Legislature(2003 - 2004)

03/25/2004 01:50 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.                                                                                                         
                                                                                                                                
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.                                                                                    

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