Legislature(2015 - 2016)BUTROVICH 205
01/26/2016 01:00 PM Senate TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| SB132 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 132 | TELECONFERENCED | |
SB 132-ELECTRONIC TAX RETURNS & MOTOR FUEL TAX
1:03:49 PM
CHAIR MICCICHE announced consideration of SB 132.
1:04:56 PM
RANDY HOFFBECK, Commissioner, Department of Revenue (DOR),
Anchorage, Alaska, explained that SB 132 is one of three
components of the new Sustainable Alaska Plan. One of the
components is the Alaska Permanent Fund Protection Act that
creates the model of using investment earnings of the Permanent
Fund as well as repurposing the royalty revenues and production
tax in order to create a sustainable draw for funding
government. That draw along with existing taxes leaves the state
about $1 billion short of a balanced budget. So, the governor
proposed a series of cuts in the budget document and a series of
bills on new revenues of which SB 132 is one.
COMMISSIONER HOFFBECK said SB 132 is just standard tax policy
and contains no restructuring. It is simply an adjustment in the
rate on an existing tax.
1:06:29 PM
SENATOR DUNLEAVY asked what they are protecting the Permanent
Fund from.
COMMISSIONER HOFFBECK answered the issue is if nothing is done
within four years the state's savings will be depleted and it
will essentially be in a position of employing either very
draconian cuts to the government services or considering a
constitutional amendment to spend from the corpus of the
Permanent Fund. The idea here is to make changes now instead of
later in order to preserve the Permanent Fund and its dividend
program.
1:07:58 PM
JERRY BURNETT, Deputy Commissioner, Department of Revenue (DOR),
Juneau, Alaska, explained that motor fuel taxes in Alaska began
in 1945. Tax rates have increased over time, but the structure
has remained unchanged. The last increase for highway taxes was
in 1970, marine taxes in 1977, and aviation fuel taxes in 1994.
That means the motor fuel tax has been 8 cents per gallon since
1970. In 1970 he bought gas for 30 cents a gallon and the
minimum wage was $1.60/hr.
1:10:02 PM
He related that the motor fuel tax was suspended from September
1, 2008 to August 31, 2009 when the state brought in more money
from oil in one month than it is bringing in this entire year,
and in 2015, HB 158 added a .95 cent surcharge on motor fuels
and other refined fuels for the Spill Prevention and Response
Fund.
He said that this proposal increases all tax rates.
CHAIR MICCICHE interrupted him to remember the struggle in
adding less than a penny to the tax.
MR. BURNETT said he remembered. He went on to explain that the
highway fuel tax will be increased from 8 cents to 16 cents a
gallon, the marine tax from 5 cents to 10 cents a gallon, jet
fuel from 3.2 cents to 10 cents a gallon, and aviation gas from
4.7 cents to 10 cents per gallon; the off-road use credit is
changed from 6 cents to 12 cents.
CHAIR MICCICHE pointed out that the off-road tax rate going from
2 cents to 4 cents is still being doubled.
MR. BURNETT said that was correct. He explained that the bill
requires the taxpayer to file electronically and provides for an
exemption process in certain cases.
SENATOR BISHOP asked the penalty for not filing timely
electronically.
MR. BURNETT answered that he would get that information. He
added that Alaska's fuel taxes are among the lowest in the U.S.
Highway fuel is the lowest; jet fuel is the 35th lowest; and
aviation gas 24th. Under this bill Alaska taxes would still be
below the national average for highway taxes (20.17 cents) and
slightly above the national average for jet and aviation fuels.
He didn't have comprehensive data for other states' marine fuel
taxes, but most don't have a marine fuel tax.
1:13:23 PM
One of the impacts of this measure is that gas prices will go up
a little bit, because the increase will be passed on to the
consumer. The aviation taxes will be available to fund
certificated urban and rural airports. An increase in aviation
fuel taxes was requested by the Aviation Advisory Committee as
preferable to landing fee increases at state owned airports.
1:13:52 PM
SENATOR BISHOP asked who the Advisory Committee members are.
MR. BURNETT said Deputy Commissioner Hatter from the Department
of Transportation and Public Facilities (DOTPF) could answer
that question.
1:14:20 PM
STEVE HATTER, Deputy Commissioner, Department of Transportation
and Public Facilities (DOTPF), answered that the Airport
Advisory Board has a cross section of aviation stakeholders - a
certain carrier representation, rural representation, urban
representation - who are all appointed by the governor.
CHAIR MICCICHE asked if a sales tax in the future would be
stacked or would fuel be exempted.
MR. BURNETT answered that the administration hadn't proposed
having a statewide sales tax. It would be a policy decision. He
thought some cities exempted motor fuel tax from sales taxes,
although Juneau doesn't.
CHAIR MICCICHE said it is not exempted in the Kenai Peninsula
where he is from. He said the motor fuel tax is on the quantity,
but the sales tax is on the value. So, the sales tax fluctuates
with the price of refined products and a fuel tax is stationary.
SENATOR DUNLEAVY asked if dedication of funds to aviation has
any constitutional issues.
MR. BURNETT answered that the Constitution provides that no tax
or license can be dedicated to a specific purpose unless it was
prior to statehood or required for participation in a federal
program. The Federal Aviation Authority (FAA) regulations for
other grant monies the state receives require that all income
received on airports gets spent on airports. So, it is not
subject to the dedication clause. The tax on aviation gas, while
it goes into the General Fund, an amount equal to that has to be
spent at airports. Airports that are municipally owned - Juneau,
Kenai, Wasilla/Palmer - have shared tax back from the state in
the budget bill every year. This year it's about $160,000. This
would increase it to about $200,000.
1:18:26 PM
SENATOR DUNLEAVY asked the estimated overall cost to administer
this tax.
MR. BURNETT answered that raising the fuel tax rates would
require no additional ongoing operating cost, but it would cost
$50,000 - 100,000 to reset the system. He emphasized again that
no structures to the tax system are being changed by this
measure.
CHAIR MICCICHE asked if distributors would fill out a similar
form to what they do now.
MR. BURNETT said the forms would have to be changed, but nothing
beyond that upfront cost. He said that increasing the tax rate
would more than double tax collections by $49 million per year
(based on fall 2015 revenue forecast) with about $200,000 being
shared back to municipally owned airports. The rest goes to the
General Fund and is allocated in special accounts for road,
water, transport and aviation facilities.
1:20:23 PM
The estimate does not account for possible changes in fuel
demand or stock piling, but it is thought that the increase is
small enough to not have much effect. Personally, he related
that he typically drives 20,000 miles a year and at 20 miles per
gallon he uses 1,000 gallons of fuel, so this would account for
another $80 more in tax.
1:22:18 PM
SENATOR BISHOP asked if overseas flights have some type of
exemption.
MR. BURNETT answered yes. All jet fuel sold for international
commerce is tax exempt. It is the largest amount of jet fuel
sold.
1:22:38 PM
He said implementation of the tax would require changing the tax
revenue management online system that is already set up for
electronic returns; the forms would have to be changed for a
cost of about $50,000. There are no additional administrative
costs afterwards.
CHAIR MICCICHE commented that this is a user fee; if you don't
purchase the product you don't pay the fee. It will impact
businesses more than individuals. But in tax philosophy,
individuals support taxes that are sort of returned back to the
systems that use them. There is no guarantee in this case; it's
just a General Fund (GF) deposit other than the minor portion
that goes to airports. He asked what returns would be seen other
than in GF expenditures?
MR. BURNETT answered that most states dedicate their motor fuel
taxes to highway maintenance. Historically, Alaska spends more
on highway maintenance; currently it is spending a great deal
more than people are paying in user fees. So, people can be
assured that the effect of this is that there may be enough
money to offset what would otherwise be reductions in highway
maintenance. While this tax is not dedicated, it is identified
in the system and can be compared to how much is being spent on
highways.
CHAIR MICCICHE remarked that clearly the best value Alaska gets
from the feds is the highway match of 90/10. So, this increase
might make more GF dollars available for federal match to keep
its highways in better condition.
SENATOR BISHOP said if this passes, Alaskans would capture some
traveling public (60,000 motor homes and fifth wheel campers)
from Outside and some marine craft that come up.
1:26:38 PM
MR. BURNETT responded that clearly anyone who uses the highways
and buys fuel in Alaska will be contributing to the state's
budget.
CHAIR MICCICHE said that a Tax Foundation Publication compares
the tax burden - broad based and specific taxes - in each state.
He remembered that Alaska pays $500 per year, essentially in
broad based state taxes, which he assumed includes motor fuel
taxes.
MR. BURNETT answered that it does.
SENATOR MICCICHE wondered how that shakes out if this were the
only tax to pass this year. Would this add $80 to the $500 of
tax burden? Is this a small chunk of the gap?
MR. BURNETT said Alaskans would still be 25 percent of the
average. The only state that competes with Alaska is New
Hampshire.
SENATOR STEDMAN related that unlike all other states, Alaska is
the only one to own the subsurface rights, so comparing our fuel
tax, income tax or any other mechanisms for state revenues gets
distorted. One needs to recognize that the citizens of the state
own a very valuable asset, and that needs to be factored in in
walking through these tax calculations. Each individual can draw
their own conclusions on how they want to add that in. Alaska is
very different, because it was structured that way at statehood.
1:30:12 PM
MR. BURNETT provided a sectional analysis of the bill.
Sec. 1 adds $25 or a 1 percent tax penalty for failure to file
electronically unless an exemption is received.
Sec. 2 requires electronic submission of tax returns, license
applications, and other documents submitted to the DOR. It
changes AS 43.05 and will apply to all tax types administered by
the department. It provides a process to request an exemption if
the taxpayer doesn't have the technology or capability to do so.
Sec. 3 changes the per gallon tax rates for dealers for all
categories of motor fuel: gasohol is changed from 8 cents to 16
cents, marine fuel from 5 cents to 10 cents, aviation gasoline
from 4.7 cents to 10 cents and jet fuel from 3.2 cents to 10
cents.
Sec. 4 changes per gallon tax rates for users of all categories
of motor fuel to the same numbers.
1:32:21 PM
Sec. 5 changes the motor fuel refund rate for off-road use when
the tax has been paid from 6 cents to 12 cents.
Sec. 6 is conforming applicability language clarifying that the
tax increases apply to motor fuels sold after the effective
date. The electronic filing requirement applies to returns
submitted after the effective date.
Sec. 7 is transitional language allowing for regulations to
implement the changes.
Sec. 8 is an immediate effective date for the transitional
regulatory language, and
Sec. 9 is an effective date of July 1, 2016, for the rest of the
bill including the tax rate changes.
CHAIR MICCICHE said the vast majority of refined product tax is
doubled, but he wanted to know the rationale behind doubling the
aviation tax and adding 6 cents.
MR. BURNETT said all revenues from aviation fuels have to be
paid to the airport and this is an alternative to landing fees
at airports that the users preferred. He said this is slightly
more than tripling the rate.
CHAIR MICCICHE asked for the value of the last 3.2 cents per
gallon.
MR. BURNETT said that would amount to $13 million from jet fuel
and $1 million from aviation gas. He said the cost to the
airports is going to be the same one way or the other. The board
preferred paying taxes rather than increasing landing fees.
1:35:47 PM
MR. HATTER added that FAA certificated airports, referred to as
jet service airports, in general are quite expensive to run, the
reason being high FAA standards and regular inspections.
Offsetting that with landing fees is a huge challenge, and
aviation industry stakeholders through the Aviation Advisory
Board asked to raise taxes instead.
CHAIR MICCICHE said the fiscal gap is a new reality for Alaska
and he would be looking for users of state services to reduce or
eliminate their subsidies. He asked if this comes close to
filling the airport subsidy gap.
MR. HATTER answered that the gap would still be substantial, but
this is a step in the right direction.
SENATOR EGAN said he thought a lot of rural airports had no
landing fee.
MR. HATTER answered that Anchorage and Fairbanks are
international airports, which are set up under a different
statute. The rest of the airports are owned by the Alaska
Department of Transportation and Public Facilities (DOTPF) and
have landing fees.
CHAIR MICCICHE said one their interests last year was to try and
reduce that amount of subsidy through landing fees, but it met
with significant resistance.
SENATOR EGAN said Juneau charges a landing fee, so that would be
more than doubled by paying the jet fuel increase, although
Juneau, Kenai and Merrill Field would get that money.
1:40:20 PM
SENATOR STEDMAN teamed up with Senator Egan's questions and
asked about the Sitka and Ketchikan airport structures relative
to Juneau, for general background.
CHAIR MICCICHE responded that the rural carriers were the most
resistant. He wanted to know if these increases would cover
enough of the gap. In polling he had seen support for a broad
based effect that doesn't focus on individual user groups.
SENATOR STEDMAN said he was not interested in bidding up tax
bills to raise any more revenue than were already presented to
the legislature. He threw in Wrangell and Petersburg airports
with his previous comments.
CHAIR MICCICHE said it's clear that no one is excited about any
tax bills.
1:42:37 PM
SENATOR BISHOP said he likes building roads and flying in
airplanes and he also likes keeping people working in his local
rural communities, and if this bill gets any traction he already
had an amendment ready. Construction dollars have a way to spin
off six times to a community and build more wealth. So, he kind
of likes the bill.
CHAIR MICCICHE said he spent his career reducing taxes where
ever possible, but Alaska has a new reality. Fairness and
balance in the distribution of the burden is the best that can
be done if the current fiscal gap continues.
SENATOR BISHOP added that cars get more miles per gallon today
versus 30 years ago and the federal government is setting new
CAFÉ standards for mileage by 2025. That asphalt doesn't know
the difference whether that car is getting 10 mpg or 45 mpg. The
asphalt wears out at the same rate, and at some point this is a
user fee and worthy of a good look.
CHAIR MICCICHE kept public testimony on SB 132 open and held it
for further work.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB132 ver A.pdf |
STRA 1/26/2016 1:00:00 PM STRA 2/4/2016 1:00:00 PM |
SB 132 |
| SB132 Sponsor Statement - Governor's Transmittal Letter.pdf |
STRA 1/26/2016 1:00:00 PM STRA 2/4/2016 1:00:00 PM |
SB 132 |
| SB132 Sectional Analysis Motor Fuel Tax.pdf |
STRA 1/26/2016 1:00:00 PM STRA 2/4/2016 1:00:00 PM |
SB 132 |
| SB132 Fiscal Note-0912-DOR-TAX-01-13-16.pdf |
STRA 1/26/2016 1:00:00 PM STRA 2/4/2016 1:00:00 PM |
SB 132 |
| SB132 Motor Fuel Tax FAQ.pdf |
STRA 1/26/2016 1:00:00 PM |
SB 132 |
| SB132 Tax presentation MOTOR FUEL 1-22-16.pptx |
STRA 1/26/2016 1:00:00 PM STRA 2/4/2016 1:00:00 PM |
SB 132 |
| Per-Capita Broad-Based State Tax Revenues, by State, 2014.pdf |
STRA 1/26/2016 1:00:00 PM STRA 2/4/2016 1:00:00 PM |
SB 132 |