In April of 2013, Senator Ernie Chambers and, later, Senator Paul Schumacher introduced Legislative Resolution 155 into the Unicameral. It’s stated intent, buried among a whole mess of “Whereas’s” and “Therefore’s” was to create a special committee to conduct a study “to review and evaluate the state’s tax laws regarding, but not limited to, sales and use taxes, income taxes, property taxes, and other miscellaneous taxes and credits and incentives.” Said committee was to accomplish this daunting task through, among other venues, a series of public hearings to be held throughout the state, since, don’t you see, “community discourse and involvement are essential to the success of a study.”
The other 47 denizens of the George W. Norris Chamber agreed that this was just a cracking good idea and it came to pass that a committee of the Unicameral was duly established, made up of a Chairman (Kearney’s own high-stepper, one Galen Hadley), the chairs of several of the legislature’s standing committees (who apparently didn’t have enough to do with their own committees), and a couple of Democrat freshmen who happened to be standing around that day looking bored. Having seen that their creation was good, they christened it the “Tax Modernization Committee”, and bade the members to go forth and do some stuff. Or something
Whereupon, Galen the Hadley escorted his band of plucky pickwickians to hearings at five locations, three in the wilds of the Out-State (Scotts Bluff, North Platte, Norfolk) and two not so much (Lincoln and Omaha), plus a couple or three “executive” sessions – “executive” being Unicam-speak for “secret”, meaning the rest of us don’t get to know what really went on. Politicians are big on “executive” sessions – but that’s another subject, for another post.
There are transcripts available of each of the public hearings and, though I am not proud of it, I read through them all (I have noted before that I have no life), and was struck by two common themes. First, at the outset of each hearing Senator Hadley was at great pains to point out that their purpose was not to raise taxes (Yaayy!!), nor to lower them (Wait … what!??); no, it seems that the sole mission of the Merry Bean-Counters was to discover whether or not the tax system in our state is “fair and equitable.” A quick perusal of Frederic Bastiat’s “The Law,” wherein he proclaims virtually all taxes constitute “legalized plunder,” might have saved them from traipsing all over the state, but hey – that’s what politicians do.
The second motif, apparent as soon as the public began to be heard at each location was that everybody, with almost no exceptions, was more than a little exercised about what they saw as a tax system that cost too much, provided too little in the way of services and benefits, and was riddled with inequities, favoritism, cronyism and towering disdain for the taxpayer. The “testifiers” were polite, but they were stern … and they were essentially unanimous in their conviction that the state tax system is/was a mess of herculean proportion.
To their credit, the senators sat stolidly through the entire gauntlet, occasionally asking a question, or offering meek rejoinders, more often smiling sweetly while looking at their watches. At length, it was over, and the brave warriors, like Monty Python’s bedraggled knights, clip-clopped back to their eastern lair, there to lick their wounds, raise a glass to a skirmish well ended and sob quietly into their pillows.
So I wondered, what, if anything came of this gallant demonstration? And the answer seems to be … not much. I have below, to the best of my ability, tried to summarize the legislation, i.e., public policy initiatives, that resulted from the group’s grand tour. I spent considerable time poring over legislative documentation of all sorts and I am reasonably confident that the data below are accurate. If anyone can demonstrate anything that I missed or misinterpreted, I would appreciate your letting me know.
The TMC made several recommendations in their final report and in the interest of brevity and clarity I will not reproduce those recommendations here but you can (and should) view them yourself (pp. 86 – 87 of the committee’s report, located here). Following is a list of bills passed as result of the TMC’s suggestions.
LB 96 – Exempt Repair or Replacement Parts for Agricultural Machinery and Equipment from Sales and Use Tax. If you’re in the Ag biz, this has to be good news right? Well, it’s better than a poke in the eye with a sharp stick, but it’s pretty small beer. The Unicameral ‘fiscal note’ (which attempts to quantify the fiscal impact of a bill) says that this will cut state revenues by $7,033,000, which comes to about 0.03% of the total state expenditures (around $20.6 billion). Really? Point oh three per cent? Really? Put another way, there are about 46,800 farms and ranches in Nebraska, so that comes to a few cents over 150 bucks per farm or ranch. Oh good … now Old McDonald can get that operation ….
LB 191 – Adopts the Nebraska Job Creation and Main Street Revitalization Act, Provide Tax Credits, and Change Certain Valuation Provisions as Prescribed. Basically what this bill does is provide some low-level incentives for redevelopment and preservation of historical property. It is difficult to discern how the TMC’s hearings relate to this bill; there were one or two testifiers who thought that the Unicam should do something to help promote tourism in Nebraska, so perhaps that’s the connection. The “fiscal impact” was stated as a reduction in state revenues of $395,929, or … wait for it … 0.0019% of the state’s total outlay for 2014.
LB 474 – Changes Provisions Relating to Occupation Taxes. This bill redefines the term occupation tax and the powers of cities to impose such a tax. Provisions of law affecting all classes of cities are amended; also modifies the occupation tax statutes which give powers to natural resource districts to impose an occupation tax. The fiscal impact, according to the auditors, is exactly zero … so basically this bill just moves a few deck-chairs around on the USS Taxandspend.
LB 814 – Redefines Sales Price, Change Sales and Use Tax Provisions Relating to ATVs and UTVs, and Change Duties of Sellers In the Distribution of Sales Tax Revenue to Provide Funding to the Game and Parks Commission. The main thrust of this bill seems to be to find a way to capture sales tax revenue on boats and ATVs that those rascally sportsmen are buying out-of-state. So, instead of asking why such items are being bought in border states, our guys develop arcane mechanisms to make such purchases subject to their rapacious sales tax policies. Fiscal impact here is a little unclear, but it seems that around $3.5 million will come out of the general fund and go into the Game and Parks Commission Capital Fund, with a net of … umm … zero. So, another round of musical sales tax chairs. Yawn.
LB 851 – Changes Revenue and Taxation Provisions on Nonresident Owners under the Motor Vehicle Registration Act. This is a sort of a catch-all bill that makes a slew of technical changes to the 1967 Revenue Act (none of which, you won’t be surprised to learn, do much toward reducing taxes). Fiscal impact is a plus for FY2014-15 revenues of $45,723. Yeehaw … now we’re cookin’. Forty five grand – that’s just walkin’ around money to a Unicameralite.
LB 867 – Change Distribution of Certain Tax Payments to Municipalities, Create Exemptions from Sales and Use Tax, and Change Provisions Relating to Review of Tax Information by Municipalities. This bill represents a change in an existing law. Seems before this bill only municipal government employees were legally allowed to review sales tax information for businesses within the municipality. LB 867 allows an individual other than a municipal employee review such information if they are contractors to provide accounting or administrative services. It also makes provision for sales tax exemptions on such things as natural gas used as vehicular fuel, sales of gold bullion, purchases of antique automobiles by museums, and certain postage charges. Fiscal impact for FY2014-15 is estimated at -$3500.
LB 986 – Changes Homestead Exemption Income Limitations. This bill increases the income limitation and evens out the declining scale of property tax relief under the homestead exemption . It also allows for a homestead exemption for persons with a developmental disability. Fiscal impact for FY2014-15 is estimated as a $4,621,000 increase in expenditures from the General Fund.
LB 987 – Adjusts Individual Income Tax Brackets for Inflation and Exempt Social Security Benefits from Income Taxation. Addresses “bracket creep” (apparent increase in income due to inflation), and makes Social Security recipients whose federal adjusted gross income is $58,000 or less (joint) or $43,000 or less (non-joint) exempt from taxation of their SS benefits. Also addresses taxation of military pensions. Fiscal impact is a loss in revenues in FY2014-15 of $8,347,000, or about 0.04% of total state expenditures.
LB 1067 – Change Sales and Use Tax Refund Provisions, Extend Sunset Dates Under Certain Tax Incentive Laws, and Change Provisions of the Angel Investment Tax Credit Act. Mainly this bill extends the tax credits available under several obscure and little-used tax credit laws for two years. Estimated reduction to General Fund for FY2014-15 is $1,040,000, or 0.005% of total state expenditures.
LB 1087 – Creates a Homestead Exemption for Disabled Veterans, Widows, and Widowers. This bill does exactly what the description states … and is long overdue. Fiscal impact is $0 in FY2014-15, and $406,000 for FY2015-16 (it doesn’t become effective until 1/1/15).
To summarize, 10 new laws, seven of which have any fiscal effect, resulting in net state revenues being reduced by $21,387,706, or, 0.104% of the state’s total expenditures for 2014. So was it all worth it? Hard to say … every little bit helps, they say, but a tenth of one per cent seems like such a little little bit ….
There were a number of bills that were engendered by the TMC’s hearings but which were NOT enacted by the 103rd legislature. A group of these are noteworthy in that they would have brought substantive property tax relief to agricultural land owners had they been enacted (See LB 101, LB 145, LB 618, LB 670, LB 813, and LB 1038) – but alas, it was not to be – they all died at the end of the session. You can peruse these “might-have-beens” beginning on page 96 of the Tax Modernization Committee’s Report located here.