03/24/1994 01:40 PM Senate L&C

  CHAIRMAN TIM KELLY  called the Labor and Commerce Committee meeting     g    
 to order at 1:40 p.m.  He introduced  SB 344  (ESTABLISH EMPLOYMENT           
 TAX) as the first order of business.                                          
                                                                               
 JACK KREINHEDER, Office of Management & Budget, explained SB 344 is           
 intended to be a modest step towards helping to solve the state's             
 budget shortfalls both this year and in the years to come.  He                
 expressed the Governor's openness to looking at spending                      
 reductions, use of reserves and other measures to help balance the            
 budget.  But given the size of the shortfalls being faced this year           
 and in the coming years, the Governor feels that it would be                  
 fiscally irresponsible to not look at some at least modest measures           
 to raise revenues.  SB 344 is one of four pieces of legislation               
 that have been introduced to do that.                                         
                                                                               
 The employment tax would raise about $31 million.  It is less in              
 the initial year because it would be in effect only part of the               
 year.  This tax would be levied only on persons age 19 and older.             
 The bill contains a provision that would reduce the burden on                 
 people making less than $1,000 a year.                                        
                                                                               
 Mr. Kreinheder, addressing a state income tax, said it was felt               
 that the climate was not right for an income tax and that an                  
 employment tax was a more modest first step towards helping fill              
 the fiscal gap and to collect something from out-of-state workers             
 who now pay very little towards the services that they get from the           
 state while they are working here.                                            
                                                                               
 Mr. Kreinheder said the collection of the tax would be as                     
 streamlined as possible, and while there would be some cost for               
 administration, the burden for employers would not be very sizable.           
 The Department of Revenue would be the lead agency in the                     
 collection of the tax, and they would work with the Department of             
 Labor in piggybacking the taxes on the other payroll taxes.  The              
 Department of Commerce and Department of Fish and Game would also             
 be involved for self-employed individuals under business license              
 provisions, as well as for fishermen who gets permits, to make sure           
 that the tax is collected.                                                    
                                                                               
 Number 107                                                                    
                                                                               
 SENATOR KELLY asked if this tax was modeled on the old school tax             
 that Alaska used to have.  JACK KREINHEDER answered that it is                
 similar to the school tax, but the school tax had some other                  
 exemptions not contained in SB 344.                                           
                                                                               
 Number 132                                                                    
                                                                               
 SENATOR RIEGER asked if the bill provides a power for the                     
 Department of Revenue to refund overpayments.  JACK KREINHEDER                
 responded that the provision was not in the bill, but he thought it           
 was intended that such a provision would be provided through                  
 regulations.                                                                  
                                                                               
 SENATOR RIEGER inquired what the criminal penalty would be for                
 failure to pay the employment tax.  JACK KREINHEDER answered that             
 he thought it was misdemeanor with a $1,000 fine and up to six                
 months in jail.                                                               
                                                                               
 Number 163                                                                    
                                                                               
 SENATOR SALO asked what the cost of administering this tax would              
 be.  JACK KREINHEDER answered that the total cost of administration           
 to the Department of Revenue and the Department of Labor would be             
 approximately $900,000 per year.                                              
                                                                               
 Number 202                                                                    
                                                                               
 RESA JERREL, State Director, National Federation of Independent               
 Businesses, stated their strong opposition to SB 344.  They believe           
 that there are ways for the state to save money without disrupting            
 services.  Ms. Jerrel provided a list to the committee of services            
 that the government does that the private sector can very easily              
 do.                                                                           
                                                                               
 Number 230                                                                    
                                                                               
 SENATOR KELLY voiced his concern with the name of the bill and                
 suggested it should be changed to a school employment tax instead             
 of just an employment tax.                                                    
                                                                               
 Number 250                                                                    
                                                                               
 SENATOR SALO stated she has a problem with regressive taxes like              
 this one, and is concerned that teenagers and others who are                  
 getting very small checks will have to pay that $100 tax.                     
                                                                               
 Number 276                                                                    
                                                                               
 SENATOR RIEGER commented that the state should be trying to get               
 some tax out of the itinerant work force that comes to the state              
 every year to work for a short time.                                          
                                                                               
 Number 282                                                                    
                                                                               
 SENATOR SHARP spoke to the high cost of the education budget, and             
 he thinks it is obvious that it is necessary to create more funds             
 for education.                                                                
                                                                               
 Number 300                                                                    
                                                                               
 SENATOR RIEGER moved that the title and references in the bill that           
 refer to "employment tax" be changed to "school employment tax."              
 SENATOR SALO objected.  The roll was taken with the following                 
 result:  Senators Rieger, Sharp and Kelly voted "Yea" and Senator             
 Salo voted "Nay."  The Chairman stated the motion carried and the             
 amendment would be incorporated into a Labor & Commerce committee             
 substitute.                                                                   
                                                                               
 Number 315                                                                    
                                                                               
 SENATOR RIEGER moved that CSSB 344(L&C) be passed out of committee            
 with individual recommendations.  Hearing no objection, it was so             
 ordered.