Legislature(2003 - 2004)
03/25/2004 01:50 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 236 An Act imposing a tax on employment; and providing for an effective date. Representative Hawker recommended that the bill was ready to move to the House Rules Committee. Co-Chair Harris asked the amount of money a person would have to earn before they were assessed the $100 dollar tax. Representative Hawker replied $600 dollars. Co-Chair Harris voiced concern that a person would have to pay $100 dollars out of $600 dollars earned. He thought that was a substantial amount for a person to have to pay with such a small income. He recommended that the earned amount be raised, having a dramatic effect on someone earning only $600 dollars. Representative Hawker advised that at $600 dollars, the tax would be zero; at $610 dollars, the tax would be $1 dollar. After that, it would be a 10% incremental increase on the next $1,000 dollars earned. An aggregate earnings of $1,600 dollars, the tax is zero for the rest of the individual's earnings. He clarified that in order to pay $100 dollars, the person would have had to make $1,600 dollars. Discussion continued between Co-Chair Harris and Representative Hawker. Co-Chair Harris asked if Representative Hawker would support raising the amount to $1000 dollars. Representative Hawker replied that they had discussed that with the sponsor of the bill and that $600 dollars was agreed upon, and that it is the federal level for recording of self-employment earnings. He stated it was not the substantive issue of the bill. Co-Chair Harris pointed out that the employer would have to deduct the amount from the person's check. Co-Chair Harris MOVED to increase the amount from $600 to $1000 dollars. Co-Chair Williams OBJECTED. Vice Chair Meyer voiced concern with the amount of overhead costs needed to generate such a small amount. He questioned how much the change would impact the total amount generated. MIKE WILLIAMS, (TESFITIED VIA TELECONFERENCE), TAX DIVISION, DEPARTMENT OF REVENUE, ANCHORAGE, advised that the revenue would remain constant whether it comes in at $600 or $1000 dollars because it is a flat tax. The tax would generate approximately $43 million dollars. Co-Chair Harris asked at $1000 dollars, would the Tax Division still need to hire 13 full time and 10 part time employees to administer the program. Mr. Williams replied they would. Regardless of the amount, the administrative structure would remain the same. Co-Chair Harris maintained his motion on the amendment in order that low paid workers would be able to keep all their money. Representative Croft sympathized with the intent of the amendment. He pointed out that the amendment would only help those people earning between $600 and $1000 dollars a year. He did not think that it would be helping anyone except unless there income was very low. He stated that he was most concerned with the person making $12,000 dollars. Representative Croft elaborated that the effort would not have much of an effect on the real people who will be hurt by the bill. A roll call vote was taken on the motion. IN FAVOR: Stoltze, Joule, Meyer, Harris OPPOSED: Chenault, Croft, Foster, Hawker, Moses, Williams Representative Fate was not present for the vote The MOTION FAILED (4-6). Vice Chair Meyer inquired how the person who has multiple jobs would be handled. Representative Hawker responded that the duty to collect is imposed upon the employer until the employee can demonstrate to that employer that they had the full amount withheld from their wages for that year. There could be simultaneous multiple employers or sequential multiple employers. Complete latitude has been given that as soon as an employee can demonstrate that they have paid the $100 dollars, they would have no more withheld. He added that there is a provision that in any case that an employee should overpay the $100 dollars, they could apply for a refund at the end of the year for that overpayment. Vice Chair Meyer voiced concern with that, pointing out that many people have multiple jobs throughout the year. There will be an extra burden placed on the employees to contribute and for them to keep track of that amount. He thought that the bill would create extra work, burden and bureaucracy on the employee. Co-Chair Williams reminisced that he had worked for three employers when the last education tax was in place. He stressed how difficult that had been not receiving the overpaid amount until the end of the year. If he knew that if he could track of the amount as proposed in this legislation, he would have done that. Vice Chair Meyer worried that many of these workers will not keep track of the amount they have paid in. Co-Chair Harris asked if it would take the same number of employees to implement a full-blown graduated income tax. Mr. Williams said it would require a larger number of staff for the income tax, with a full time staff of 80 people. The amount generated would depend on the particular bill in place. Under Governor Knowles' version, the amount generated would have been approximately $350 million dollars. Representative Foster commented on the jobs that he had when he was sixteen years old and the implications of paying that tax had on him. Representative Foster MOVED to report CS HB 236 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 236 (FIN) was reported out of Committee with "individual recommendations" and with a new fiscal note by the Department of Revenue and indeterminate note #1 by the Department of Labor & Workforce Development.