Neb. Educators Backing Amendment To Uphold Tax System

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Nebraska educators are hoping that a proposed amendment to the state constitution to be put before voters next week will bring a new era of financial stability to school budgets.

The proposed Amendment 1, which will be voted on May 12, would essentially uphold a taxation system that has been ruled unconstitutional by the state supreme court.

Unless the amendment is passed, supporters say, many of the state's key industries and largest companies may move out of state.

"Basically, all of us believe that this is the best solution,'' said Jim Griess, the executive director of the Nebraska State Education Association.

"It's not perfect, but it's the best alternative we have,'' said Mr. Griess, whose organization has linked up with about 25 other education, business, local-government, and labor groups in the state to support Amendment 1.

Tax Exemptions at Issue

Opponents of the amendment argue that it would give the legislature too much taxing authority.

Recent opinion polls indicate that voters are almost evenly divided on the complicated amendment.

The proposed amendment seeks to solve a taxation problem that began in the early 1970's, when the state began to exempt certain types of property, including business and farm inventories, household items, and farm equipment and machinery, from the state's personal-property tax.

Over the past five years, several of the state's largest industries have challenged the exemptions in federal and state courts, contending that the constitution requires all tangible assets to be uniformly taxed.

The courts agreed, ruling that the industries should be exempt and are owed $75 million in refunds. To date, the legislature has delayed the payment of the refunds, which would have to come from local governments.

Then, last summer, the state supreme court ruled that all the exemptions were illegal. The court ordered that all personal property be put back on the tax rolls as of Jan. 1 of this year.

The ruling spurred concern among lawmakers that the state would be put at a competitive disadvantage economically, since such key industries as farming, livestock, and storage companies would be subject to taxes that they do not have to face in neighboring states.

As a result, the legislature this year passed the proposed constitutional amendment.

Amendment 1 would establish real estate and personal property as separate tax categories under the constitution. The two categories would have to be taxed at the same rate, and all real property would be taxed under uniform rules, with no exemptions. Personal property, however, could be taxed either according to its actual or depreciated value.

At the same time that it approved the proposed constitutional changes, the legislature adopted a tax package that would go into effect if the amendment is passed. Under the package, all inventories would be exempt from taxes, and only personal property that is used for the production of income and has a life longer than one year would be subject to the tax.

'100 Percent Permission'

The proposed amendment would give the legislature too much flexibility to raise taxes and exempt large businesses from taxes, said Dean Bresley, the treasurer of the Save Nebraska's Constitution Committee, which opposes Amendment 1.

"If it passes, it gives the legislature 100 percent permission to do anything it wants to do,'' he said.

But educators and other amendment backers warn that if it does not pass, and all personal property stays on the tax rolls, the state may lose many businesses.

Moreover, they note, lawmakers may be pressured to remove all personal property from the tax rolls, which would lead to a greater reliance on the real-estate property tax, which is largely used to fund schools.

If Amendment 1 is adopted, local taxing authorities and schools will no longer have to worry about certain industries becoming exempt from taxes, said Dale Siefkes, the executive director of the Nebraska State School Boards Association.

"We've had five years of very unstable conditions because of the lawsuits,'' he said. "We need a stable tax base.''

Vol. 11, Issue 33, Page 16

Published in Print: May 6, 1992, as Neb. Educators Backing Amendment To Uphold Tax System
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