Nebraska has no state debt, pays no bond interest and has reduced property taxes a third within the last ten years
R. A. FARQUHARSONSeptember11938
No Debt Here
R. A. FARQUHARSON
NEBRASKA, a purely agricultural state in almost the exact centre of the United States, prides itself on what it hasn’t got.
Nebraska has no debt. It has no sales tax, income tax, cigarette tax, or any of the other special taxes which have become so common in recent years.
Furthermore, property taxes have been reduced one third within the last ten years.
The forty-seven other states owe two and a half billion dollars in long-term debts. But Nebraska, having no debt, no bonds, hasn’t a cent to pay in interest.
And now Nebraska is so proud of its public frugality that it boasts it is the White Spot on the black tax map of North America.
I motored to Nebraska, to find out how the state got that way. Naturally, I was interested in roads. So are many other people.
One of the first persons I met in the beautiful capitol at Lincoln was Señor Podeska, of the Argentine Highways Department, who is spending the summer copying the Nebraska highway system.
Nebraska gets more road for less money than any other American state, he told me, and his observations were backed up by other engineers. The state’s road system— 8,000 miles of surfaced roads built, without borrowing, at a cost of $111,000,000 -has drawn curious engineers from South Africa, Australia, Brazil and Cuba.
Nebraskans are proud of their economies in road building. It was a drug clerk who first told me that Nebraska could build one of its black top roads clear across the White Spot for the annual interest bill neighboring Iowa pays on its $97,000,000 highway debt.
Nebraskan roads are smoother than the highways of Manitoba which lies due north. They compare favorably with anything except the most densely travelled highways of Canada. And dense traffic is not one of Nebraska’s problems. In its 77,000 square miles there are 1,364,000 residents, and tourists see the state only en route to somewhere else.
Nebraskan roads are just a sample of the inbred public economy in Nebraska, the dislike of debt which finds a personal as well as public expression. Though there is a motor car for every 3.3 persons, fewer are bought on installments than in any other state in the union.
Nebraska does not undertake what it cannot afford. Wedged between South Dakota and Kansas it is on the pathetic edge of the United States dust bowl. Drought and grasshoppers will have to be forgotten before the state can raise its standards without raising taxation.
The Grasshopper Constitution
AS A matter of fact, Nebraska is free of state debt because it w'as plagued with grasshoppers. The constitution was drafted in the seventies, just after the grasshoppers had destroyed a promising crop. The pioneers feared the combination of debt and crop failure, so the debt ban was anchored in the constitution.
And just as a reminder of the reason for no debts, a grasshopper last summer flew in the window of the governor’s magnificent office and ate a hole in Nebraska’s most expensive curtains. The hole is still there. The governor says the state can’t afford a new curtain.
But a freedom from debt as old as the state is hardly new enough to create the present interest in Nebraska which has drawm feature w'riters from all parts of the country and put the White Spot in the movie newsreels.
It is Nebraska's ability to reduce taxes when taxes are climbing everywhere else, its successful insistence on carrying on without new taxes, which has roused the interest of weary taxpayers outside the White Spot.
Nebraska wasn’t always that way. The state was free of debt, but the cities and counties were not. In the lush days leading to 1929 they did their best to make up for the state’s lack of debt. And when the crash came, the cost of government rose as the taxpayers’ income dropped.
In Omaha, the largest city, with a population of 200,000, and in Lincoln, the state capital, the story was the same as in Vancouver and Halifax, Montreal and Winnipeg.
But the businessmen did more than talk about taxes.
Nebraska has no state debt, pays no bond interest and has reduced property taxes a third within the last ten years
In 1932 the taxpayers turned. They organized on nonpolitical lines and educated the voters so effectively that now economy pays in politics—even in city hall politics.
They didn’t talk about guarding the public treasury. They talked instead of guarding private pocketbooks; about “pick pocket” taxes.
They employed investigators to study the publicaccounts. They listed high-cost counties and low-cost counties, and figured out what government inefficiency was costing individual taxpayers.
They found that the cost of stationery, of fence posts, of road work, varied ridiculously; that the same supplies cost 570 per cent more in a high-cost than in a low-cost county.
So they drove their lesson home in terms of fence posts rather than millions. They kept away from big, puzzling figures beyond the reach of the individual taxpayer’s pocketbook.
Frank G. Arnold, a stocky real estate man, led the fight. Since 1932 he has been president of the Nebraska Federation of County Taxpayers’ Leagues which has eighty-four branches. Of the ninety-three counties, seventy-seven are now free of debt, and the total of bonded indebtedness has dropped from $113,000,000 to $79,000.000.
Arnold is now out in Colorado, demonstrating, at the request of that state, how its various governments are wasting $40,000,000 a year in tax money.
As an example of what tax crusaders can accomplish, take the case of Omaha. Nebraska’s only industrial centre, where Walter Pierpoint, president of the Association of Omaha Taxpayers, has led the fight.
A A HI EN the campaign started in 1932, Omaha and W Douglas County had a combined debt of $30.100,000. Here is the record: the debt has been reduced some
$7,000,000; not a new' bond has been sold since 1932; it is now illegal to issue bonds without a vote of the people; assessment has been reduced thirty jx-r cent; no new taxes have been added.
Said Mr. Pierpoint: “We have taught the voters that a bond issue is more than a mortgage on the city hall. It is definitely a mortgage on their own homes. When any expenditure is suggested, we ask the citizens if they want it enough to mortgage their own homes for it. We have found that the best way to rouse public pressure against spending proposals.”
Taxes are all earmarked in Omaha and throughout Nebraska. The taxpayer knows to a mill where his money is going. He can’t help knowing. It is not only printed on the tax bills, it is printed on the front pages of the newsConlinued on page 31
No Debt Here
Continued from page 13
papers and broadcast over the radio. In the state of mind built up in Nebraska, everything connected with public expenditure is big news and is treated as such. Mr. Pierpoint showed me thirty-eight huge scrapbooks covering the last five years, to prove it.
Furthermore, there is no lumping of revenue in a general pot and no switching of appropriations from one department to another.
This applies to counties and cities as well as to the state. Counties have been recent transgressors, and at the last session of the legislature the Tax leagues succeeded in having some teeth added. Any county official who now exceeds his budget item is guilty of a misdemeanor with a stiff fine and removal from office upon conviction. Furthermore, a contract now made in excess of the budget figures, is invalid.
As the leagues swept along in their lusty campaign to reduce taxation, they found that city, county and state taxes were so closely related that, if their drive was to be a success, it would have to take in all spending bodies.
As the campaign broadened, all public bodies began to feel the squeeze of taxpaying opinion, at last decidedly vocal.
A change came in both politics and politicians. In 1934 Robert Leroy Cochran was taken from his job as State Engineer— senior civil service post in Nebraska—and shoved into politics.
Now, Governor Cochran is definitely the central figure in the White Spot. He seems to epitomize the whole philosophy that has made Nebraska a taxpayers’ oasis.
Nebraskans are proud of their frugality and proud of their frugal governor. This feeling seems to run through all classes.
Even the waitresses will tell you they have good government in Nebraska.
“He’s more than a governor. He knows how to run the state’s business,” the brunette at the Cornhusker remarked at breakfast just before I had my first interview with Roy Cochran.
Born in a sod house, the governor practices in the Executive Mansion the thrift he learned in his youth. High cheek bones, bushy eyebrows, tight lips, strongly suggest the Scot, though he never saw Scotland.
Lacking faith in his ability ever to be able to make a speech, the governor switched from law to engineering and hence got into politics Soon he was State Engineer. He built the state roads that have aroused international attention. He built the famous state capitol—one of the continent’s great buildings —and was $235,000 inside the $10,000,000 appropriation. He still dislikes speaking, but every Sunday afternoon he talks into the microphone and never talks politics. He speaks only on the functions of government and taxes, and he has become the state’s leading radio speaker.
The capitol building, incidentally, is one of Nebraska’s debt-free assets. It always has been debt free. It took ten years to build, but each year’s construction was paid for out of that year’s current state revenue.
When he ran for office, Roy Cochran made only one promise—no new taxes for Nebraska. Since then a wave of new taxes has swept the other states, rushing to keep abreast of New Deal developments. Governor Cochran has maintained his promises. Like other states, Nebraska has adopted old-age pensions, but the money has been found without new taxes.
No Hidden Taxes
UNDER the Nebraskan system the governor prepares the budget which can only be increased by a sixty per cent vote of the legislature. The budget is made
up for two years, and under the new con-
stitution the one house legislature sits only every second year. Thus the governor is left free most of the time to carry on the state’s business.
There has never been an overdraft on a Cochran budget. The governor does not believe in hidden taxes. They should be» direct and painful, he told me. An added tax is to him only an eventual added expenditure. The soak-the-rich philosophy of many politicians ends, he believes, by soaking all the taxpayers.
“Keep taxes painful and you build up a public pressure against new expenditures,” he said.
Nebraska’s tax system is simple and direct. To finance the current $30,500,000 state budget there is first a state property levy of 2.54 mills. Collected with this is a levy on personal property—motor cars, furniture, money in the bank, stocks, bonds.
Then there is the gasoline tax of five cents a gallon. It is the most productive impost in the state and netted last year $11,200,000.
On every citizen between the ages of twenty-one and fifty a two-dollar poll tax is collected.
Liquor taxes yielded $1,800.000 in 1937.
Such are the main sources of revenue in Nebraska, without taking into account the increasingly large federal grants Succession duties are almost nominal, bringing about $100,000 a year.
Every time a new service is added in Nebraska, the amount it costs is noted on the tax bills. The voters can figure exactly what the pet scheme of any politician will cost them individually. Perhaps it is no wonder that every economy move evokes cheers.
But Nebraska’s adventure in tax cropping has not been entirely free of criticism. Judged by Canadian standards the state lags in its social service work, its education, its public health system. Even in Nebraska there are those who say that in this regard the White Spot is the nation’s black spot.
The governor resents this. When I questioned him closely about public health and education, he said:
"You and I may argue about what services a state should provide, but when you are poor and there is only so much money to go around, you should cut your standards to your resources. There are many things we would like to have in Nebraska, but we are not having what we cannot afford. There is such a tiling as providing relief by relieving the taxpayer.”
So Nebraska leaves public health to the counties, just as it leaves relief. It provides state hospitals for the insane and the tubercular, but it does nothing toward free serums, toxoids and clinics.
The governor is firm in his views about relief. He insists that it be kept as close to the taxpayers as possible. “The farther away you move relief, the more the pressure grows; the larger the relief bills mount. And the more attractive relief is. the more people will find a way to get on the relief rolls.”
Schools, the Scapegoat ?
GOVERNOR Cochran’s chief critics are in university and educational circles. The schools, they say, have been the scapegoat to satisfy the insistent demands for tax reduction. The primary need, they argue, is a reasonable plan of state aid. Nebraska school grants are almost negligible.
In university circles, where the financing is done directly by the state, there is a rumbling against economy. One professor said that Governor Cochran was more than thrifty. He was downright tight. Th« governor pointed to Nebraska's
standing as second in literacy in the United States. “Our educational system cannot be so bad after all,” he remarked.
Regarding the professor’s complaints, he expressed regret that so many had been lost to Nebraska because of the inability to pay higher salaries. “But haven't you a similar problem in Canada?’’ he asked. “Don’t you lose good men to wealthier institutions?”
Alone of all the states, Nebraska is chary of the gifts that the New Deal is so eager to make. Not that Nebraska hasn’t
accepted its full share of federal assistance, but it has been exceedingly cautious about embarking on the various dollar-for-dollar projects.
As one official remarked, federal funds establish expensive activities that cannot easily be discontinued, and Nebraska
does not want * i left holding the bag.
So, as Tble, the PWA and the
WPA, ar ' et— 1er alphabet funds, have been expended i.t ways that are not habitforming.
What suits Nebraska may not be ideal for Canada. But Nebraska's attitude toward debt and taxes has made possible a form of relief unknown in Canada— relief for the taxpayer.
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