Legislature(2001 - 2002)

05/02/2002 09:20 AM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                        May 02, 2002                                                                                            
                         9:20 A.M.                                                                                              
                                                                                                                                
TAPE HFC 02 - 101, Side A                                                                                                       
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House Finance Committee meeting                                                                    
to order at 9:20 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 Lisa Murkowski                                                                                                   
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 225    An Act relating to municipal taxation of alcoholic                                                                    
          beverages and increasing the alcoholic beverage                                                                       
          tax rates.                                                                                                            
                                                                                                                                
          CS HB 225 (FIN) was reported out of Committee with                                                                    
          a "do pass" recommendation and with a new fiscal                                                                      
          note by Department of Revenue.                                                                                        
                                                                                                                                
HOUSE BILL NO. 225                                                                                                            
                                                                                                                                
     An Act relating to municipal taxation of alcoholic                                                                         
     beverages and increasing the alcoholic beverage tax                                                                        
     rates.                                                                                                                     
                                                                                                                                
Vice-Chair Bunde MOVED to RETURN to the table HB 225.  There                                                                    
being NO OBJECTION, it was so moved.                                                                                            
                                                                                                                                
Vice-Chair  Bunde MOVED  to  ADOPT the  committee  substitute                                                                   
#22-LS0806\R, Kurtz, 5/01/02,  as the working document before                                                                   
the Committee.  There being NO OBJECTION, it was adopted.                                                                       
                                                                                                                                
Representative  Harris MOVED  to AMEND  the bill by  adopting                                                                   
Amendment #1,  #22-LS0806\0.4, Kurtz, 5/2/02.   The amendment                                                                   
would  phase the ten  cents per  drink in  over a  three-year                                                                   
period.  Co-Chair Williams OBJECTED.                                                                                            
                                                                                                                                
REPRESENTATIVE   LISA   MURKOWSKI    opposed   the   proposed                                                                   
amendment.   She noted that it  would make the most  sense to                                                                   
implement the legislation and  get the tax "in place" and not                                                                   
have to  work it through  a three-year  period.   The adopted                                                                   
committee substitute  addresses stockpiling.   Representative                                                                   
Murkowski  commented  that she  did  not understand  how  the                                                                   
transition provision  would work if  there were a  three year                                                                   
phase in.                                                                                                                       
                                                                                                                                
Vice-Chair Bunde  inquired if the costs to  the Department of                                                                   
Revenue  would triple if  the tax  were put  in place  over a                                                                   
three-year period.                                                                                                              
                                                                                                                                
Representative   Murkowski  explained   the  excise   tax  is                                                                   
accessed at  the bonding warehouse  when the product  leaves.                                                                   
A simple process is used to increase  the tax.  At this time,                                                                   
the  tax on  spirits  is $5.60  a  gallon and  if  HB 225  is                                                                   
adopted, it would be $12.80 per gallon.                                                                                         
                                                                                                                                
Representative Croft referenced  the inventory floor tax.  He                                                                   
remembered  that there  was  stockpiling  happening when  the                                                                   
cigarette tax  was passed.  He  asked if that would  occur if                                                                   
the amendment passed.                                                                                                           
                                                                                                                                
Representative  Murkowski replied that  she did not  know how                                                                   
that would  work.   If the increased  tax was implemented  on                                                                   
the  effective date,  it is  clear  how the  floor stock  tax                                                                   
would happen.   When doing  the inventory, that  number would                                                                   
be provided to  the Department of Revenue.  She  did not know                                                                   
how the tax would affect it and  if the Department of Revenue                                                                   
had considered that.                                                                                                            
                                                                                                                                
Vice-Chair Bunde  commented that if there were  a stockpiling                                                                   
and a warehouse inventory tax,  some warehouses would need to                                                                   
go through that process three  times, which would cost money.                                                                   
                                                                                                                                
Representative Murkowski agreed.                                                                                                
                                                                                                                                
Representative  Harris  argued  that for  those  distributors                                                                   
that stockpile, that was the least  of their concerns.  Those                                                                   
merchants  would rather  absorb any added  costs rather  than                                                                   
what they  anticipate they will  loose with the sales  to the                                                                   
responsible  drinkers.    He emphasized  that  the  merchants                                                                   
would rather  see the tax  phased in.  Representative  Harris                                                                   
added that  it would not be  absorbed at the  wholesale level                                                                   
and would be passed on to the consumer.                                                                                         
                                                                                                                                
Representative   Whitaker  questioned   the  intent   of  the                                                                   
amendment.                                                                                                                      
                                                                                                                                
Representative  Harris explained  that it  was his intent  to                                                                   
minimize the impact of the tax  increase happening all at one                                                                   
time and the  amendment would provide for businesses  and the                                                                   
public to phase into the change.                                                                                                
                                                                                                                                
Representative  Whitaker recommended that  the effect  of the                                                                   
phase  should  be determined  and  how  it will  affect  each                                                                   
drink.  Representative Whitaker  spoke against the amendment,                                                                   
claiming  that it  would prolong  the inevitable.   The  bill                                                                   
creates a tax and someone must pay it sooner or later.                                                                          
                                                                                                                                
Vice-Chair Bunde  asked Representative Moses if a  tax to the                                                                   
retailer would  have a greater  impact if implemented  in one                                                                   
year or in three years.                                                                                                         
                                                                                                                                
Representative Moses  advised that it would not  be that much                                                                   
trouble to change the prices each  year.  He pointed out that                                                                   
most businesses would increase their retail price.                                                                              
                                                                                                                                
Vice-Chair Bunde  commented that was  the intent of  the tax,                                                                   
however,  he  did  not  want  to  see  the  tax  become  more                                                                   
burdensome for the retailers.                                                                                                   
                                                                                                                                
Representative  Croft spoke  to the phasing  in question  and                                                                   
asked  Representative Murkowski's  thoughts  on enacting  the                                                                   
proposal.  He asked what position  that would place Alaska in                                                                   
relationship to the rest of the states.                                                                                         
                                                                                                                                
Representative  Murkowski explained that  the price  would be                                                                   
ten cents  per drink on beer,  wine and spirits.   That price                                                                   
compared to other  state's taxes where the average  per drink                                                                   
price is thirty cents, Alaska,  at ten cents per drink, would                                                                   
be  well below  the national  average.   She reiterated  that                                                                   
member's should  keep in mind  that Alaska does not  have any                                                                   
other State tax on alcohol.                                                                                                     
                                                                                                                                
Representative Murkowski  spoke to Amendment #1.   She stated                                                                   
that  it  would appear  that  a  phase  in would  assist  the                                                                   
wholesalers  at the  time that  they have to  pay the  excise                                                                   
tax.   However, the net effect  to the consuming  public, who                                                                   
ultimately pay  the tax, would  be less of  a hit if  the tax                                                                   
were changed one time only.                                                                                                     
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Foster,   Harris,    Moses,   Bunde,   Mulder,                                                                   
               Williams                                                                                                         
OPPOSED:       Lancaster, Whitaker, Croft, Davies                                                                               
                                                                                                                                
Representative Hudson was not present for the vote.                                                                             
                                                                                                                                
The MOTION PASSED (6-4).                                                                                                        
                                                                                                                                
Co-Chair Mulder  MOVED to DELETE Section #3.   Representative                                                                   
Croft OBJECTED.                                                                                                                 
                                                                                                                                
Co-Chair Mulder argued that section was punitive.                                                                               
                                                                                                                                
Representative  Murkowski  responded   that  Section  #3  was                                                                   
introduced at the  request of the Department of  Revenue as a                                                                   
direct  response to  what they  saw to the  increase of  tax.                                                                   
She noted  that the  Department knows  that there is  already                                                                   
stockpiling going on in anticipation of the legislation.                                                                        
                                                                                                                                
Representative  Davies understood that  when the  tobacco tax                                                                   
was implemented,  it took about six months  before sales came                                                                   
back.  Stockpiling did occur in  most of the larger stores at                                                                   
a disadvantage.  Removing Section  #3 would place the smaller                                                                   
stores.  He spoke against the amendment.                                                                                        
                                                                                                                                
Representative  Whitaker  agreed with  comments  made by  Co-                                                                   
Chair Mulder that the language was punitive.                                                                                    
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Foster, Harris, Hudson, Lancaster, Moses,                                                                        
               Whitaker, Williams, Mulder                                                                                       
OPPOSED:       Davies, Bunde, Croft                                                                                             
                                                                                                                                
The MOTION PASSED (8-3).                                                                                                        
                                                                                                                                
Co-Chair  Mulder MOVED  to  report  CS HB  225  (FIN) out  of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal note.                                                                                                       
                                                                                                                                
Representative Foster OBJECTED.                                                                                                 
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Croft, Davies, Harris, Hudson, Lancaster,                                                                        
               Moses, Whitaker, Bunde                                                                                           
OPPOSED:       Foster, Mulder, Williams                                                                                         
                                                                                                                                
The MOTION PASSED (8-3).                                                                                                        
                                                                                                                                
CS HB  225 (FIN)  was reported  out of  Committee with  a "do                                                                   
pass"  recommendation   and  with   a  new  fiscal   note  by                                                                   
Department of Revenue.                                                                                                          
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 9:48 A.M.                                                                                          

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