The first four and half hours of the Revenue Committee hearing on February 6 on Legislative Bill 405, one of the Governor’s proposals to eliminate state income tax for a broader sales tax, seemed noisy and riddled with insider banter. From 1:30 to 6 p.m. senators, bureaucrats and the Governor talked to each other about the bill while the public and lobbyists waited to speak.
From time to time, the bonhomie was punctuated by the somber voice of one senator with persistent and unusual questions.
Senator Paul Schumacher of Columbus, would ask, “What is a ‘modern’ tax system?” Then seem to listen intently, jotting notes. In one instance, the Governor, despite having called for a “modern” system, seemed somewhat on the spot.
Schumacher did not appear to be picking on the Governor. He asked similar, if not identical, questions of Senators McCoy and Ashford, who introduced the bill, and other testifiers--questions like, “What is the purpose of taxes?”
What was this, a Socratic classroom? What lay behind the unaccustomed questioning? As it turned out that afternoon, nothing more than questions asked and sort of answered.
Paul Schumacher grew up on a farm between Cornlea (pop. 36) and Tarnov (pop. 46) in Platte County, Nebraska. He took an Associate Degree in History at Platte College in Columbus; a BS summa cum laude at Fort Hays Kansas State College with a triple major in Psychology, General Science and Speech; and a JD at Georgetown University Law School in Washington, DC, all between 1969 and 1976.
He practiced law in Columbus, including serving as City Attorney for a number of rural communities and in 1978 and 1982 was elected County Attorney of Platte County. He is the founder and president of Community Lottery Systems, Inc. – Lotto Nebraska and co-founder of Community Internet Systems, headquartered in Columbus.
Embedding the Tax Modernization Commission
On the last day to file bills, Senator Schumacher quietly dropped a bill to create a Tax Modernization Commission. At that time, many senators thought they would spend the session wrestling the Governor’s tax reform juggernaut.
Rumors had been circulating since late summer 2012 that the Governor was talking to senators about eliminating income tax in Nebraska. But Schumacher was thinking otherwise about tax reform. “I just thought we couldn’t make big changes to taxes without studying it,” he told The Reader.
Five senators joined him as co-sponsors on the Commission bill (LB 613) at filing; three more joined in following weeks.
Surprisingly, on February 12, Senator Brad Ashford, co-sponsor of the Governor’s tax bills, signed on to Schumacher’s bill, even as the Governor was insisting on swift action on income tax in the 2013 session. Some called further study “Death by Delay” for the Governor’s bills.
Four days later, on February 16, the Governor and Senator Beau McCoy, the introducer of the governor's tax bills, held a rare Saturday media conference call to announce they would withdraw the bills. On the day he killed the tax bills, February 21, McCoy signed on to Schumacher’s Commission bill.
Less Is More
The Tax Modernization Commission bill was heard before the Legislature’s Executive Board. Schumacher had designed a unique Commission, comprised of the Chairs of only certain standing committees of the Legislature, absolutely necessary State staff and only two academic tax experts, to be selected from in-state universities—no expensive tax consultants from places nothing like Nebraska.
The bill provided for both traditional and electronic public participation.
Perhaps anticipating that members of the Executive Board would be thrown by the proposal, Schumacher spoke plainly in introducing the bill. He said his design anticipated a “robust” tax discussion. And it occurred to him to include the Chairs of committees overseeing areas of State government where a lot of money is spent—Education and the Health and Human Services Committees.
He designed the Commission he said, “to create action -- if action is needed --on a relatively short time frame.”
Asked why he had not included the entire Revenue Committee, a more typical approach -- revenue issues go to the Revenue Committee -- Schumacher explained, “A bigger commission is not necessarily a better commission.” And, he said, he wanted to broaden the view of the Commission. He said this wasn’t just about revenue, “this is about financing government.”
He said only what was necessary—extremely unusual in the Legislature—and stood aside for others, who were generally supportive.
Schumacher closed, observing that the discussion of taxes was not an academic exercise, that mere legislative talk created uncertainty among investors. He advised that the Commission must operate and act with reasonable speed.
And when he said it, it seemed possible.