Legislature(2021 - 2022)ANCH LIO DENALI Rm
10/14/2021 10:00 AM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB141 | |
| HB4005 | |
| Presentation(s): Local Sales Taxes in Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 141 | TELECONFERENCED | |
| *+ | HB4005 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 4005-STATE SALES AND USE TAX
10:27:41 AM
CHAIR SPOHNHOLZ announced that the next order of business would
be HOUSE BILL NO. 4005, "An Act relating to a state sales and
use tax; authorizing the Department of Revenue to enter into the
Streamlined Sales and Use Tax Agreement; and providing for an
effective date."
10:28:15 AM
REPRESENTATIVE GERAN TARR, Alaska State Legislature, prime
sponsor, presented HB 4005. She summarized a PowerPoint
presentation, titled, "HB 4005 Statewide Sales and Use Tax"
[hard copy included in the committee packet]. Beginning on slide
2, she expressed her concern that a cut to the dividend was a
regressive option that would disproportionally affect middle
income families the most. She turned to slide 3, highlighting
conclusions made by the Institute of Social and Economic
Research (ISER) on the economic impact of PFD cuts. She
proceeded to slide 4, which read as follows [original
punctuation provided]:
Concepts for HB 4005
upsilon Lessons from 2017
upsilon Spreading burden among all who benefit from public
services upsilon Getting comfortable with a sales tax
upsilon Who pays and how soon
upsilon Deductions
upsilon Management
REPRESENTATIVE TARR advanced to slide 5, which read as follows
[original punctuation provided]:
Lessons from 2017
upsilonHouse Majority passes 4-part Fiscal Plan
upsilonZero support from Senate Majority leads to failure
upsilonGovernor must support proposals forwarded by
legislature
REPRESENTATIVE TARR continued to slide 6, which read as follows
[original punctuation provided]:
Do you want only Alaskans to contribute to public
services? No!
upsilon Everyone who use benefits from public services should
have a way to contribute
upsilon Population of Alaska (733,000) is a medium size city
in lower 48
upsilon Denver, Seattle, San Francisco, Indianapolis,
Charlotte, Columbus, Jacksonville, Fort Worth, and
Austin are all around or more than our entire
population of 733,000
upsilon Very large state (2.5 times the size of Texas, the
next largest state and Texas, California, and Montana
combined are all smaller than Alaska)
upsilon 20% of workforce is out of state residents and 2.26
million visitors (2019)
REPRESENTATIVE TARR continued to slide 7, which read as follows
[original punctuation provided]:
Getting Comfortable with a Sales Tax
upsilon 45 other states have statewide sales and use tax
upsilon 21 with Democratic Governors
upsilon 24 with Republican Governors
upsilon Alaskans spend more on domestic travel than residents
of any other state
upsilon Hawaii 4% GET plus legislature authorized
counties to collect surcharge
upsilon City and County of Honolulu: 0.5% effective
January 1, 2007 to December 31, 2030
upsilon HONOLULU (KHON2) Counties are poised to
increase hotel room taxes up to 3%. It is a move
that affects not just visitors, but also many
Hawaii residents. Tourism experts said Hawaii
hotels already add 15% in taxes to the hotel room
rates. That will soon go up to 18%. (Jul 8, 2021)
10:37:57 AM
REPRESENTATIVE SPOHNHOLZ was usure how domestic travel related
to the sales tax proposal.
REPRESENTATIVE TARR pointed out that when Alaskans travel to
other paces, they are contributing to those economies.
Similarly, she argued that visitors to Alaska should be
contributing to Alaska's economy. She resumed the presentation
on slide 8, which provided a table of who would be affected by
various tax proposals, how much they would pay, and how soon
revenue would be collected. She addressed exemptions on slides
9-10, which read as follows [original punctuation provided]:
Exemptions
upsilon Don't want to disproportionately burden rural
communities and lowincome (sic) families
upsilon Exempt basic essentials
upsilon Food from grocery store
upsilon Medicine, including medical services, drugs,
durable medical equipment, mobility enhancing
equipment, and prosthetic devices
upsilon Child care services
upsilon Feminine hygiene products (No Period tax!)
Exemptions
upsilon Some deductions must be included
upsilon State can't tax feds
upsilon State or an instrumentality of the state
upsilon Others included could be considered or expanded
upsilon Financial services
upsilon Non-profits (now just 501(c)(3) (there are 29
501(c) categories)
REPRESENTATIVE TARR proceeded to slide 11, which read as follows
[original punctuation provided]:
Management (new version)
upsilonMunicipalities and Boroughs levy the tax, collects it
and remits to state
upsilonExemptions for local sales and use tax can be
different from state
upsilonNeeds to be reauthorized every 7 years
10:48:03 AM
REPRESENTATIVE TARR advanced to slide 12, which read as follows
[original punctuation provided]:
One part of a seven-part Fiscal Plan
REVENUE GENERATION:
upsilon HJR 7: The constitutional amendment protecting the
Permanent Fund by changing to the percent of market
value (POMV) management, limiting the annual draw to
5%, and saying there shall be a dividend as provided
by law (introduced by Governor Dunleavy on February
18, 2021).
upsilon HB 73: Legislation that establishes a 50/50 split
between government expenditures and dividends for the
annual draw (introduced by Governor Dunleavy on
February 18, 2021).
upsilon HB 104: Legislation that increases the base tax rate
per gallon for four separate motor fuels (8 cents for
highway, 5 cents for marine, 4.7 cents for aviation,
and 3.2 cents for jet, introduced by Representative
Josephson on February 19, 2021).
upsilon HB 130: Legislation that closes tax loopholes in
Alaska's corporate income tax structure (introduced by
Representative Wool on March 10, 2021).
NEW LEGISLATION:
upsilon HB 4004: Legislation that increases the minimum tax
on oil and gas from 4% to 6%, suspends all other
components of the oil and gas tax until December 31,
2024, (introduced by Representative Tarr on August 30,
2021).
upsilon HB 4005: Legislation establishing a sales tax which
exempts food for groceries, heating oil, health care
services (including services at a health care
facility, drugs, durable medical equipment, mobility
enhancing equipment, and prosthetic devices, childcare
services, feminine hygiene products), among other
exemptions (introduced by Representative Tarr on
August 30, 2021).
BUDGET REDUCTIONS:
upsilon Address five major public health and public safety
crisis of child abuse, domestic violence, sexual
assault, mental health, and substance misuse
REPRESENTATIVE TARR advanced to slide 13, which read as follows
[original punctuation provided]:
Impact to Alaskans 2% general sales and use tax
In terms of the impact to Alaskans, here are some
estimates
PFD $2350 per person (50/50 plan)
Fuel Tax - $32 for every 10,000 miles driven in a car
with 25 mpg
Sales Tax - $200 for every $10,000 in spending on
taxable items
Total = $2118 after paying taxes
Double the tax burden
PFD $2350 per person (50/50 plan)
Fuel Tax - $64 for every 20,000 miles driven in a car
with 25 mpg
Sales Tax - $400 for every $20,000 in spending on
taxable items
Total = $1886 after paying taxes
Hypothetical family of four is better off by $4,450
with sales tax, does not children
REPRESENTATIVE TARR concluded on slide 14, which read as follows
[original punctuation provided]:
Other Considerations
upsilon Is state management necessary?
upsilonLessons learned since 2015 and online sales tax
Nils Andreassen of AML to speak to this issue
upsilon Should all 501(c) organizations be exempt?
upsilon29 different categories- did not change in this
version
upsilonVolunteer fire departments (could be (c)(3)
or (c)(4)
upsilonVeteran organizations (c)(23)
10:53:06 AM
REPRESENTATIVE JOSEPHSON asked why the legislature should invest
energy into this proposal given the likelihood that the governor
would veto it. He further noted that the legislation lacked a
companion bill in the Senate.
REPRESENTATIVE TARR suggested that several senators had
indicated interest in this proposal; however, she was unsure
whether a companion bill would be introduced. She conveyed that
she had asked the governor to indicate his willingness to
support a sales tax, adding that she wished such a statement had
been made by the administration.
REPRESENTATIVE JOSEPHSON expressed his concern that the
legislation was being proposed as part of a seven-part plan. He
was unclear on how that could be accomplished.
REPRESENTATIVE TARR relayed that recently, people seemed to be
more willing to consider proposals that that they may not align
with. She said, "[We're] just getting to a place where we just
need to do something."
11:00:59 AM
REPRESENTATIVE TARR, in response to a question from
Representative Prax, said her intention was that businesses
would not pay sales tax when purchasing something they would be
selling. She continued to explain that businesses would obtain
a seller's permit.
11:04:04 AM
REPRESENTATIVE WOOL expressed his concerns with the proposal and
asked for specifics on what kind of items and services would be
taxed. He pointed out that prices in rural Alaska were already
high and opined that the addition of a sales tax would be
extremely regressive. He recalled a slide from a prior
presentation on HB 37 that highlighted data from ISER and ITEP,
indicating that those who make less than $100,000 per year would
pay more on a sales tax than an income tax. He noted that 81
percent of Alaskans make less than $100,000 annually. He
maintained his concern about the regressivity of the proposal.
He discussed the impact of dividend cuts and wondered how the
bill sponsor would acquiesce to the various exemptions that many
groups would lobby for.
REPRESENTATIVE TARR acknowledged his concerns. She discussed
the impacts that government shutdowns have on state employees.
She reiterated that the state could bring in $300 million in new
revenue while keeping food, medicine, and heating oil exempt.
She suggested adding essential items for children, such diapers,
to the list of exemptions.
11:15:31 AM
CHAIR SPOHNHOLZ, directing her question to Ms. Reynolds, asked
whether this proposal could truly be implemented by July 1,
2022, as suggested in the sponsor's presentation.
11:17:01 AM
NICOLE REYNOLDS, Deputy Director, Tax Division, Department of
Revenue, expected a bill such as this to take at least 12 months
to implement.
CHAIR SPOHNHOLZ, referring to the fiscal note, asked whether the
local tax collections reduced the implementation cost and by how much.
MS. REYNOLDS said that change in the legislation did not affect
the fiscal note.
11:18:11 AM
REPRESENTATIVE JOSEPHSON recalled that Representative Tarr had
implied that if HB 4005 had been law, it would have improved the
political impasse that occurred last summer. He asked her to
elaborate on that thought.
REPRESENTATIVE TARR shared her belief that to the extent that
new revenue solves the dividend debate, HB 4005 would be
beneficial.
CHAIR SPOHNHOLZ opined that such a complex piece of legislation
could take years to implement even if expedited by the
department.
11:20:37 AM
REPRESENTATIVE WOOL asked whether the sponsor's constituents
would have reacted differently to the proposal if they knew that
those making under $100,000 would pay more under a sales tax
compared to an income tax. Additionally, he asked whether a
$1,000 increase to the PFD would offset the sales tax.
REPRESENTATIVE TARR said a dividend of over $1000 would offset a
sales tax; further, she acknowledged that her constituents
preferred an income tax.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4005 Sponsor Statement.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| HB 4005 Sectional Analysis.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| HB 4005 Fiscal Note - DOR.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| HB 4005 Supporting Documents.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| AML Presentation - Local Sales Taxes, 10.14.21.pdf |
HW&M 10/14/2021 10:00:00 AM |
|
| CS for HB141(W&M) v. D.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB 141 |
| HB 141 Fiscal Note, 5.3.21.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB 141 |
| HB 141 Sponsor Statement.pdf |
HW&M 4/29/2021 11:30:00 AM HW&M 10/14/2021 10:00:00 AM |
HB 141 |
| HB 141 Sectional Analysis. v.D.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB 141 |
| HB 141 Explanation of Changes, v.G to v.D.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB 141 |
| HB 4005 Presentation, 10.14.21.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| HB 4005 COST Testimony 10.13.21.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| DOR Response to HWM 2021.10.28.pdf |
HW&M 10/14/2021 10:00:00 AM |