Legislature(1997 - 1998)
02/04/1997 08:00 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 1 - CIGARETTE AND TOBACCO TAX HB 52 - INCREASE TOBACCO TAXES Number 1790 The next order of business to come before the House State Affairs Standing Committee was HB 1, "An Act relating to taxes on cigarettes and tobacco products; and providing for an effective date." And, HB 52, "An Act relating to taxes on cigarettes and tobacco products; and providing for an effective date." CHAIR JAMES announced she would open the committee meeting to the invited testifiers only. Number 1805 TIM SCHRAGE was the first person to testify via teleconference in Anchorage. He stated he was against the tobacco tax. He was a retail owner of a couple of liquor stores in Anchorage and the Matanuska Valley. The current state tax was $2.90 per carton, the current federal tax was $2.93 per carton, and the current municipality of Anchorage tax was $2.72 per carton. Therefore, a total of 50 percent of the wholesale price was pure tax. In addition, the retailer paid for a license to sell tobacco from the federal government, the state government and the municipal government. The bill was asking the smoker to pay a higher price. He asked, "Aren't they already doing that?" Furthermore, a smoker could not smoke in public buildings and on public transportation. A smoker also paid a higher insurance rate. He asked, "Where do these taxes go that they're paying?" He believed they were going to the general fund, and he wondered if the public was getting their money back. Mr. Schrage stated before an additional tax was added, the state should look at other ways to spend the money from the existing taxes. Furthermore, the heath organizations in support of the tax had 33 years, since the first report from the surgeon general that indicated smoking was a habit, to educate them. If the state was truly interested in stopping the children from smoking, then it should enforce the laws already in place and close the loopholes. Since it was illegal to sell cigarettes to minors he wondered where they were getting them. He stated they were probably getting them from stealing, their parents, friends, and illegal retailers. He reiterated, "Let's close the loophole, let's not tax more." Number 1962 BOBBY SCOTT was the next person to testify via teleconference in Anchorage. He did not promote or condone the use of tobacco products by the youth. He wondered why kids were using tobacco if it was illegal now. The kids today had the same attitude that the adults did when they were in school, therefore, the price did not matter. The tobacco tax would put an unfortunate amount of pressure on the less fortunate kids encouraging them to obtain cigarettes in order to fit in with the other kids. But, it was his responsibility to teach honesty, responsibility and respect to his kids. He explained he worked for a small retailer and he feared that the small retailers would be put out of business before long and send the economy on a downward spiral. There were other powerful ideas that had been discussed in Juneau and he would like to see them continued with the proper communication to reach the goal of deterring teens from smoking. The tax would not reach that goal. It would accomplish diversity, havoc and ultimately destruction. He thanked the committee for letting him testify. Number 2095 BRIAN LICK was the next person to testify via teleconference in Anchorage. He was a non-smoker, and he worked in the retail industry. A retailer he spoke to recently cited he was missing $20,000 in cigarette products. A reasonable amount of that was contributed to theft. He believed the tobacco tax would increase the amount of theft. In Canada the price of cigarettes went up to $50 per carton and bootlegging and smuggling became a real issue. The retailers would have to absorb $20,000 to $25,000 per year to protect their investments. This was not a threat, it was just a realistic perspective, he declared. The retailers would pass that cost on in a gallon of milk, for example, causing all Alaskans to pay and not just the smokers. Furthermore, he stated that the permanent fund dividend program invested in stock of the Phillip Morris Company. He felt that was a double standard. Number 2201 CHAIR JAMES explained that the Phillip Morris Company was a family of trading companies. It sold more than tobacco products. Number 2218 RICHARD CROSS was the next person to testify via teleconference in Glennallen. He was against the cigarette tax. He did not think it was right to tax one segment of society. It would not stop the kids from smoking. He had been smoking for 33 years and the price had increased every since he started. It did not stop him from smoking. The kids would steal and borrow for cigarettes. He stated the current laws needed to be enforced. He had seen kids burglarize to get cigarettes and then sell them at school to make money. It was not right to tax something that did not need to be taxed, he declared. Enforce what already existed. Some members of his family smoked and some did not. He tried it and liked it. "Some people were born with that." He reiterated the cigarette tax was wrong. Number 2279 GLADYS THOMPSON was the next person to testify via teleconference in Anchorage. She was a long time resident of Alaska. She had also lived in the Midwest and New England. When she was a little kid she remembered signs on the barns that were paid for by the tobacco companies encouraging the farmers who were not doing well. She agreed with the tobacco tax. She would even double the amount. She recognized the other ramifications that previous testimony referred to that needed to be addressed also. It was illegal to steal. Furthermore, she recalled from her earlier days that the signs on the barns were advertizing chewing tobacco. In Cleveland, Ohio spittoons were placed on the streets for those chewing tobacco. She started to smoke when she went to college because of the influence of the movie stars in the 1930's and the 1940's. It was considered glamorous. She only enjoyed it to an extent. That was another example of how the tobacco companies marketed their products to encourage young people to smoke. She believed they should be put out of business in the long run. Number 2414 REX SHATTUCK was the next person to testify via teleconference in Anchorage. He was representing himself and not the tobacco industry or the health industry. It appeared that it was only the tobacco and the health industries that were testifying on this issue. He believed that testimony should be weighed. He started smoking 28 years ago and quit last year. The price of a package of cigarettes was not a deterrent nor was it a consideration when he quit, it was due to the urging of his children. The gradual price increases over the years were not effective. Two of his parents suffered from emphysema, but that did not spur him to support a 344 percent tax increase. That was the biggest increase ever. TAPE 97-6, SIDE B Number 0001 MR. SHATTUCK continued by stating that there was not a way to earmark the money from this tax to education. He reiterated he did not support a tobacco tax, and he strongly recommended that the committee members review the federal and the state constitution to determine their responsibilities in terms of raising revenues. Furthermore, last year the legislators did a good job of decreasing the budget. He suggested they do the same thing this year and not increase the revenues. Number 0041 CHAIR JAMES closed the House State Affairs Standing Committee meeting to public testimony on HB 1 and HB 52. It was now time for the committee members to deliberate. CHAIR JAMES explained there was an amendment that changed HB 1 to look like HB 52. She called for a motion to adopt the amendment. Number 0062 REPRESENTATIVE IVAN IVAN moved that the committee adopt Amendment 1, dated 1/28/97. Number 0081 REPRESENTATIVE CON BUNDE announced he did not have a problem with Amendment 1, dated 1/28/97. REPRESENTATIVE VEZEY objected. A roll call vote was taken. Representatives James, Berkowitz, Elton and Ivan voted in favor of the motion. Representative Vezey voted against the motion. The amendment was adopted. CHAIR JAMES announced for the record that Representatives Fred Dyson and Mark Hodgins were excused from today's committee meeting. CHAIR JAMES further explained that HB 1 was the vehicle that would move through the committees, while HB 52 would remain in the House State Affairs Standing Committee. Two tobacco tax bills were not needed. Number 0127 REPRESENTATIVE BUNDE expressed his appreciation of the efforts of Representative James in soliciting the testimony heard on this subject. He also thanked the public for taking the time to testify. Representative Bunde recapped the goal of CSHB 1(STA) by stating it was designed to achieve an economic barrier to young people starting to smoke, and a user fee for those who wished to continue to smoke. He responded to prior testimony from the tobacco industry. He suggested that the spokes people acquaint themselves with the laws in Alaska. He explained one had not bothered to register with the state as a lobbyist. His latest research showed that the nicotine industry had spent over $200,000 in lobbyists. That alone told him that the bill would work. The committee members also heard considerable comments about protecting the small business person. He took those comments to heart. However, if smuggling was such a challenge, he stated, "I don't think anybody would go so far as to recommend we remove existing taxes." And, the mail order problem could be addressed through other legislation. That was something that needed to be looked at. The business people that he heard from supported the notion that the legislators should stop kids from smoking, and research showed that the vast majority of people began smoking when they were children. If that was accepted as a fact, then these business people had better be making plans for the future because if they stopped children from smoking they would indeed put themselves out of business over a period of time. He reiterated he was sympathetic to the small business owner. He reminded the committee, however, that at one time cocaine was put in Coca-Cola because it was thought to be healthy. And, codeine was put in a lot of patented medicines causing addictions at one time. As more information was obtained, businesses needed to change. Furthermore, there were concerns about enforcement and Indian country. He thought it was a little unfair to assume that the majority of the Native citizens would become scofflaws and immediately begin smuggling. It was necessary to consider the geography of Alaska. He stated, "Not too many people are gonna go to Egegik to buy smuggled cigarettes." Moreover, there would not be the common border problems that the Canadians had on the East coast. The people in Western Canada did not lower their prices because of smuggling problems. Furthermore, if the state faced the issue of Native sovereignty, he thought that the issue of smuggling tobacco would be only one of many, many challenges the state would face. The bottom line was that the increase in the tobacco tax obviously worked to reduce the demand. "If it didn't," he asked, "Why would the nicotine industry be here spending so much time and money to fight this increase." He thanked the committee members for their time. Number 0335 CHAIR JAMES stated that this issue was not one of her favorite issues. She believed strongly in a person's right to do what was legal, and smoking tobacco was legal. She also believed that imposing a tax at a time when the legislature was trying to cut the budget was not wise. It violated the pledge to not impose taxes until the budget was under control. She had never smoked and she hated smoking. She did not want any children to start to smoke, and she would prefer that everyone would quit. However, she recognized the legal right of those that wanted to use tobacco. Therefore, she struggled with this issue and had been very candid about her feelings from the beginning. She also had a great passion for school maintenance and construction and the children of the state. In addition, over the past four years, she had not seen much interest in putting money towards that process. She did not want to fill the general fund with more money creating a tendency to spend it. Therefore, the pre-dedicated school fund was much more palatable. Moreover, she was pleased to have the approval of Representative Bunde as sponsor of HB 1. She was also pleased to hear the testimony from the public supporting the dedication. The committee today would also be hearing HJR 18 which called on the people to vote on a constitutional amendment that would allow the raising or lowering of a tax in a pre-dedicated fund and close the opportunity for a law suit. She thought it was a better idea to go to the public than it was to go to the courts. She had very little confidence in the court system due to decisions made whimsically by judges. She felt guilty that she did not have confidence in the judicial system, but she would rather go to the public to vote on this issue. She was happy to walk together with Representative Bunde the rest of the way with this bill. Number 0507 REPRESENTATIVE KIM ELTON stated he hoped the money that went into the school construction and maintenance account was not seen as a substitute for general fund dollars. The money generated from the tax would not be enough to accomplish what needed to be done in school maintenance and construction. It should not be seen as the only answer for the problems that many of the school districts faced. Number 0548 REPRESENTATIVE ELTON moved that CSHB 1(STA) move from committee with the attached fiscal note(s) from HB 52 and with individual recommendations. There was no objection. The CSHB 1(STA) was so moved from the House State Affairs Standing Committee. Number 0569 CHAIR JAMES announced that she was in the process of designing legislation that would improve the enforcement of the current laws surrounding teenage smoking. She asked for assistance from anybody that knew where more enforcement was needed. Number 0599 REPRESENTATIVE ETHAN BERKOWITZ stated that he was offended because a representative of the tobacco industry had not provided information to him within the time that he indicated. Number 0630 CHAIR JAMES stated that it had only been one week. She suggested putting his request in writing to ensure a response. Number 0640 REPRESENTATIVE VEZEY stated that if a lobbyist promised information one should allow three weeks to four weeks to receive it.
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