Legislature(2001 - 2002)
03/25/2002 09:27 AM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 25, 2002
9:27 A.M.
TAPE HFC 02 - 64, Side A
TAPE HFC 02 - 64, Side B
TAPE HFC 02 - 65, Side A
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 9:27 A.M.
MEMBERS PRESENT
Representative Bill Williams, Co-Chair
Representative Eldon Mulder, Co-Chair
Representative Con Bunde, Vice-Chair
Representative Eric Croft
Representative John Davies
Representative Richard Foster
Representative John Harris
Representative Bill Hudson
Representative Ken Lancaster
Representative Carl Moses
Representative Jim Whitaker
MEMBERS ABSENT
None
ALSO PRESENT
Representative Gary Stevens; Representative Lisa Murkowski;
Representative Peggy Wilson; Denny Dewitt, Staff,
Representative Eldon Mulder
SUMMARY
HB 229 An Act imposing a tax on employment; and providing
for an effective date.
HB 229 failed to move out of Committee.
HB 303 An Act relating to the levy and collection of a
sales tax; and providing for an effective date.
CS HB 303 (FIN) was reported out of Committee with
a "do not pass" recommendation and with a new
fiscal note by the Department of Revenue.
HB 304 An Act relating to disposition of income of the
permanent fund; and providing for an effective
date.
CS HB 304 (FIN) was reported out of Committee with
a "do pass" recommendation and a new fiscal note
by the Department of Revenue.
#HB304
HOUSE BILL NO. 304
An Act relating to disposition of income of the
permanent fund; and providing for an effective date.
Co-Chair Mulder MOVED to RESCIND previous action taken on
moving CS HB 304 (FIN) from Committee. There being NO
OBJECTION, action was rescinded.
Co-Chair Mulder advised that an amendment was being drafted.
He stated that the amendment for next year, FY03, would
limit the draw on the permanent fund. The amendment would
provide for taking language from HB 304 and delaying action
for one year, which would provide a FY03 earnings reserve
draw in the amount of $300 million dollars.
Representative Davies questioned what the "delay for one
year" meant.
Co-Chair Mulder explained that the FY02 dividend would be
paid from 2003 earnings. He wanted to understand that the
mechanics were correct before he walked through the change.
Representative Croft inquired if the percentage amount
discussed at the previous meeting would be changed.
Co-Chair Mulder thought that there could be an amendment,
which would address percentages.
Representative Hudson asked if the State would be sticking
with the 7%-6%-5% and then starting it a year later.
Co-Chair Mulder replied that was correct and that the draw
would be $300 million dollars. It would be consistent to
have $300 million dollars come from the Permanent Fund
Earnings. That was a decision made by the Majority caucus.
HB 304 was HELD in Committee for further consideration.
RECESS: 9:30 A.M.
RECONVENED 10:15 A.M.
HOUSE BILL NO. 229
An Act imposing a tax on employment; and providing for
an effective date.
Co-Chair Mulder MOVED to ADOPT work draft, #22-LS0842\O,
Kurtz, 3/23/02, as the version of the bill before the
Committee.
Co-Chair Williams stated that the cruise ship head tax had
been removed from the proposed version. He insisted that
was the only change made to the draft.
CS HB 229 (FIN) was HELD in Committee for further
consideration.
RECESS: 10:17 A.M.
RECONVENED: 10:23 A.M.
HOUSE BILL NO. 303
An Act relating to the levy and collection of a sales
tax; and providing for an effective date.
Co-Chair Mulder MOVED to ADOPT Amendment #1, #22-LS1206\W.1,
Kurtz, 3/25/01. Representative Lancaster OBJECTED for the
purpose of discussion.
Co-Chair Mulder explained that Amendment #1 was a trigger
mechanism on sales tax. If the applicable tax rate was 3%
th
as of September 30 of the previous year and the Capital
Budget Reserve (CBR) is less than $2 billion dollars, it
would change the amount to 2%. If the CBR were between $2
and $2.5 billion dollars, then the tax would be 1%; if the
CBR were between $2.5 and $3 billion dollars, the percentage
would be zero. Co-Chair Mulder assured members that the
trigger mechanism would provide the Alaskan public that
should there be higher oil prices, tax would decrease.
Representative Lancaster inquired if Amendment #1 this year
would be tied to the Earnings Reserve Account.
Co-Chair Mulder responded that there are many moving parts,
which need to be tied. There is a potential trigger drafted
in Amendment #3, which ties it to the price of oil. He
noted that tying it to the price of oil would not address
the production of oil and estimated that the shock absorber
would tie it to the CBR.
Representative Hudson acknowledged that would be the correct
tie because the government has a constitutional
responsibility to pay any draws from the CBR. Any new
infusion of revenue has to go to the CBR. If the oil
prices or production increased, or new oil was struck, all
the new revenue would pile up into the general fund and at
the end of the year would sweep back over into paying the
CBR. He noted his support that process.
Representative Davies argued that the problem with that
concept is that the permanent fund would continue to be
depleted. He stated that the only revenue measure would be
the earnings from the permanent fund and that acceptance of
the trigger should be a similar draw from the permanent
fund.
Representative Croft objected because the total amount would
be taken out from the permanent fund. He noted that Ex-
Governor Jay Hammond recommended that there should be a pure
dividend tax bracket. Representative Croft suggested that
Alaska should rest somewhere between those two concepts.
The entire taxation picture should now be addressed. The
proposal would take out the only tax Alaska has left,
removing it from the permanent fund earnings. There must be
a broad-based tax and there should be a reestablished
connection with economic development. Economic development
alone would do nothing for the State coffers.
Representative Croft objected to any tax triggers.
Representative Hudson agreed with Representative Croft. He
thought if possible #4, Line 16, should be eliminated:
"Zero if, on September 30 of the previous year, the unedited
balance in the budget reserve fund created by art.IX,
sec.17, Constitution of the State of Alaska, was more than
$3,000,000,000." Making that change would mean that the tax
would never be less than 1%, however, it could be graduated
down. Leaving it at 1% would make forever-combined
collection requirements.
Representative Hudson recommended removing Section #4.
Co-Chair Mulder recommended that action would require
deleting language in Section #3, Line 15: "But not more than
$3,000,000,000; or".
Representative Hudson noted that then conceptually, there
would never be less than 1%, which would always keep the tax
enforced.
Co-Chair Mulder restated the amendment. Representative
Whitaker OBJECTED in order to read it through.
Recognizing that the work draft had not yet been adopted,
Co-Chair Mulder WITHDREW his MOTION to adopt Amendment #1.
Co-Chair Mulder MOVED to ADOPT the work draft #22-LS1206\W,
Kurtz, 3/23/02, as the version of the bill before the
Committee. Representative Davies OBJECTED for purposes of
discussion.
Co-Chair Mulder explained that the technical amendments had
been incorporated into the work draft and that nothing had
been included which was not previously discussed, except for
the "small vendor" clause. Everything else had been
proposed by the Department of Revenue.
DENNY DEWITT, STAFF, REPRESENTATIVE ELDON MULDER, listed the
changes made to the work draft.
· Page 2, Line 26, extensive discussion of the
boroughs ability to levy "special" taxes.
Representative Lancaster questioned if the cities would
collect and retain that tax.
Mr. DeWitt replied that the intent was to leave those
activities as they are today.
Representative Croft referenced Sections 6 & 7, and asked if
a borough could levy a general tax and then a special tax.
He thought that they could claim any special exemptions such
as utilities and then claim again that sales tax.
Mr. DeWitt advised that they would have to enact a special
sales tax relative to that specific item. They could
collect it themselves. He added that another example would
be a bed tax, which would be a special tax.
Representative Croft understood that there will be the same
taxes and exemptions across the State. The way that the
language is written, particularly in Section 7, there is a
potential for a "patchwork" of taxes and exemptions.
Co-Chair Mulder agreed that there will be a tax patchwork,
however, the exemptions would be uniform.
Representative Croft discussed that the exemptions could be
removed by the special taxes.
Mr. DeWitt acknowledged that there is the potential for
doing that for the exemption. An additional tax such as
alcohol would be allowed over the general sales tax in a
community. He restated that if there was a general sales
tax, there could be a special tax on alcohol. In reference
to the general broad-based sales tax, the State would
collect it and it would be uniform across the State. The
municipality buying into it would have the same exemptions
on the broad-based sales tax that the State would have. It
would also reserve the opportunity for the community to add
and collect their own special taxes.
Representative Croft asked if alcohol was a "special" issue.
He advised that the State has always prohibited the
communities from doing that.
Mr. DeWitt interjected that Juneau currently has a special
alcohol tax.
Representative Davies inquired if current language would
allow cities to enact special taxes.
Mr. DeWitt clarified that it would allow cities to enact
special taxes for places that have the authorization under
Title 29 and that they would continue to be able to do that.
Co-Chair Mulder thought that there was confusion and that
the bill would retain the cities and boroughs ability to do
what they are now doing even with the implementation of the
proposed bill.
Representative Davies asked why Section 7 referred only to
"boroughs" and not cities.
Mr. DeWitt understood that to be a drafting decision and
that it would accomplish the same thing.
Mr. DeWitt discussed the changes made to the draft:
· Section 8 - the power of the levy.
· Section 9 begins the use tax, dropping
language on Line 24, "in the State". He
added that Sections (b) & (c) had been
reworded. Section 2 was reworked on Line 15
to include transportation and goods that are
used in connection with or would become an
ingredient.
· Added in Section 7, "brokerage firms and
interested earned or paid".
· Added a technical correction in sub-Section
(8), Page 6, Line 10, "sales and purchases by
governmental entities".
· Referenced Page 8, collection of sales taxes,
adding language to Line 7: "However, a seller
that collects less than $1,000 in tax in a
calendar quarter may remit the tax within 30
days following the last day of the calendar
quarter in which the tax was collected."
· Added "taxi cab" to sub-Section (d) on Page
8, Line 18.
· On Line 25, regarding the exemption
certificate now indicates that the Department
should provide an exemption certificate for
both buyers and sellers.
· In Sections (a) & (b), language was added as
recommended by the Department.
Representative Hudson referenced Page 8, Line 7, commenting
that the change would indicate from a monthly to a calendar
quarter; it would also address the small vendor as long as
they collect less than $1,000 dollars in a calendar quarter.
Co-Chair Mulder MOVED to ADOPT the committee substitute,
#22-LS1206\W, Kurtz, 3/23/02, as the document before
Committee members. There being NO OBJECTION, it was
adopted.
Co-Chair Mulder noted a language change in Amendment #1,
deleting language from Line 15 following "$2,500,000,000;"
though Line 18. Co-Chair Mulder MOVED to ADOPT the changed
Amendment #1. Representative Croft OBJECTED.
Representative Croft stated that when the collection goes
down to 1%, the amount collected would only be $100 million
dollars. He advised that would never reach the anticipated
50/50. That number moves further from any parity between
what is taken from the permanent fund earnings and what is
taxed back.
Representative Croft noted that most of the proposals that
the Fiscal Policy Council started with recognized some of
the lessons learned in 1999:
· By starting with substantial taxes; and
· Narrowing it to 1, now moving it to ½.
He stressed that a tax rate must be established for the
appropriate economy.
A roll call vote was taken on the motion to adopt Amendment
#1.
IN FAVOR: Foster, Harris, Hudson, Lancaster, Whitaker,
Bunde, Williams, Mulder
OPPOSED: Davies, Moses, Croft
The MOTION PASSED (8-3).
Co-Chair Mulder advised that Amendment 3, #22-LS1206\W.3,
Kurtz, 3/25/02, would no longer apply as it was triggered to
the price of oil. Amendment 2, #22-LS1206\W.2, Kurtz,
3/25/02, would make the sales tax a seasonal sales tax. He
stated that Amendment 2 would not be offered at this time.
RECESS: 10:55 A.M.
RECONVENED: 1:55 P.M.
Co-Chair Mulder reiterated that he would not be offering
Amendment 2.
Representative Croft spoke to the seasonal sales tax
provision.
Co-Chair Williams interrupted, requesting that the
discussion be kept to the amendments before the Committee.
Representative Davies stated that the list of exemptions
should include unprepared foods. He MOVED to ADOPT that as
a conceptual amendment. Co-Chair Mulder OBJECTED.
Representative Davies stressed that the proposed sales tax
disproportionably affects the lower income person. In
particular, that tax will impact their necessities as
opposed to discretionary expenditures. One of the most
important expenditures is food. He proposed that unprepared
foods be exempt.
Representative Croft advised that 36 states have a sales tax
and of those, 29 exempt food. Only 9 states tax food at the
same rate without other mitigating measures. Representative
Croft voiced support to exempt food. He pointed out that
taxing food is a regressive sales tax and could be
interpreted as targeting the poor.
Representative Lancaster spoke against adding any additional
exemptions. He stressed that the boroughs are already
allowed so many exemptions that the State will end up where
they started.
Representative Whitaker spoke against the amendment. He
pointed out that Page 5(b) exempts food coupons and stamps.
He claimed that allowance would provide an exemption for the
least fortunate Alaskans by exempting them from paying tax
on food.
Representative Croft acknowledged that those on welfare
would be exempted, but emphasized that the working poor
would not be exempted. He referenced the graph provided by
the Legislative Finance Division. [Copy on File].
Representative Davies reiterated that the enclosed language
would impact the working poor. The nature of the language
is aggressive to the poor people of the State.
Co-Chair Mulder clarified for the record that the sales tax
collected for the State would be 3% not 5.6%.
Representative Whitaker countered and asked what would
happen if the proposed sales tax were as high as the
proposed income tax. He pointed out that the proposed sales
tax was a lower rate. While the percentage of income might
be higher, the dollars involved are somewhat minimal.
Representative Hudson asked further clarification of what
"unprepared foods" are.
TAPE HFC 02 - 64, Side B
Representative Davies replied that milk would be included in
the exemption.
Vice-Chair Bunde spoke against the amendment. He stressed
how complicated it would be for the sales clerks. He added
that all Alaskans need to have ownership of the State
government and that by paying taxes, it would then be fair.
Representative Croft stated that with a sales tax of 3%, the
poor Alaskans would be paying 2% of their income and rich
Alaskans would be paying less than 1%. He referenced the
handout, Chart #2, which more clearly defines the
differences. He stressed that the numbers provided by the
Division of Legislative Finance indicates a definite
disproportionate impact on poor Alaskans.
Representative Whitaker asked what that percentage meant.
He believed that the real numbers indicate how much the
working poor would be charged with a State income tax. He
stated that those in the upper income brackets would be
paying more. Representative Whitaker noted that he quoted
from a statement provided by the Department of Revenue.
[Copy on File]. He discredited the argument that the
proposed tax was a regressive tax effort.
Co-Chair Williams requested that the discussion be kept to
the amendment.
Representative Davies advised that his "principle concern"
is regarding whether the proposed tax would be regressive.
The sales tax is disproportionate to those with less income
as compared to those with more income. The proposed sales
tax has the property of taxing the people with relatively
less income, a higher percentage of their income. That, by
definition is regressive. He stressed that is the meaning
of "regressive". He offered the amendment because sales tax
is regressive and it will impact people's ability to buy
food.
Representative Croft claimed that the key point is that the
amendment addresses the regressive nature of the proposed
tax and that unprepared food is the key point. He stressed
that the argument proposed by Representative Whitaker is
wrong. The number he proposes to use, the sales tax would
raise somewhere around $250 million dollars as compared to
an income tax that would raise $360 million dollars. The
statistics do not tell an accurate story. Also, there is a
Department of Revenue proposal, which analyzes it
differently, indicating that the numbers cannot be compared.
There is a hole, which needs to be filled, and the question
is about how to fill it most fairly.
A roll call vote was taken on the motion.
IN FAVOR: Croft, Davies, Harris, Hudson, Moses
OPPOSED: Foster, Lancaster, Whitaker, Bunde, Mulder,
Williams
The MOTION FAILED (5-6).
Representative Croft MOVED to ADOPT Amendment 2, which would
add an exemption that would make the tax, a seasonal sales
tax. Vice-Chair Bunde OBJECTED.
Representative Croft explained that many Alaskans have the
impression that the fiscal gap could be solved with a
seasonal sales tax. He admitted that the seasonal sales tax
would most likely not be able to fill the gap, but more
importantly, the seasonal nature of the tax does not have
all the consequences that people assume. He added that many
constituents have discussed the option as a possible remedy
to the State's dilemma.
Vice-Chair Bunde testified in opposition to the amendment.
He stated that the amendment perpetuates the notion that
someone else can pay for the services of this State. He
claimed that is a mythical concept.
A roll call vote was taken on the motion.
IN FAVOR: Moses, Croft, Mulder
OPPOSED: Davies, Foster, Harris, Hudson, Lancaster,
Whitaker, Bunde, Williams
The MOTION FAILED (3-8).
Co-Chair Mulder MOVED to REPORT CS HB 303 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. Representative Davies OBJECTED.
Representative Croft stated that the legislation would be
paired with a reduction to the permanent fund. He noted
that the proposed legislation is regressive and not fair.
The Committee has rejected amendments that would make the
legislation more progressive. He added that it would pre-
empt other communities that have a sales tax, and that would
provide an additional burden. The legislation will hurt
poor Alaskans and Alaskan communities that already have a
sales tax.
Representative Davies echoed the comments made by
Representative Croft. He emphasized that the draw on the
permanent fund paired with the legislation makes it
extremely regressive. The revenue that would be generated
is too small and that more revenue will need to be
determined. He spoke in support of a broad-based tax.
Representative Whitaker commented that the two proposals
before the Committee are for either a 3% sales tax or a 4%
income tax. He believed these were valid comparisons. The
least fortunate Alaskans will pay no tax on life essentials.
The more wealthy Alaskans will pay nine times more than the
least fortunate. He agreed that it is not the perfect tax
because every person in the State will pay. The perfect tax
is the one where someone else pays. He stressed that the
least fortunate will be protected and that the proposed
legislation is "fair".
Co-Chair Mulder spoke in favor of moving the bill from
Committee. He added that the proposed legislation would
work well with the permanent fund proposal. He claimed that
his basic objection to having a permanent fund dividend and
an income tax would be that the dividend would then become a
welfare payment. With implementing a sales tax provision,
everyone pays. He claimed that the more a person makes, the
more they spend. The very nature of that demonstrates that
the wealthy will be paying more.
Co-Chair Mulder commented that the State would be surprised
at the amount received from the seasonal sales tax. He
thought that a sales tax could stand the "public muster".
He added that a sales tax has more public support than an
income tax.
Representative Lancaster supported the comments of
Representative Whitaker. He indicated his concern with the
exemption process. He noted that he would support the bill
so that the debate could occur on the House Floor.
Representative Davies rejected Co-Chair Mulder's statement
that the dividend has become a welfare payment. He stressed
that the payment of the dividend is related to an ownership
that Alaskans have to the State's resources. Few Alaskans
do much to deserve the dividend. He thought that it was
fair since all Alaskans own that resource that the dividend
is distributed equally.
He disagreed with comments made by Co-Chair Mulder that
there is more acceptance for a sales tax versus an income
tax. He clarified that statement entered into the category
of a "big lie" and that most public's communication to the
legislator's office has proven that. More people have come
to the conclusion that an income tax would be a better way
to go for Alaska over a sales tax. The impact of a sales
tax will be dramatic on the municipalities.
Vice-Chair Bunde noted that his constituents do not want
taxes, however, they would prefer a sales tax to an income
tax. He explained how the proposal would reduce the
dividend; next year, the dividend would remain the same and
then in the future, the dividend would change.
Co-Chair Mulder commented on the resale exemption and that
the intent of that exemption was not to hurt businesses
which have "value added" in the State of Alaska. The
components that go into a finished product would not be
taxed.
Representative Davies asked if that would include sales
outside the State of Alaska such as logs and fish.
Co-Chair Mulder understood that they would be taxed.
Representative Lancaster disagreed with Co-Chair Mulder. He
stated that neither would be taxed.
Representative Davies clarified that it is not a question of
whether the retail occurs within the State.
A roll call vote was taken on the motion.
IN FAVOR: Harris, Hudson, Lancaster, Whitaker, Bunde,
Williams, Mulder
OPPOSED: Foster, Davies, Moses, Croft
The MOTION PASSED (7-4).
CS HB 303 (FIN) was reported out of Committee with a "do not
pass" recommendation and with a new fiscal note by
Department of Revenue.
HOUSE BILL NO. 304
An Act relating to disposition of income of the
permanent fund; and providing for an effective date.
Co-Chair Mulder MOVED to ADOPT the work draft, #22-LS1207\B,
Cook, 3/25/02. Representative Davies OBJECTED for
discussion purposes.
Representative Davies inquired the changes made to the work
draft.
Co-Chair Williams outlined the changes that had been made to
the draft:
· Delay effective date for changing to POMV
until June 29, 2003.
· Intend to transfer $300 million dollars from
the earnings reserve to the general fund in
2002 (for the FY03 budget).
· Language referring to the dividend as being
$1540 this October, since the State will be
leaving the current formula in effect until
next year. He emphasized that nothing would
change with this year's dividend.
Representative Croft observed that the changes would delay
it for a year and the 7% would then be in effect. He asked
if it would change the percent of distribution from 45% to
55% mix-government.
Co-Chair Mulder restated the MOTION to ADOPT the work draft
"B" as the working document before the Committee. Co-Chair
Williams OBJECTED.
Representative Lancaster observed that the rate of return
had been changed from 7.95% to 8.25%. He noted information
listed on the spreadsheets. [Copies on File].
Discussion followed amongst Committee members regarding
information contained on the spreadsheet.
Co-Chair Williams stated that the payout 7.65% would be
delayed starting in FY04.
Representative Davies commented on the delay and how that
would affect the Capital Budget Reserve (CBR). One of the
tests used was determining what would be left in the CBR and
what the impact would be.
Representative Hudson commented that this is a work in
progress. The Committee had passed the sales tax, which
would generate $250 million dollars. Taking that into
consideration and the $300 million proposed dollars from the
legislation, the State would be about $250 million dollars
short. He commented that with all the pieces of legislation
passed, the State would be down to a $300 million dollar
draw rather than $750 million dollar draw.
Co-Chair Williams WITHDREW his OBJECTION to adopting the
work draft. There being NO further OBJECTION, the work
draft was adopted.
Representative Hudson MOVED to report CS HB 304 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. Representative Croft OBJECTED.
Representative Croft indicated his concern that there is not
a spreadsheet available regarding how it would affect the
CBR and reiterated his concern with how the legislation will
affect poor Alaskans.
Co-Chair Williams noted that the bill previously passed had
a pay out of 7.65%, which was agreed to by the Permanent
Fund Corporation. He claimed, with that amount, there is
enough remaining in the general fund to not have to deal
with taxes of any kind. He reiterated that he did not
support any taxation and believed that the proposed solution
would be appropriate.
Co-Chair Williams stated that the manner in which the
original bill was written, there was $258 million dollars in
FY05 to cover the capital projects. He added that those
projects would be cut back. The State should not be taxed
economically when the State is depressed. He recommended
keeping the original numbers. He claimed that it is not
right to tax the people of the State when there exists a
dividend. Co-Chair Williams emphasized that Alaska is the
largest, socialist State in the world. Alaska should be
able to manage it finances. He urged that the bill not be
passed.
Co-Chair Mulder provided the idea of the legislation and the
spreadsheet. With CS HB 304 (FIN) and if HB 303 and HB 229
were to be put in place, the estimated $300 million from HB
304 and $150 million dollars additional tax revenues, the
net amount would total $450 million dollars. Offsetting
that is the fact that the oil revenue spring forecast for
FY03, if spending is held in line, the oil market is now
healthier, the State would be considering a draw estimate of
about $750 million dollars absent any new revenues. The
$750 million minus the $450 million dollars would be about a
$300 million dollar draw from the CBR. The balance in the
CBR would be in excess of $2 billion dollars.
Representative Davies claimed that the only way that is a
"healthy" outlook for the CBR is if people are willing to
consider that the State will not be able to do anything in
the future to address infrastructure concerns.
TAPE HFC 02 - 65, Side A
Representative Davies stated that is not a "rosy" picture
for the State of Alaska.
Co-Chair Mulder stated that was only a "capsule" view of
where the State would be at the conclusion of FY03. There
will be a 2% growth allotment, and with the percent of
market value (POMV) provisions related to permanent fund
earnings, as well as the additional revenue generated from
State tax dollars, those amounts would go a long way to
filling that gap.
Co-Chair Mulder asked if a spreadsheet would be needed to
move the bill from Committee.
Representative Croft replied that it was not needed as he
assumed that there were enough votes to move the bill from
Committee. He indicated for the record that he did not want
the proposal to move forward.
Representative Whitaker asked about the infrastructure
development in the capital budget.
Co-Chair Mulder responded that in relation to HB 304 and
because it has been delayed for a year, there will be no
effect on the upcoming capital budget. He claimed that in
the future, there would be a $250 million dollar stream
moving toward infrastructure development. He added that
there would be capital to provide more than an adequate
stream for school construction, maintenance and road
construction.
Representative Whitaker asked if for FY03, the capital
budget would be somewhere in the range of $100-$150 million
dollars.
Co-Chair Williams noted that the capital budget would be
$114 million dollars, which would be rolled to $193 million
dollars. He thought that it would be a 50/50 split.
Representative Whitaker asked if it were a fair conclusion,
that given the adoption of HB 304, there would be a
significant growth in the capital budget this year for the
State of Alaska.
Representative Davies asked if that growth would be general
fund dollars.
A roll call vote was taken on the motion.
IN FAVOR: Foster, Harris, Hudson, Lancaster, Whitaker,
Bunde, Mulder
OPPOSED: Williams, Davies, Moses, Croft
The MOTION PASSED (6-4).
CS HB 304 (FIN) was reported out of Committee with a "do
pass" recommendation and a new fiscal note by the Department
of Revenue.
HOUSE BILL NO. 229
An Act imposing a tax on employment; and providing for
an effective date.
Representative Croft noted the three amendments contained in
the member's packets. He thought that it would make more
sense to move amendment labeled #3 first, as Amendments 1
and 2 make technical changes to the income tax. If
Amendment 3 passes, it would not make sense to submit the
other two amendments.
Co-Chair Williams indicated that all the amendments should
be discussed. He welcomed the amendments proposed by
Representative Croft.
Representative Croft MOVED and spoke to Amendment #1, S22-
LS0842\O.1, Kurtz, 3/25/02. He noted that his amendment
would make technical changes to the income tax. Co-Chair
Williams OBJECTED for the purpose of discussion.
Representative Croft explained that the amendment would
provide the necessary technical changes. He indicated that
he had worked with Larry Persily from the Department of
Revenue to help address those technical concerns.
Co-Chair Williams WITHDREW his OBJECTION. There being NO
OBJECTION, Amendment 1 was adopted.
Representative Croft MOVED to ADOPT Amendment 2, #22-
LS0842\O.2, Kurtz, 3/25/02. Co-Chair Williams OBJECTED.
Representative Croft explained that the amendment would
remove the "trigger" provision. He stated that the clearer
the language, the better it will be.
Co-Chair Mulder voiced his OBJECTION. He stated that he
liked the trigger mechanism and that it would provide
Alaskans some level of assurance that if the State does not
need the money, and if there is more revenue from a higher
price of oil or more production, then Alaskans would not
need to be taxed.
Representative Lancaster asked if item #3 had been removed.
Co-Chair Mulder responded that the 1% had been left in the
bill.
Co-Chair Mulder spoke against removing the trigger mechanism
in the bill. He believed that the State should have never
gotten rid of the tax so that the mechanics would be in
place. He claimed that was what the trigger mechanism would
do. He assumed that Alaskans would be frustrated if that
did not occur. Co-Chair Mulder believed that there would be
a move to repeal any income tax.
Representative Croft WITHDREW Amendment 2.
Representative Whitaker WITHDREW Amendment 3.
Representative Hudson MOVED to report CS HB 229 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. Co-Chair Williams OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Hudson, Lancaster, Moses, Croft, Davies
OPPOSED: Whitaker, Bunde, Foster, Harris, Mulder,
Williams
The MOTION FAILED (5-6).
CS HB 229 (FIN) FAILED to move out of Committee.
ADJOURNMENT
The meeting was adjourned at 3:29 P.M.
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