Legislature(2015 - 2016)BILL RAY CENTER 208
05/27/2016 03:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4003 | |
| HB4005 | |
| HB4006 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB4005 | TELECONFERENCED | |
| *+ | HB4003 | TELECONFERENCED | |
| *+ | HB4006 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 4003
"An Act relating to the motor fuel tax; and providing
for an effective date."
3:13:56 PM
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, explained that the provisions in HB
4003 were identical to provisions in HB 4001 pertaining to
motor fuel tax. He relayed the bill would increase current
tax rates for highway fuel from 8 cents to 16 cents; for
marine fuel from 5 cents to 10 cents; for aviation gas from
4.7 cents to 7 cents; and for jet fuel 3.2 cents to 6.5
cents. He reviewed the sectional analysis (copy on file):
· Section 1: Amends AS 43.40.010(a) Changing the tax
rate from eight cents to 16 cents per gallon for
highway fuel, from four and seven tenths cents per
gallon to seven cents per gallon for aviation
gasoline, from five cents to 10 cents per gallon for
fuel used in watercraft, and from three and two-tenths
cents per gallon to six and one-half cents per gallon
for aviation fuel other than gasoline.
· Section 2: Amends AS 43.40.010(b) to conform with
changes made in Section 1.
· Section 3: Increases the credit against the motor fuel
tax from six cents to 12 cents for fuel used for non-
highway uses.
· Section 4: Makes the change in sections 1, 2, and 3
applicable to fuel sold after the effective date of
those section.
· Section 5: Allows the Department of Revenue to adopt
regulations to implement the provisions of this Act.
· Section 6: Is an immediate effective date for Section
5.
· Section 7: Provides for a July 1 effective date for
the changes to the motor fuel tax.
3:16:08 PM
Representative Wilson asked how the bill would impact the
mining and fishing industries. She spoke to jet fuel and
relayed the international airports currently took over $32
million in excess, which would not be used in Anchorage or
Fairbanks and went to smaller airports. She asked if there
had been any determination on why "this is better than
landing fees on those small airports" versus increasing the
jet fuel tax.
Mr. Burnett responded that the aviation advisory committee
had recommended (after the Department of Transportation and
Public Facilities' (DOT) recommendation to implement
landing fees in airports other than Anchorage and
Fairbanks) an increase in the aviation fuel tax rather than
landing fees.
Co-Chair Thompson relayed that there were testifiers
available from DOT.
Representative Wilson noted that a group had gotten
together and had decided they still did not want landing
fees; therefore, they recommended increasing jet fuel. She
explained increasing jet fuel [tax] increased cost at the
two airports that already had landing fees [Anchorage and
Fairbanks]. She wondered how it was fair to put more stress
on the international airports that were self-sustainable
versus implementing landing fees at smaller airports or
exempting the international airports.
JOHN BINDER, DEPUTY COMMISSIONER, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES (via teleconference),
clarified his understanding that the question was about why
DOT preferred a fuel tax over a landing tax.
Representative Wilson asked if the department supported the
legislation.
Mr. Binder answered that the governor had tasked DOT with
investigating ways to reduce the amount of General Fund
(GF) subsidies to the rural airport system. He detailed
that the rural airport system cost about $39 million to
operate annually and brought in $5 million in revenue. The
conversation had begun approximately 1.5 years ago when the
legislature had asked DOT to subsidize or fund personnel
increases (at the time operations had been increasing -
significant overtime had been occurring and carriers had
been requesting extended hours at the airports, which
required personnel) with landing fees. He furthered that
the aviation advisory board had asked the governor to
engage with DOT on other available options for generating
revenue. He detailed the conversation had built over the
past year about what options were available and what made
sense. He continued that board members had raised concerns
about equitability and fairness across the state rather
than at a specific airport. The board felt that due to the
impact on the state, since aviation fuel taxes were already
in place and were some of the lowest in the country, the
board believed it would be the best way to generate
additional revenue on the rural system to close the subsidy
gap. The board recommended an increase up to 7 cents [note:
some audio indecipherable], which was the foundation for
the governor's inclusion of the tax increase in the current
bill.
Co-Chair Thompson shared that about 2.5 years back he had
chaired the finance transportation subcommittee and had
requested the department come back with some way to help
cover the exorbitant cost of keeping 249 airports open
without any money to offset.
Representative Wilson relayed she had found it upsetting
when she had called DOT to try to determine how much
general funds were used at every airport - she had been
unable to get an answer. For example, she had been told
that a lump sum of money was sent to the northern region
and there was no way of tracking what went to the highway
and the airports. She opined that it was pretty scary if
that was the way the state handled business. She asked if
the department would be in favor of excluding the
international airports from the tax, given they were
already self-sufficient. She did not have a problem with
the option for other airports. She was concerned that the
bill would put more stress on the larger airports to
subsidize the smaller airports.
Mr. Binder responded that domestic traffic would be
impacted by the aviation fuel tax since the international
traffic was exempt already - it was about three-fourths of
the total figure and impacted the amount of revenue
generated [note: poor audio quality, some testimony
indecipherable]. He pointed out that the international
airports were directly benefiting from rural Alaska. He
stated that while the fuel tax was being collected in
Anchorage and Fairbanks and then flowing back to the rural
system, the international airports were directly
benefitting from the operations even if they did not
actually weigh in.
3:24:01 PM
Representative Wilson was concerned about actually looking
at the users being able to support the industry. She
clarified she was not speaking to the benefit. She noted
she would offer an amendment to exempt the international
airports from the tax. She furthered that the landing fee
paid for capital projects at present on the two
international airports (the airports also operated domestic
flights). She asked if the department had modeling to show
how the proposed increases would affect the average person
in the mining, fishing, and other related industries
throughout the state.
Mr. Burnett responded that the modeling primarily looked at
the amount of revenue each of the particular tax increases
would raise (on the existing taxes). He explained that the
subject matter experts and economists in DOR and other
departments believed the increases would have minimal
impact on the business.
Co-Chair Thompson remarked that some modeling had been done
pertaining to a commuter driving into Anchorage from the
valley. The scenario had assumed a certain gas mileage and
a five-day per week commute. He did not remember the
precise numbers, but it had determined the motor fuel tax
increase would cost someone about $48 per year.
Representative Wilson stated that it was not just about the
tax. She stated the committee had heard how low its taxes
were, but that Alaska paid some of the highest gas prices.
She continued there were impacts to everyone and as
investors she believed they should know how the increases
would impact individuals. She stated the addition may be
minimal, but it was necessary to factor in the cost of gas,
the income people brought in, and what else would be
utilized.
3:26:35 PM
Representative Gara referred to the committee's recent
debate about whether there should be a big bill that
included numerous taxes or separate bills for each of the
taxes. He remarked that the administration had tried to
submit individual bills [during regular session], which had
not worked. Subsequently, the administration had introduced
a large bill that included all of the taxes. He believed
the administration was just trying to get something done.
He apologized to Commissioner Hoffbeck that he had become
animated in the previous discussion. He emphasized he
merely wanted to see a bill move forward. He addressed the
fuel tax and relayed the committee had been told that with
the increase in the legislation the state's fuel tax would
still be the lowest in the nation. He asked if the same was
true for aviation fuel.
Mr. Binder responded in the affirmative.
Representative Gara remarked that the high price of fuel in
Alaska had more to do with refineries; however, he
acknowledged it was not the appropriate time to address
that issue. He added that he and others had introduced a
bill that would have dealt with refinery charges. He asked
for verification that the aviation fuel tax increase would
apply equally to all domestic flights including small plane
flights in rural Alaska or flights at larger airports.
Mr. Binder replied in the affirmative. He detailed that
most of the [air] traffic in Alaska used jet fuel [note:
poor audio quality, some testimony indecipherable]. As
written, the bill would apply to everyone in the state
except for international traffic originating or ultimately
landing in a foreign country.
3:30:17 PM
Representative Gara remarked that whether or not people
wanted to agree, the state needed to raise revenue. He
stated the question was about how to raise the revenue and
about how fair it was to everyone. He was leaning in favor
of the legislation. He was concerned that a significant
portion of the burden was falling on individuals with
little money. He wanted to see wealthier individuals
contribute in a commensurate way. Overall he wanted to see
a package that was fair to everyone and more balanced.
Co-Chair Thompson referred to a prior presentation on HB
4001, which had demonstrated how the proposed motor fuel
tax increase would impact Alaskans. For example, a typical
person driving 12,000 miles per year in a vehicle getting
roughly 20 miles per gallon, would pay an additional $48
per year in taxes.
Representative Gara referred to a fiscal policy caucus that
had existed before he had served as a legislator. At the
time he had recommended that at high prices when there was
less of a need for money and the price of gas was much more
expensive, the gas tax would roll back. He noted a former
version of the bill had rolled back the gas tax. He wanted
the committee to spend some time considering whether the
approach was fair.
Co-Chair Thompson noted the committee would consider the
bill the following day as well.
3:32:17 PM
Representative Guttenberg acknowledged the state's budget
crisis and noted that the price of motor and aviation fuel
was fairly low. He recognized the bill's goal of increasing
revenue. He mentioned the estimated $48 per driver in
additional taxes per year for motor fuel. He spoke to a
time when the price of gas increased to over $4.00 per
gallon and was concerned the impacts on individuals would
be significantly higher, but the state's needs for raising
revenue would be greatly diminished. He asked if the
administration had considered rolling back taxes at
different stages if the oil price increased to $80, $90, or
$110. He had heard questions about how the state would
account for the price difference between Southcentral and
Northern Alaska regions. He contended it was not difficult
to draw a line around Paxson or Trapper Creek and Cantwell.
He detailed rural Alaska would be paying the same hit two
or three times the amount impacting the road system.
Mr. Burnett answered that the House and Senate
Transportation Committees had both included a price trigger
in the legislation; however, the governor's legislation had
never included a price trigger. He detailed that in 2008
when the price of oil hit its record high, the legislature
acted to suspend the gas tax for one year, which was always
an option in periods of excess prices. He relayed the issue
was not a concern included in DOR's 10-year revenue
forecast.
Representative Guttenberg thought the best time to do
something was when there was no pressure on it. He would
look at bringing some of the things back.
3:35:13 PM
Representative Wilson asked how the increase would impact
the trucking industry in Alaska. She remarked that most of
the goods were trucked into Fairbanks.
Mr. Burnett responded that he did not have any estimates on
hand related to shipping rates. The department had looked
at how much fuel someone may use and what that would
affect. He detailed the change in taxes was less than the
change in the last month in fuel prices in most of the
state's communities. He remarked there were not changes in
shipping rates every time gasoline or diesel increased or
decreased 8 cents. He stated it was very difficult to tell
what the impact would be over time. He continued it was
possible to identify the costs to a specific company, but
it was not possible to know how it would impact prices.
Representative Wilson hoped to hear about the impact from
the trucking industry, which had pulled its support from
the bill. She believed the administration was asking the
legislature to make a decision without all of the
information. She wanted to know how the motor fuel, jet,
and other taxes would impact her constituents. She remarked
that many goods were either flown or trucked in from
Anchorage. She opined the impact would be very different in
communities across the state. She believed the answers
should be known.
Representative Edgmon spoke to the art of raising taxes. He
wondered if there was any way to quantify the cause and
effect of raising taxes on industry, private sector, and
consumer behavior. He assumed the answer was "no." He
surmised there were ways for industry representatives to
provide numbers about what increases to their costs mean in
terms of their economic behavior (their ability to invest
and to go forward to private sector entities). He was
frustrated that levying taxes was inevitable. Additionally,
he was frustrated that the cause and effect relationship
was indeterminate and that the legislature had to rely on
others to tell them. He furthered that even DOR, with its
best quantitative tools, could only give some kind of
extrapolation or estimate about what the tax increases
would mean. He asked if the department had been able to do
the analysis. Alternatively, he wondered if the legislature
would have to rely on others to come forward to specify
what the increases would truly mean.
3:39:02 PM
Mr. Burnett replied that DOR could determine what the cost
would be to an individual or company for any of the taxes.
However, DOR could not determine how people would behave or
change their behavior as a result of the tax. He shared
that he had been a university business instructor in the
past. He relayed there were numerous academic studies on
the topic, but they were not conclusive and would not
provide an answer about what would occur when taxes were
raised.
Representative Gattis referred to the study of Mat-Su
commuters driving an average of 12,000 per year who would
pay an average of $48 more per year [under the proposed
motor fuel tax increase]. She shared that she lived in
downtown Wasilla, which was 55 miles from Anchorage. She
rounded the distance to 50 miles and stressed that a
commute to Anchorage five days per week was more than
12,000. She stated the actual mileage would range between
27,000 and 30,000 not counting any other travel. She
emphasized that the increase would have a bigger impact on
Mat-Su than $48 per year.
Co-Chair Thompson clarified that he had received a sheet
from a former presentation showing that a car driving
12,000 miles per year at 20 miles per gallon, would pay an
additional $48. He explained 12,000 per year was considered
to be the national average for miles put on a vehicle. He
shared that his vehicle was a 2001 and it only had 92,000.
3:41:14 PM
Representative Gattis replied that she had a 2003 vehicle
with over 150,000 miles. She stressed that most of the
miles were not commuter miles. She detailed Mat-Su
residents spent a significant amount of time traveling back
and forth to Anchorage; therefore, there would be a big
impact.
Representative Guttenberg referred to his personal
vehicles. He believed the appropriate term was
"elasticity." He relayed he had recently read an article on
the elasticity in the economy on men's underwear. He
provided further detail about the article. He remarked that
elasticity was a common economic concept. He did not
believe there was no way of measuring the impact of the
proposed tax increases on Alaska. He surmised it was
possible to Google the question and come up with a
multitude of papers. He asked about the effect of the taxes
on the economy. He surmised that at present the impact
would probably be minimal, but if the price ever went to
$100, he believed it would be severe. He stated it was not
rocket science. He underscored that the committee was
asking questions, but was not getting the answers. He was
disinclined to support the bill and had never been inclined
to support it.
Mr. Burnett responded that the elasticity of demand for
motor fuels was very, very low within any relevant range.
The change from 8 cents to 16 cents was unlikely to make
any reasonable change in people's behavior. The price
change from $2.00 to $4.00 was a separate question
entirely. He emphasized the price change as a result of the
legislation would be very low.
Representative Guttenberg responded that he "certainly
recognized that, but you get to a dollar a lot faster and
that's the impact." He furthered that when the price went
to $1.00 because of the increase in the legislation, it
would impact "it faster than it would otherwise." He stated
it made a difference when fuel would be $4.00 or $5.00 per
gallon. He believed the increase in the bill would get to
the higher price faster.
Co-Chair Thompson summarized that the bill would increase
motor fuel tax from 8 cents to 16 cents and the state would
still have the second lowest gas tax in the nation. He
shared he had recently been in California, which had a 52
cent tax; gas in California had been $3.15 per gallon when
it had been $2.30 per gallon in Fairbanks.
HB 4003 was HEARD and HELD in committee for further
consideration.