on the labor force, and high paying jobs, and that we look at that, the income tax, the personal income tax, does have an impact on what we're able to attract, both in businesses and in individuals coming into our labor force.  And I guess I have one example of a company in Bellevue that we've worked with that is a real good example of how income


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taxes do impact our competitiveness.  The company is a small software development company, has 26 employees, has been in business for three years, and this year had to open an office on the east coast, and that office employees five people, and the reason that office is there is because we could not attract those five people who are software development specialists into the Bellevue area, based on what they saw was an unfair burden on their income tax.  It does have an effect.  It may not be all the answer but it's part of the answer.


SENATOR COORDSEN:  Any questions?  Seeing none, thank you, sir.  Anyone else who would like to testify in support?


SUSAN HILT:  Good afternoon, Senators.  My name is Susan Hilt.  I live at 341S Richmond Road here in Lincoln.  I am chair of the Lincoln Board of Realtors Governmental Affairs Committee, and I'm here today on behalf of the Nebraska Association of Realtors.  I'm here to speak in favor of LB 493.  We are particularly supportive of the owner-occupied portion of the bill.  And while we don't know if $160 is the magic number, we would ask the Committee to do something for property tax relief.  Thank you for the opportunity to appear this afternoon.


SENATOR COORDSEN:  Questions of Ms.  Hilt?  Seeing none, thank you.  Is there anyone else who wishes to testify in support of this bill?


FRANK HILSABECK:  Good afternoon, Senator Coordsen, members of the Revenue Committee.  I am Frank Hilsabeck with Aliant Communications.  I'm also on the Board of Directors of the Lincoln Chamber of Commerce and here today representing the Chamber in support of LB 401 and LB 493.  At the beginning of this hearing, Senator Coordsen asked us to do two things.  One was to not be repetitive and the other was to be brief.  After IS people have testified, I'm afraid I cannot help but be repetitive, but I can try to be brief.  It is unusual for the Chamber to be in the position to come before you today and ask YOU to spend money.  We normally ask you to save, to cut and to prioritize.  This year we're asking you to prioritize but in a different way.  It is our opinion that the additional revenues available this year should be taken off the table and not incorporated into long-term programs.  It is always interesting, I think, to hear people talk about


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the state, how the state spends money.  What we sometimes fail to recognize is that the money the state spends is our money, and so it makes sense in times Of surplus that we get some of our money back.  While we are advocating this tax cut, we also recommend that serious consideration be given to the length of this action.  There is discussion that this type of tax cut is sustainable and, in our opinion, nothing could be better.  But as good business people, we also know that you should never overextend your expansion or exceed the limits of your present resources.  Thank you, and we urge you to advance LB 401 and LB 493 out of committee.


SENATOR COORDSEN:  Thank you.  An interesting concept since you are out of telecommunications.  We...  a number of years ago, created an investment scheme that made it fairly attractive to invest in infrastructure on behalf of many industries including the telecommunications industry.  Now do we have...  I also sit on Transportation Committee, and I hear a lot of antidotal evidence with regard to the exorbitant profits now enjoyed by that industry across the ...  certainly not your company but across the state of Nebraska.  And yet, I find here that the...  all of a sudden now that we have the ability to make a significant amount of money in Nebraska, that the tax rates are too high.  Would we be better off having modifications made in the LB 775 package and stuff so that folks didn't make so much money, so they didn't have to pay so much income tax?


FRANK HILSABECK:  I'm not sure that the people who benefit from LB 775 are the same people who are going to reap the benefits of this property tax and income tax reduction.


SENATOR COORDSEN:  Okay, thank you.  It was a question I had to ask.




SENATOR COORDSEN:  Is there anyone else who would testify in support of any one of these three bills?  I would indicate for the record that I have a fax transmittal from Mr. Dennis Devine, Wildcat Enterprises of Geneva, that he would ask that his testimony on behalf of himself and from his position of vice president of the Nebraska Diplomats be entered into the record in support of these three bills, so we'll have that for the record and the distribution.


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(Exhibit 2.) Could I have a Page?  Now, is there anyone here who would be in opposition of any of these bills?  Seeing none, anyone who would provide neutral testimony?  Seeing none.  Senator Will has indicated that he would like to do a brief closing on LB 493, and then we will see if Senator Warner wishes to close on the other two bills.


SENATOR WILL:  That's right.  Thank you, Senator Coordsen, members of the Committee.  For the record, Eric Will, representing the 8th Legislative District in Omaha and closing on LB 493.  1 apologize to the Committee that I wasn't here at the outset of the hearing.  The combination of the weather and former Senator Hall's father's funeral delayed my getting here.  But in a nutshell, number one, Senator Coordsen, I want to answer your question.  You asked about the double homestead exemption, whether this could be applied to someone who's already receiving a homestead exemption under existing law.  And under Section 2 of the bill, subsection (3), it specifically points out that the credit shall not be allowed on any return filed by an owner of a homestead that received a homestead exemption for the calendar year.  So this would be ...  this would be separate and would not apply to those individuals currently qualifying, or qualifying under current statute, I should say, so that is spelled out in the bill.  Beyond that, I introduced this bill on behalf of the Governor because I've always believed in property tax relief for homeowners in past years.  I have, as this Committee well knows, I've always brought a general homestead exemption bill that would exempt, based on valuation.  I didn't do that this year.  I brought this bill and a couple of others instead, that are attempts to go at it from a different angle.  The Governor convinced me that we have enough money to do this, that it's something that is probably equitable and that I think we can afford to do it.  It's of benefit to homeowners and it's something we ought to do.  We can ...  there are other avenues available as I mentioned.  Among those are classifying property, allowing just classification of any type of property which we do now in several areas.  And also we can ...  we can do targeted homestead exemptions ...  or property tax relief to individuals whose property taxes have increased by a certain amount, and those are both bills that we will be hearing later so I won't address them now to any great extent.  But I would say I think the money's there.  This is something that can provide benefit to property


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taxpayers, especially homeowners who are individuals that I think are deserving Of some relief.  And I think the structure of LB 493 is good and I would urge the Committee to advance it.  And in accordance with my promise to Senator Coordsen, I will be brief and stop here.  And if there are any questions, I'll answer them.


SENATOR COORDSEN:  Well, thank you, Senator Will.  Questions of Senator Will?  Seeing none, thank you, sir.  That closes the hearing on LB 493.


SENATOR WILL:  Thank you.


SENATOR COORDSEN:  Senator Warner, did you wish to say anything in closing on LB 401 or LB 410?  Closing is waived on LB 401 and LB 410.  Moving on then to LB 24, Senator Warner.


SENATOR WARNER:  Senator Maurstad here yet?  I guess he's on his way.  Can I ask how many are going to appear on this bill.  Two, three.  Okay, go ahead, Dave.