Legislature(2003 - 2004)
03/22/2004 01:42 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HOUSE BILL NO. 236
An Act imposing a tax on employment; and providing for
an effective date.
Co-Chair Harris MOVED to ADOPT Work Draft 23-LS0921, Version
X dated 3/19/04. There being NO OBJECTION, it was so
ordered.
Representative Hawker announced that Representative Wilson
was unable to attend the hearing and that Mr. Ecklund would
explain the changes in the proposed committee substitute.
MR. PETER ECKLUND, STAFF TO REPRESENTATIVE WILLIAMS, noted
that Version X deletes from Version W the lines 13-28 on
page 2, subsection (d). He explained that this deletes two
triggers: one where the tax would go into effect if the CBR
is less than $1 billion, and the other where the trigger
goes off when the CBR goes higher than $2.5 billion.
Mr. Ecklund noted a change adding new language requested by
the Department of Revenue on page 2, lines 30-31. It states
"The Department of Revenue may, if it will result in cost
savings for the state in the administration of the tax, for
employers in the administration of the tax, or for both."
Mr. Ecklund explained that the Department of Labor receives
federal funds with restrictions on how the monies can be
used, and the department wanted to ensure that the
Legislature would not require it to cooperate in ways that
didn't make sense.
Representative Hawker expressed that the sponsor,
Representative Wilson, is in concurrence with the proposed
changes.
Representative Croft asked what difference the word "may"
makes when the department can do whatever it wants. Mr.
Ecklund affirmed that the Department of Revenue asked for
the language. Representative Croft also questioned the
meaning of the words, "or for both."
Representative Croft asked why the trigger was removed from
Version X. He noted that the billion dollar minimum amount
in the Constitutional Budget Reserve has been important in
the discussions of both Governor Murkowski and the
Conference of 55.
Co-Chair Williams replied that this would generate $42
million a year, and to start up a process and then stop it
would cost more. The people of the state are asking for this
type of tax.
Representative Croft MOVED to ADOPT Amendment #1. Co-Chair
Harris OBJECTED.
Representative Croft explained that his office talked to the
National Conference of State Legislatures (NCSL) about every
state's income tax structure. He noted that 35 states have
some kind of income tax that is graduated, but none have
graduated it downward, or charged a higher percentage for
poorer people. These 35 states adopted the concept that
wealthier people should pay a higher percentage of their
income on an income tax. If each person was taxed $100, as
you go up in income level, it becomes a smaller and smaller
percentage of that income. If a person is extremely wealthy,
it is a miniscule percentage of that income. He is not
proposing any substantive amendments to the bill but feels
it should be titled correctly. He said it should be known
as the only regressive income tax in the nation.
Representative Hawker stated that this bill is known as a
head tax, and he asked the sponsor of the amendment to
consider changing his proposed language to "We've All Got a
Stake in the Future of Alaska Act." He said that's the
point of this bill. It is not designed as a comprehensive
income tax, but as an ante up for participating in the
bounty of Alaska.
Co-Chair Harris asked Representative Croft when the state
passed a school tax and if it was $10 per year for everyone
regardless of income level. Representative Croft affirmed
that it was $10 for everyone. Co-Chair Harris asked if he
thought this is different. Representative Croft said that
at the time, there was a progressive income tax included, so
this is an alternative minimum.
Co-Chair Williams commented that he had suggested a $100
school tax last year when this was introduced.
Representative Croft commented on "class responsibility."
He felt that there is nothing fundamentally unfair about the
idea of upper incomes paying proportionately more.
Conservatives make the argument for a flat tax. He noted
that only regressive ideas are on the table--proposals that
would take from the poorest members of society. He said
that this title is at least honest about what this bill
does. He didn't want this measure to be a "trick" for some
later tax. He thought that this is the only regressive tax
in the nation and it deserves further discussion.
Co-Chair Harris agreed that there's no doubt that the bill
is based on people who earn income. He discussed current
user fees and taxes, noting that poor people pay the same
amount as do rich people. Everyone benefits from education;
he expressed concern that the Legislature can't mandate that
this will go to education, just as it can't dedicate the
Permanent Fund to education. It can be called an education
fund but Co-Chair Harris said that it doesn't guarantee it
will be appropriated to education. It's a user fee.
Representative Hawker commented that the characterization of
this as a regressive device intrigued him. He pointed out
that the bill was crafted to create a huge exemption for
folks who have no jobs and exist purely by subsistence or
public welfare or retirement income. The State is looking at
a basis to generate earnings to support public institutions,
and in this case, the base is the people who are working.
TAPE HFC 04 - 63, Side A
Representative Hawker continued, in aggregate it is a
substantial contribution to education. It seems a reasonable
approach and looks at value for value. It asks working
people to give a small amount back to the state.
A roll call vote was taken on the motion to adopt Amendment
#1.
IN FAVOR: Croft
OPPOSED: Fate, Foster, Hawker, Joule, Meyer, Moses, Stoltze,
Chenault, Williams, Harris
The MOTION FAILED (1-10). Amendment #1 was not adopted.
Vice-Chair Meyer said he would not make an amendment without
the bill sponsor being present. He noted on page 5, line 6
where it says, "the legislature may appropriate the
estimated amounts to be collected and separately accounted
for" under this section for education. He appreciated that
this would go to education. The Legislature has talked
about inflation proofing education for some time, and he
spoke in favor of a source of money to inflation-proof the
Foundation Formula. He said he would like to change the
word "may" to "shall" because it is a little stronger, even
though money can't be dedicated. He would wait to discuss
it with the sponsor.
Discussion ensued regarding whether the language change
would carry any weight.
Vice-Chair Meyer stated his understanding that there would
be legal concerns in charging out-of-state workers twice the
amount charged to in-state workers, or $200.
Representative Stoltze introduced Mr. Bill Sherrill, who
works for the Transportation & Infrastructure Committee in
the U.S. Congress.
BILLIE JO HANSEN, REPRESENTING SELF, VIA TELECONFERENCE,
WASILLA, voiced opposition to the bill because she felt that
it would penalize the retired person who moves off of social
security to work part-time to make ends meet. She thought it
would also penalize motivated youth in the workforce who may
work only one day a week for eight hours. She felt there
are other ways to do this, and it is not appropriate to call
it an education tax. She suggested calling it a work permit
tax and setting it on a percentage rate of income for the
year. She would rather give $100 to a school for her son's
education than to the General Fund when it's not
specifically appropriated to education.
HB 236 was heard and HELD in Committee for further
consideration.
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