03/21/2002 03:35 PM Senate STA

                                                                                                                                
                        HJR 35-REPEAL ESTATE TAX                                                                            
                                                                                                                                
HEATH HILYARD, staff for Representative Jeannette James,                                                                        
introduced HJR 35 and read the following into the record:                                                                       
                                                                                                                                
      This  resolution  is  similar  in wording   and intent  to  HJR
  introduced  by  Rep.  Coghill   in the  first  session   of                                                           
      the  twenty  first  Alaska  Legislature.     The major  reason                                                            
      we've  chosen   to  revisit   this  issue  is  that   in 2001,                                                            
      President   Bush  signed  into  law  a  tax  relief   act  that                                                           
      included  a  temporary   repeal  of  the  Death  tax  and  that                                                           
      repeal sunsets in 2010.                                                                                                   
                                                                                                                                
      To  address  some  of  the  technical   elements   of  the  new                                                           
      provisions   I have  included   with my  sponsor  statement   a                                                           
      timeline,   prepared   by   Deloitte   &  Touche   LLP,  which                                                            
      demonstrates   the graduated   decline  in  tax rates  and  the                                                           
      increasing   exemption   levels   as  a  result  of  the   2001                                                           
      law.    Alaska   currently   has   its  own   Estate  tax   (AS                                                           
      43.31)  and our  rate,  and  thus the  revenue  generated,   is                                                           
      driven  by the  federal  law.   According   to Brett  Fried,  a                                                           
      tax   economist    with   the   Alaska   Dept.   of   Revenue,                                                            
      regardless  of  whether  or  not the  federal  repeal  becomes                                                            
      permanent,   the   temporary   repeal   will  cause   Alaska's                                                            
      revenue stream from this tax will dry up by FY06.                                                                         
                                                                                                                                
      In the  same  study  cited in  the  sponsor  statement,  using                                                            
      very  sophisticated   econometric   models,  analysts  believe                                                            
      that  had  the  tax  been   repealed   in  1996  the  nation's                                                            
      economy  would  have  yielded  an average   of $11  billion  in                                                           
      additional   output,   created  an  average   of  145,000   new                                                           
      jobs,  and  personal   income   would  have  increased   by  an                                                           
      average  of  $8  billion   over  the  following   nine  years.                                                            
      The overall   increase  in the  national  economy   would  have                                                           
      created   enough   additional   revenue   to  compensate    for                                                           
      that which had been generated by the tax.                                                                                 
                                                                                                                                
      In a  statement  of  support  from  NFIB  Alaska  for  HJR  35,                                                           
      the  NFIB   states,   "In   addition   to   the   tax  itself,                                                            
      thousands  of  small  businesses  are  impacted  each  year  by                                                           
      expensive  fees  paid  to attorneys,   accountants,   and  life                                                           
      insurers  necessary   to prepare  for  an eventual   death  tax                                                           
      debt."    Further,   an  article  appearing   in  Farm  Bureau                                                            
      News  published   by  the American   Farm  Bureau   Federation                                                            
      states   "many  farmers   and  ranchers   feel   compelled   to                                                           
      spend  money   for  estate   planning,   an  expense   that  is                                                           
      drain  on ongoing   farm  operations."    In  addition  to  the                                                           
      NFIB,   efforts   to  permanently    repeal  this   tax  enjoy                                                            
      broad   support   from   the   National   Black    Chamber   of                                                           
      Commerce,   the  National   Association   of   Women  Business                                                            
      Owners  and  the   National  Congress   of  American   Indians                                                            
      among others.                                                                                                             
                                                                                                                                
      As  indicated   in  the  sponsor  statement,   not  only   does                                                           
      the  death  tax  disproportionately    tax  several   specific                                                            
      demographic   groups,   it  also  does  not  justify   its  own                                                         
      existence   from  a  fiscal   perspective    costing   more  to                                                           
      collect than the revenue it generates.                                                                                    
                                                                                                                                
      Finally,  I  will  leave  with  a quote  from  President   Bush                                                           
      in   a   speech    given    this    week   to    the   Women's                                                            
      entrepreneurship    summit,   "We  must  make  the  repeal   of                                                           
      the  death  tax  permanent.     I call  upon  Congress   to  do                                                           
      this immediately."                                                                                                        
                                                                                                                                
CHAIRMAN    THERRIAULT   asked   whether    the   phone   call   that   was                                                     
scheduled   for   the  following   day   from  Speaker   Hastert   was   in                                                     
regard  to  the  national   effort   to permanently    repeal  the  estate                                                      
tax.                                                                                                                            
                                                                                                                                
                                                                                                                                
REPRESENTATIVE    JEANNETTE   JAMES,   resolution   sponsor,   replied   it                                                     
was  for  that  purpose  and  she  had  already  had  one  teleconference                                                       
meeting with the U.S House on the issue.                                                                                        
                                                                                                                                
CHAIRMAN  THERRIAULT   stated  that  his  office  received  a notice  that                                                      
contained   a copy  of a suggested   resolution   for the  Legislature   to                                                     
consider.    He  asked   whether    HJR   35  contained    the   suggested                                                      
language.                                                                                                                       
                                                                                                                                
MR.   HILYARD   replied    that  legislative    legal    had  that   basic                                                      
document when they drafted the resolution.                                                                                      
                                                                                                                                
CHAIRMAN   THERRIAULT   noted   there  was  a  zero  fiscal   note.  There                                                      
were no further questions or additional testimony.                                                                              
                                                                                                                                
CHAIRMAN   THERRIAULT   disclosed    his  wife  is  an  attorney   with   a                                                     
master degree in tax issues.                                                                                                    
                                                                                                                                
REPRESENTATIVE    JAMES   announced    she  changed    the  name   of   the                                                     
resolution to "Repeal Estate Tax" from "Repeal Death Tax."                                                                      
                                                                                                                                
CHAIRMAN THERRIAULT said he appreciated the change.                                                                             
                                                                                                                                
There was no prepared CS and no proposed amendments.                                                                            
                                                                                                                                
He asked for the will of the committee.                                                                                         
                                                                                                                                
Senator   Davis  made  a  motion  to  move  HJR  35  am  and  zero  fiscal                                                      
note from committee with individual recommendations.                                                                            
                                                                                                                                
There being no objection, HJR 35 am moved from committee.