Legislature(2003 - 2004)

03/22/2004 01:42 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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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