Legislature(2001 - 2002)

02/13/2002 03:25 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                       February 13, 2002                                                                                        
                           3:25 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Lisa Murkowski, Chair                                                                                            
Representative Andrew Halcro, Vice Chair                                                                                        
Representative Kevin Meyer                                                                                                      
Representative Pete Kott                                                                                                        
Representative Norman Rokeberg                                                                                                  
Representative Harry Crawford                                                                                                   
Representative Joe Hayes                                                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 229                                                                                                              
"An  Act imposing  a  tax  on employment;  and  providing for  an                                                               
effective date."                                                                                                                
                                                                                                                                
     - MOVED CSHB 229(L&C) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 258                                                                                                              
"An  Act  converting  the  business license  fee  to  a  business                                                               
license tax;  adding, as an  element of that tax,  computation of                                                               
the  tax based  on  the taxpayer's  gross receipts;  establishing                                                               
adjustments to  that tax; and transferring  administration of the                                                               
levy  to  the  Department  of   Revenue;  and  providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
     - FAILED TO MOVE CSHB 258(L&C) OUT OF COMMITTEE                                                                            
                                                                                                                                
HOUSE BILL NO. 333                                                                                                              
"An  Act  extending  the  termination   date  of  the  Regulatory                                                               
Commission of Alaska; and providing for an effective date."                                                                     
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
BILL: HB 229                                                                                                                  
SHORT TITLE:EDUCATION TAX ON EMPLOYMENT                                                                                         
SPONSOR(S): REPRESENTATIVE(S)STEVENS                                                                                            
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
04/02/01     0810       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
04/02/01     0810       (H)        L&C, FIN                                                                                     
04/27/01                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
04/27/01                (H)        Heard & Held                                                                                 
04/27/01                (H)        MINUTE(L&C)                                                                                  
02/11/02                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
02/11/02                (H)        Tabled                                                                                       
                                   MINUTE(L&C)                                                                                  
02/13/02                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
                                                                                                                                
BILL: HB 258                                                                                                                  
SHORT TITLE:CHANGE BUSINESS LIC. FEE TO RECEIPTS TAX                                                                            
SPONSOR(S): REPRESENTATIVE(S)SCALZI                                                                                             
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
04/25/01     1206       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
04/25/01     1206       (H)        L&C, FIN                                                                                     
04/25/01     1206       (H)        REFERRED TO LABOR & COMMERCE                                                                 
04/27/01                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
04/27/01                (H)        Heard & Held                                                                                 
04/27/01                (H)        MINUTE(L&C)                                                                                  
02/11/02                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
02/11/02                (H)        <Bill Postponed to 2/13/02>                                                                  
02/13/02                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
AMY ERICKSON, Staff                                                                                                             
to Representative Lisa Murkowski                                                                                                
Alaska State Legislature                                                                                                        
Capitol Building, Room 408                                                                                                      
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT:  Answered questions relating to CSHB
229(L&C).                                                                                                                       
                                                                                                                                
REPRESENTATIVE DREW SCALZI                                                                                                      
Alaska State Legislature                                                                                                        
Capitol Building, Room 13                                                                                                       
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT:  As the sponsor, presented HB 258 to the                                                                    
committee and answered questions.                                                                                               
                                                                                                                                
NEIL SLOTNICK, Deputy Commissioner of Revenue                                                                                   
Treasury Division                                                                                                               
Department of Revenue                                                                                                           
PO Box 110405                                                                                                                   
Juneau, Alaska  99811-0405                                                                                                      
POSITION STATEMENT:  Testified that the Department of Revenue                                                                   
does not support HB 258.                                                                                                        
                                                                                                                                
BRETT FRIED, Economist III                                                                                                      
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
PO Box 110400                                                                                                                   
Juneau, Alaska  99811-0400                                                                                                      
POSITION STATEMENT:  Answered questions related to HB 258.                                                                      
                                                                                                                                
EMMITT TRIMBLE                                                                                                                  
Kachemak Board of Realtors, Inc.                                                                                                
PO Box 150                                                                                                                      
Anchor Point, Alaska  99556                                                                                                     
POSITION STATEMENT:  Testified in opposition to HB 258 as it is                                                                 
currently drafted.                                                                                                              
                                                                                                                                
KEN WARDWELL, Independent Licensed Real Estate Broker                                                                           
PO Box 844                                                                                                                      
Anchor Point, Alaska  99556                                                                                                     
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
MIKE LOHMAN                                                                                                                     
M. Lohman Investments, Inc.                                                                                                     
574 Paystreak                                                                                                                   
Wasilla, Alaska  99654                                                                                                          
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
Gary Weber                                                                                                                      
Wasilla Chevron                                                                                                                 
PO Box 871216                                                                                                                   
Wasilla, Alaska  99687                                                                                                          
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
JAMES MORGAN                                                                                                                    
Sand Lake Automotive                                                                                                            
1200 West Dimond, Number 519                                                                                                    
Anchorage, Alaska  99515                                                                                                        
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
FRED ROSENBERG, Vice President                                                                                                  
Alaska Restaurant and Beverage Association (ARBA)                                                                               
4450 Cordova Street, Number 200                                                                                                 
Anchorage, Alaska  99503                                                                                                        
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
JOSEPH HENRI                                                                                                                    
9921 Near Point Drive                                                                                                           
Anchorage, Alaska  99507                                                                                                        
POSITION  STATEMENT:   Testified  in opposition  to  HB 258,  and                                                               
offered  that using  the  receipts  of the  permanent  fund is  a                                                               
better option to try to close the fiscal gap.                                                                                   
                                                                                                                                
ROCKY FLINT                                                                                                                     
Rocky's Marine, Inc.                                                                                                            
PO Box 690                                                                                                                      
Petersburg, Alaska  99833                                                                                                       
POSITION STATEMENT:   Testified in opposition to  HB 258, stating                                                               
that  a gross  receipts  tax would  affect  the fishing  industry                                                               
dramatically.                                                                                                                   
                                                                                                                                
NANCY BERG                                                                                                                      
Viking Travel, Inc.                                                                                                             
PO Box 1435                                                                                                                     
Petersburg, Alaska  99833                                                                                                       
POSITION  STATEMENT:   Testified  in  opposition  to HB  258  and                                                               
expressed that  she would  be more supportive  of a  state income                                                               
tax that gave some kind of tax credit to local residents.                                                                       
                                                                                                                                
BEN PHILLIPS                                                                                                                    
Tongass Marine                                                                                                                  
PO Box 1314                                                                                                                     
Petersburg, Alaska  99833                                                                                                       
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
KATHY HANSEN                                                                                                                    
9369 North Douglas Highway                                                                                                      
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT:   Testified on  HB 258, and offered  that she                                                               
would rather have a state sales tax than a gross receipts tax.                                                                  
                                                                                                                                
THYES SHAUB, Lobbyist                                                                                                           
for National Federation of Independent Business (NFIB)                                                                          
217 Second Street, Number 206                                                                                                   
Juneau, Alaska  99801                                                                                                           
POSITION  STATEMENT:   Testified  in opposition  to and  answered                                                               
questions relating to HB 258.                                                                                                   
                                                                                                                                
PAMELA LaBOLLE, President                                                                                                       
Alaska State Chamber of Commerce                                                                                                
217 Second Street                                                                                                               
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
DONNA ISAAK, Owner                                                                                                              
Ike's Fuel                                                                                                                      
409 Fifth Street                                                                                                                
Douglas, Alaska                                                                                                                 
POSITION STATEMENT:  Testified in opposition to HB 258                                                                          
                                                                                                                                
RICK WITHROW                                                                                                                    
Alsek Freight                                                                                                                   
PO Box 210734                                                                                                                   
Auke Bay, Alaska  99821                                                                                                         
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
BERNIE SMITH                                                                                                                    
Chugiak-Eagle River Chamber of Commerce                                                                                         
17710 Toakoana                                                                                                                  
Eagle River, Alaska                                                                                                             
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
SUSAN W. SPRINGER, Owner                                                                                                        
Herring Bay Mercantile                                                                                                          
PO Box 257                                                                                                                      
Seldovia, Alaska  99663                                                                                                         
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
KAC'E McDOWELL, Executive Director                                                                                              
Alaska Cabaret, Hotel, Restaurant and Retailers Association                                                                     
1111 East 80th Avenue, Suite 3                                                                                                  
Anchorage, Alaska  99518                                                                                                        
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
MARTHA J. ROGERS, Owner                                                                                                         
Peters Creek Inn and Catering                                                                                                   
PO Box 671487                                                                                                                   
Chugiak, Alaska  99567                                                                                                          
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
DIXIE WADDELL, Owner                                                                                                            
Rural Discount Center                                                                                                           
18915 Old Glenn Highway                                                                                                         
Chugiak, Alaska  99567                                                                                                          
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
JON NAUMAN, Owner                                                                                                               
Horse Drawn Carriage Company                                                                                                    
PO Box 671316                                                                                                                   
Chugiak, Alaska  99567                                                                                                          
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
SUSIE GORSKI, Executive Director                                                                                                
Chugiak-Eagle River Chamber of Commerce                                                                                         
PO Box 770353                                                                                                                   
Eagle River, Alaska  99577                                                                                                      
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
BURL A. ROGERS, Owner                                                                                                           
Burl's Aircraft Rebuild                                                                                                         
PO Box 671487                                                                                                                   
Chugiak, Alaska  99567                                                                                                          
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
DEBORAH LUPER, Director of Business Development                                                                                 
Eklutna Inc.                                                                                                                    
PO Box 771757                                                                                                                   
Eagle River, Alaska  99577                                                                                                      
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
DEBRA LEWIS, Realtor                                                                                                            
RE/MAX of Eagle River                                                                                                           
PO Box 772582                                                                                                                   
Eagle River, Alaska  99577                                                                                                      
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
AL ROMASZEWSKI, Realtor                                                                                                         
RE/MAX of Eagle River                                                                                                           
16600 Centerfield Drive                                                                                                         
Eagle River, Alaska  99577                                                                                                      
POSITION STATEMENT:  Testified in opposition to HB 258.                                                                         
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 02-18, SIDE A                                                                                                              
Number 001                                                                                                                      
                                                                                                                                
CHAIR  LISA  MURKOWSKI  called   the  House  Labor  and  Commerce                                                               
Standing   Committee    meeting   to    order   at    3:25   p.m.                                                               
Representatives  Crawford, Halcro,  Hayes,  Meyer, and  Murkowski                                                               
were present at the call  to order.  Representatives Rokeberg and                                                               
Kott arrived as the meeting was in progress.                                                                                    
                                                                                                                                
HB 229-EDUCATION TAX ON EMPLOYMENT                                                                                            
                                                                                                                                
Number 032                                                                                                                      
                                                                                                                                
CHAIR MURKOWSKI announced that the  first order of business would                                                               
be HOUSE BILL NO. 229, "An  Act imposing a tax on employment; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
Number 037                                                                                                                      
                                                                                                                                
REPRESENTATIVE  HALCRO  moved  to  bring   HB  229  back  up  for                                                               
committee  discussion.   There  being no  objection,  HB 229  was                                                               
before the committee again.                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO moved to report  HB 229, as amended, out of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal notes.                                                                                                                   
                                                                                                                                
Number 052                                                                                                                      
                                                                                                                                
REPRESENTATIVE MEYER objected for the  purpose of discussion.  He                                                               
asked  if   Representative  Murkowski  wished  to   have  a  full                                                               
committee present to vote on moving the bill from committee.                                                                    
                                                                                                                                
CHAIR MURKOWSKI said  that the committee could wait  to vote, but                                                               
she doesn't think that is necessary.   She stated that her intent                                                               
"was to get  those elements that might be ...  even considered to                                                               
be part of a fiscal plan and part  of a revenue package ... up to                                                               
House Finance  with as much  expediency as  we could."   She said                                                               
the testimony heard  on Monday [2/11/02] was  good and relatively                                                               
extensive.   She mentioned  that two  committee members  that are                                                               
absent were  able to give their  full input in the  discussion on                                                               
Monday.   She  said  that  this being  the  fact,  she isn't  too                                                               
concerned with having the full committee present.                                                                               
                                                                                                                                
Number 079                                                                                                                      
                                                                                                                                
REPRESENTATIVE MEYER  clarified that  this is the  $100 education                                                               
tax.                                                                                                                            
                                                                                                                                
CHAIR MURKOWSKI said that is correct.                                                                                           
                                                                                                                                
REPRESENTATIVE MEYER said that he  would maintain his opposition.                                                               
He asked  if there were any  amendments made at the  last hearing                                                               
in regard to the age.                                                                                                           
                                                                                                                                
Number 088                                                                                                                      
                                                                                                                                
AMY  ERICKSON, Staff  to  Representative  Lisa Murkowski,  Alaska                                                               
State Legislature,  responded to Representative  Meyer's question                                                               
by stating  that the  committee changed  the payment  schedule to                                                               
quarterly with  the Employment  Security Contribution  (ESC) tax.                                                               
She mentioned  that the committee  also "made the  effective date                                                               
with the passage of a personal income tax [January, 1 2003]."                                                                   
                                                                                                                                
CHAIR MURKOWSKI said, "I stand corrected.   ...  What we have ...                                                               
are the  amendments that  were made by  the committee  on Monday.                                                               
So this  is a  corrected draft."   She told  Representative Meyer                                                               
that he was correct.                                                                                                            
                                                                                                                                
REPRESENTATIVE MEYER voiced concern  over whether the two members                                                               
who are  absent were  comfortable with  the amendments  that were                                                               
made.                                                                                                                           
                                                                                                                                
CHAIR  MURKOWSKI  asked  if Representative  Meyer  maintains  his                                                               
objection.                                                                                                                      
                                                                                                                                
REPRESENTATIVE MEYER replied in the affirmative.                                                                                
                                                                                                                                
Number 108                                                                                                                      
                                                                                                                                
A  roll call  vote  was taken.    Representatives Hayes,  Halcro,                                                               
Crawford,  and Murkowski  voted in  favor  of moving  HB 229,  as                                                               
amended, from committee.  Representative  Meyer voted against it.                                                               
Therefore, CSHB 229(L&C) was reported  out of the House Labor and                                                               
Commerce Standing Committee by a vote of 4-1.                                                                                   
                                                                                                                                
HB 258-CHANGE BUSINESS LIC. FEE TO RECEIPTS TAX                                                                               
                                                                                                                                
Number 125                                                                                                                      
                                                                                                                                
CHAIR MURKOWSKI announced  that the next order  of business would                                                               
be HOUSE  BILL NO. 258,  "An Act converting the  business license                                                               
fee to  a business  license tax;  adding, as  an element  of that                                                               
tax,  computation  of  the  tax based  on  the  taxpayer's  gross                                                               
receipts; establishing adjustments to  that tax; and transferring                                                               
administration  of the  levy to  the Department  of Revenue;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
Number 135                                                                                                                      
                                                                                                                                
REPRESENTATIVE  DREW SCALZI,  Alaska State  Legislature, sponsor,                                                               
presented  HB  258  to  the  committee.   He  reported  that  the                                                               
proposed committee substitute (CS) for  HB 258 "is closer to what                                                               
was originally  on the Alaska books  ... from 1949 to  1979."  He                                                               
stated, "It  was repealed at  ... the  same time that  the income                                                               
tax was  repealed."  Those  were the two revenue  generators that                                                               
the state  had at that time.   It was substantially  different in                                                               
that  the  tax collected  at  that  time  was  .5 percent  up  to                                                               
$100,000, and then it dropped  down to .25 percent over $100,000.                                                               
He explained  that for the sake  of consistency, he'd chosen  a 2                                                               
percent [gross receipts  tax].  He asked if  the committee wanted                                                               
to move  to adopt  the proposed CS  for HB 258  so that  he could                                                               
speak directly to it.                                                                                                           
                                                                                                                                
Number 150                                                                                                                      
                                                                                                                                
REPRESENTATIVE HALCRO moved to adopt  the proposed CS for HB 258,                                                               
version  22-LS0920\L, Kurtz,  2/5/02,  as  the working  document.                                                               
There being no objection, Version L was before the committee.                                                                   
                                                                                                                                
Number 159                                                                                                                      
                                                                                                                                
REPRESENTATIVE SCALZI  stated that HB  258 is a  little different                                                               
from "the one you saw briefly  last spring."  [The gross receipts                                                               
tax] would  have a floor of  $20,000, so there would  be no taxes                                                               
collected  on  any  small businesses  that  generated  less  than                                                               
$20,000.  Businesses that generated  between $20,000 and $100,000                                                               
would  be  taxed  at  the  rate  of  2  percent.    Any  business                                                               
generating  over  $100,000 would  have  a  collection rate  of  1                                                               
percent.  He  stated, "I eliminated the separating  out of ticket                                                               
items over  $2,000.   In the  original bill  last spring  ... the                                                               
big-ticket items  over $2,000 were  exempt.  That appeared  to be                                                               
also  a   accounting  nightmare.     So   this  would   just  tax                                                               
everything."                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SCALZI described  that the  difference between  a                                                               
gross receipts  tax and  a regular  sales tax  is that  there are                                                               
specific exemptions  that are  allowed in  the collection  of the                                                               
tax  and "in  the  spending of  an  item."   In  other words,  if                                                               
somebody had  a church bookstore,  he/she would be exempt  from a                                                               
gross receipts tax.  But if  a preacher or somebody involved with                                                               
a church  purchased some lumber for  the church, it would  not be                                                               
exempt.  He  explained, "It would not have an  exemption card for                                                               
purchases.    They  would  for sales,  but  not  for  purchases."                                                               
Representative Scalzi  said the intent  is to give  the committee                                                               
an opportunity  to view a  tax that could be  collected statewide                                                               
on  sales with  little "encumbered  problems that  you have  on a                                                               
sales tax on the register."                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI  explained that  in each  different borough                                                               
or  city there  are problems  with different  exemptions in  each                                                               
taxing district.   Some taxing districts have  caps; for example,                                                               
he  thinks that  Juneau  has a  $2,000  tax cap  for  items.   He                                                               
addressed the  issue of  having different  sales tax  credits for                                                               
municipalities  that already  have  sales taxes.    He said  this                                                               
would  eliminate the  argument that  if  a state  income tax  was                                                               
added on  the register, then  those communities that  are already                                                               
collecting it  would need  to be  exempted.   He offered  that he                                                               
thinks the fairness issue is valid.  He explained:                                                                              
                                                                                                                                
     For instance, if  Anchorage were to impose  a 2 percent                                                                    
     sales tax  on them, but  yet we eliminated the  City of                                                                    
     Soldotna because  they already have a  sales tax, well,                                                                    
     that would  not be fair.   I mean, people in  each area                                                                    
     would not be paying their fair share to the state.                                                                         
                                                                                                                                
Number 198                                                                                                                      
                                                                                                                                
REPRESENTATIVE  SCALZI offered  that a  gross sales  receipt tax,                                                               
where  the incorporation  of  the  tax is  in  the  price of  the                                                               
product, would  be able to  be administered on a  statewide level                                                               
without any  problems with exemptions  or caps that  are inherent                                                               
in a regular 2  percent sales tax.  He said,  "I have no penchant                                                               
for passing  any of these tax  measures, but being a  part of the                                                               
...  fiscal policy  caucus, ...  it's difficult  to come  up with                                                               
concepts and  have the public speak  to concepts."  He  said that                                                               
because of  that problem, there  wasn't enough dialogue  from the                                                               
public.  He stated:                                                                                                             
                                                                                                                                
     So this  tax bill, as  the other  one I introduced  - I                                                                    
     believe it  was House  Bill 233, which  is a  regular 2                                                                    
     percent sales tax  - are out there as  vehicles for the                                                                    
     public  to make  their  comment for  this committee  to                                                                    
     consider, and find out if  there's anything here that's                                                                    
     worth moving forward.                                                                                                      
                                                                                                                                
REPRESENTATIVE SCALZI said,  "It was intriguing to  me because it                                                               
was on the books before.   It's intriguing to me because it takes                                                               
care of  those issues  that I've  stated."   He offered  that [HB
258] should be on  the table for discussion.  He  said he has had                                                               
some  input  from constituents  "that  it  is a  value-added  tax                                                               
essentially."   Every  facet  of  sales gets  taxed,  and it's  a                                                               
multiple tax,  not just a retail  tax.  He said  [the legislature                                                               
has] to be cognizant of that.  He stated:                                                                                       
                                                                                                                                
     If this  committee chose  to do that,  or make  it just                                                                    
     retail, or if they chose to  make it a ... net receipts                                                                    
     tax  versus   a  gross  receipt  tax,   that  could  be                                                                    
     considered.  Again, this is  just a vehicle and I offer                                                                    
     it for consideration.                                                                                                      
                                                                                                                                
Number 234                                                                                                                      
                                                                                                                                
REPRESENTATIVE  CRAWFORD voiced  that his  biggest fear  would be                                                               
the  fact  that  sales  could  be taxed  before  there  were  any                                                               
profits.  He  offered that this could drive  businesses right out                                                               
of business.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SCALZI agreed  with  Representative Crawford  and                                                               
said, "That's  a good  argument."  The  intent is  to incorporate                                                               
the tax  into the price  of the product.   He gave an  example of                                                               
selling a sign  for $2 and said  that by putting "the  2 cents on                                                               
the  register, I  don't see  any  difference in  knowing what  my                                                               
margin is  and incorporating the  2 cents  into the price  of the                                                               
product."    He   offered  that  the  business   owner  would  be                                                               
responsible for collecting  that tax throughout the  year for the                                                               
State of  Alaska.  He  stated, "So,  instead of selling  this for                                                               
$2, and a 2-cent tax at the  register, I would sell it for $2.04,                                                               
and I  would hold  that part of  my gross receipts  ... as  a tax                                                               
that I would owe to the State of Alaska."                                                                                       
                                                                                                                                
REPRESENTATIVE  SCALZI stated  that he  has heard  arguments from                                                               
stores that  operate on a very  slim margin, and don't  have "the                                                               
room to  put that  added value  in there."   Putting a  2 percent                                                               
sales tax on top of any product  is going to end up with the same                                                               
results.    He mentioned  that  there  are  two people  from  the                                                               
Department of  Revenue present to  answer questions and  to speak                                                               
to some of the intricacies of the tax and the collection.                                                                       
                                                                                                                                
Number 263                                                                                                                      
                                                                                                                                
REPRESENTATIVE  HALCRO  referred  to Representative  Scalzi's  $2                                                               
sign example,  and said the  problem with the gross  receipts tax                                                               
is that it  "basically puts business at the top  of the pyramid."                                                               
He said,  "There's no way you  can pass through a  gross receipts                                                               
tax because  if you sell  this sign for $2,  you pay a  2 percent                                                               
gross receipts  tax on $2."   If a  business owner tries  to pass                                                               
that to  the customer, and raise  the cost of the  sign to $2.04,                                                               
he/she will pay 2 percent on $2.04, not on $2.                                                                                  
                                                                                                                                
REPRESENTATIVE SCALZI replied, "That's correct."                                                                                
                                                                                                                                
REPRESENTATIVE  HALCRO  said,  "I  just wanted  to  clarify  that                                                               
because  ... unlike  a sales  tax, you  cannot pass  that through                                                               
[to] the consumer."                                                                                                             
                                                                                                                                
REPRESENTATIVE SCALZI  said that  is partially correct  because a                                                               
business can pass the 4 cents on to the consumer.  He explained:                                                                
                                                                                                                                
     There's an  inherent price that  the business  is going                                                                    
     to pick up,  and in this case  it would be .04.   So in                                                                    
     other  words, you're  paying ...  2  percent on  $2.04,                                                                    
     rather than  $2.02.   But if you  compute that  out, it                                                                    
     comes out to .04, which  would be $40 on $100,000 worth                                                                    
     of sales.   That's what you  can't collect.  If  you do                                                                    
     the  math, that's  what it  comes  out to.   So  you're                                                                    
     right  that there  is  a percentage,  ...  and in  this                                                                    
     particular  instance  it  would   be  .04,  or  $40  on                                                                    
     $100,000 worth  of gross, yet  the business  would have                                                                    
     to absorb,  but you still  have the ability  to collect                                                                    
     that 2  percent on  the gross.   What  you lose  is you                                                                    
     lose the compounded part, which is .04.                                                                                    
                                                                                                                                
CHAIR MURKOWSKI stated that she  wants to take testimony from the                                                               
Department of Revenue  to learn the mechanics of the  tax and how                                                               
it might be applied.                                                                                                            
                                                                                                                                
Number 295                                                                                                                      
                                                                                                                                
NEIL   SLOTNICK,  Deputy   Commissioner   of  Revenue,   Treasury                                                               
Division, Department of Revenue,  testified before the committee,                                                               
and  noted  that  Brett  Fried  has  accompanied  him  to  answer                                                               
questions  relating to  the  economic  analysis of  HB  258.   He                                                               
explained that the  Department of Revenue did not have  a copy of                                                               
the proposed  committee substitute when  Mr. Fried did  his work,                                                               
but he  does have some estimate  of what the original  bill would                                                               
have  raised, and  can explain  some of  the difficulties  of the                                                               
bill.   He  stated that  a gross  receipts tax  would not  apply,                                                               
however, to  sales in  the state  made from  afar.   Mr. Slotnick                                                               
noted that  the tax wouldn't  be able  to be applied  to Internet                                                               
sales, to  catalog sales, or  to any sales that  didn't originate                                                               
with the business that did business in Alaska.                                                                                  
                                                                                                                                
MR.  SLOTNICK  reported  that  the   Department  of  Revenue  has                                                               
submitted a  fiscal note  indicating what it  thinks the  cost of                                                               
collection would  be.  There are  some features of [HB  258] that                                                               
are  labor-intensive,   such  as   the  security   provision  for                                                               
nonresident   licensees.     He  explained   that  the   security                                                               
provisions, in [his] experience  with similar provisions for fish                                                               
tax,  do  tend  to  be   quite  labor-intensive  because  there's                                                               
individual  consideration  involved  as  to the  amount  of  real                                                               
estate that someone  may be putting up.  He  said, "If they can't                                                               
put up real  estate, then we have to tailor  specific security to                                                               
them."    There  are  also  collection issues  when  there  is  a                                                               
business failure.   Mr. Slotnick  noted another concern  that the                                                               
Department of Revenue has is  that the businesses will be holding                                                               
the gross  receipts for over a  year before the return  is due to                                                               
be filed.                                                                                                                       
                                                                                                                                
Number 320                                                                                                                      
                                                                                                                                
BRETT FRIED, Economist III, Tax  Division, Department of Revenue,                                                               
testified before the  committee.  He referred to  the fiscal note                                                               
and said,  "The reason why we  didn't put the revenue  amounts on                                                               
the front page  is they're very rough estimates."   The reason is                                                               
because  there is  no data  available, for  instance, to  address                                                               
something like a cap,  so that a business is not  paying tax on a                                                               
single item that's over $2,000.                                                                                                 
                                                                                                                                
MR. FRIED  said the  Department of Revenue  looked at  this issue                                                               
[and devised]  three different scenarios.   One of  the scenarios                                                               
is  that  everything  essentially  is  included  in  the  revenue                                                               
estimate, except  for what's specifically  excluded in  the bill.                                                               
This 2 percent tax would raise $380 million.  He stated:                                                                        
                                                                                                                                
     Somebody might  have heard ...  an estimate  that we've                                                                    
     made  that a  sales  tax  at 1  percent  with very  few                                                                    
     exemptions  would raise  $100  million.   So, why  does                                                                    
     this  raise so  much more?    ...   When we're  usually                                                                    
     referring to  sales tax we're  talking about sort  of a                                                                    
     traditional  sales  tax  that  is  mostly  targeted  at                                                                    
     retail,  and that  includes some  services.   This  ...                                                                    
     would hit just about every sector in the economy.                                                                          
                                                                                                                                
Number 344                                                                                                                      
                                                                                                                                
MR. FRIED gave an example  of pyramiding, whereby a fisherman who                                                               
sold  fish to  a manufacturer  would  then pay  on his/her  gross                                                               
receipts.   Then the manufacturer, when  it sold the fish  to the                                                               
wholesaler,  would  pay  on those  gross  receipts,  which  would                                                               
include the  tax that  the fishermen  paid.   He said,  "It would                                                               
just  go  up  the  chain  all  the  way:  wholesaler  through  to                                                               
retailer."  If  services, for instance, were not  included in the                                                               
tax, and transportation refining  and wholesale sale of petroleum                                                               
products  were basically  excluded because  of the  cap, then  it                                                               
would be raising around $176 million.                                                                                           
                                                                                                                                
Number 358                                                                                                                      
                                                                                                                                
REPRESENTATIVE CRAWFORD asked, if  Southeast Alaska was producing                                                               
2x4  [lumber], and  was competing  against 2x4s  coming from  the                                                               
Lower   48,  "wouldn't   that  make   our   products  much   less                                                               
competitive?"                                                                                                                   
                                                                                                                                
MR.  FRIED replied  that gross  receipts taxes  would need  to be                                                               
paid, and  it would depend on  if the competitors were  paying [a                                                               
similar] tax.  He stated, "You  wouldn't be as competitive as you                                                               
would be if you didn't have to pay."                                                                                            
                                                                                                                                
MR. SLOTNICK offered  that he thinks, in addition,  that there is                                                               
a tax on  the business imports.  He said  the manufacturing plant                                                               
would have to  make certain purchases [in Alaska] in  which the 2                                                               
percent tax is  then passed on.  He explained  that this economic                                                               
term is known as the "pyramiding  effect," where one is paying on                                                               
each of the business inputs.                                                                                                    
                                                                                                                                
REPRESENTATIVE HALCRO offered that when  that happens, in the end                                                               
the consumer pays far more for  the end product because it's been                                                               
taxed on every level.                                                                                                           
                                                                                                                                
MR. FRIED  stated, "It would  depend on how  far up the  chain it                                                               
is."   For  instance,  if  that fish  was  sold  directly to  the                                                               
consumer, then  it would just  be taxed once.   But if  that fish                                                               
went through  a manufacturing process  - it was wholesaled  - and                                                               
then  sold  to  retail,  then   there  would  be  much  more  tax                                                               
associated with that product.                                                                                                   
                                                                                                                                
Number 376                                                                                                                      
                                                                                                                                
REPRESENTATIVE KOTT  asked how  many other  states have  a taxing                                                               
scheme similar to the one being discussed.                                                                                      
                                                                                                                                
MR. FRIED  responded that  he doesn't know  the number  of states                                                               
that have this specific taxing scheme,  but he can find that out.                                                               
He said  that in terms  of the number  of services -  if services                                                               
are included  under [HB 258]  - the  states that tax  services as                                                               
widely are  Hawaii and New Mexico.   That is essentially  a gross                                                               
receipts tax.                                                                                                                   
                                                                                                                                
REPRESENTATIVE KOTT  voiced that there  are very few  states that                                                               
have this kind of  a scheme.  He said he suspects  that if he did                                                               
the necessary research, he would  find out that the general state                                                               
of  [these states']  economies during  the  last decade  probably                                                               
didn't  show much  growth.   He said,  "If New  Mexico is  one of                                                               
those, I  know for  a fact, having  lived there.   ...   I'm just                                                               
wondering what  the net  effect would  be on  the economy  in the                                                               
state if we implemented this kind of a scheme."                                                                                 
                                                                                                                                
MR. FRIED replied that it is hard to know.                                                                                      
                                                                                                                                
REPRESENTATIVE KOTT asked if the  administration is supportive of                                                               
this [taxing scheme].                                                                                                           
                                                                                                                                
Number 393                                                                                                                      
                                                                                                                                
MR. SLOTNICK  offered that  the Department  of Revenue  very much                                                               
appreciates working with Representative  Scalzi, but said, "We're                                                               
not as fond of the bill.  ...  We do not support this bill."                                                                    
                                                                                                                                
REPRESENTATIVE  MEYER reiterated  what Representative  Scalzi had                                                               
mentioned, which was that [Alaska]  used to have a gross receipts                                                               
tax in place, and he asked why [Alaska] got rid of it, and when.                                                                
                                                                                                                                
MR. SLOTNICK stated that he thinks it was repealed in 1978.                                                                     
                                                                                                                                
REPRESENTATIVE MEYER asked, "Was there justification?"                                                                          
                                                                                                                                
REPRESENTATIVE SCALZI said,  "The issue was that you  need ... an                                                               
income tax to  verify the gross receipts in the  business."  When                                                               
the  income  tax  was  repealed, [the  gross  receipts  tax]  was                                                               
repealed also.                                                                                                                  
                                                                                                                                
REPRESENTATIVE  MEYER asked  if the  income tax  was repealed  at                                                               
that same time [as the gross receipts tax] in 1978.                                                                             
                                                                                                                                
REPRESENTATIVE SCALZI replied that he believes that is correct.                                                                 
                                                                                                                                
Number 429                                                                                                                      
                                                                                                                                
EMMITT TRIMBLE,  Kachemak Board of Realtors,  Inc., testified via                                                               
teleconference.  He  stated that the board of  directors [for the                                                               
Kachemak  Board   of  Realtors]  met  yesterday   and  there  was                                                               
unanimous  opposition to  the  proposed  committee substitute  as                                                               
drafted.   The Board of  Directors passed a resolution  that will                                                               
be forwarded in opposition to [HB 258].  He explained:                                                                          
                                                                                                                                
     Some  of the  concerns are  that there's  an assumption                                                                    
     that you  can pass  along these  costs into  your price                                                                    
     structure  and charge  more.   And maybe  some business                                                                    
     can do that; most businesses  can't easily do that.  If                                                                    
     the state wants the money,  and it's going to be really                                                                    
     a sales tax,  let's call it a sales tax.   And that has                                                                    
     no  effect [on]  the impression  that the  consumer has                                                                    
     about the  business raising  their prices.   Obviously,                                                                    
     the disadvantages of the pyramiding are there.  ...                                                                        
                                                                                                                                
     I see  it as being  discriminatory against  the smaller                                                                    
     [business],   which  receives   gross  receipts   under                                                                    
     $100,000, versus  some larger -- for  example, a retail                                                                    
     store  in  Homer versus  [a  big  retail] store  up  in                                                                    
     Kenai, Soldotna,  or Anchorage.   [On the]  majority of                                                                    
     their  sales they  would be  paying 1  percent.   [The]                                                                    
     majority of  the sales that the  small business [makes]                                                                    
     is really the backbone of the economy.  ...                                                                                
                                                                                                                                
     Speaking to  a point that was  raised earlier regarding                                                                    
     profitability  and   having  a   tax  based   on  gross                                                                    
     receipts, many businesses, and all  of us have probably                                                                    
     had  to do  with starting  a business  - and  sometimes                                                                    
     it's  three   or  four  years  before   a  business  is                                                                    
     profitable - and  so a 2 percent tax  on gross receipts                                                                    
     is  really  devastating  to   a  business  that's  just                                                                    
     starting out.                                                                                                              
                                                                                                                                
Number 453                                                                                                                      
                                                                                                                                
KEN WARDWELL, Independent Licensed  Real Estate Broker, testified                                                               
via  teleconference in  opposition to  HB  258.   He stated,  "It                                                               
seems  like  the multiple  taxation  of  the dollars  created  by                                                               
increased value are  a product that we're trying to  build in the                                                               
State  of Alaska  -  that  it makes  us  noncompetitive with  any                                                               
products that we  would be getting from Outside."   It would also                                                               
seem  that there  would  be a  flight  to try  to  buy goods  and                                                               
products  from  outside of  the  state  on  the [Internet].    He                                                               
offered  that  this is  already  happening  "in any  state,"  but                                                               
[Alaska]   doesn't  need   to  put   itself  in   an  unfavorable                                                               
competitive  position relative  to  competitors  outside of  [the                                                               
state].                                                                                                                         
                                                                                                                                
Number 467                                                                                                                      
                                                                                                                                
MIKE  LOHMAN,   M.  Lohman   Investments,  Inc.,   testified  via                                                               
teleconference in  opposition to HB  258, and noted that  he also                                                               
owns  a  commercial-building  rental  business.   He  stated  his                                                               
opposition to  HB 258, or  any other  form of gross  receipts tax                                                               
against businesses.   He noted  that he'd spoken with  many other                                                               
business owners who could not  believe "that anyone would propose                                                               
such a tax."  He said, "One  to 2 percent doesn't sound like much                                                               
until you convert it to your  net [profit]."  He stated that this                                                               
is  an  "extremely  discriminatory"  tax  because  only  business                                                               
owners  pay it,  and the  lower  one's operating  margin is,  the                                                               
greater the percentage of tax paid on the net [profit] will be.                                                                 
                                                                                                                                
MR. LOHMAN reiterated,  as someone already had  pointed out, that                                                               
even  if one  didn't  make any  money,  he/she would  essentially                                                               
still have to pay a tax.  He explained:                                                                                         
                                                                                                                                
     [Some]  business owners  work  on profit  margins of  8                                                                    
     percent  before federal  taxes.   Your  tax would  cost                                                                    
     that owner  24 percent of  his net - for  businesses up                                                                    
     to $100,000,  and 12 percent  for those  over $100,000.                                                                    
     How  would  you  like  your   paycheck  reduced  by  24                                                                    
     percent?   This  tax is  one of  the best  ways to  put                                                                    
     Alaska's economy  into a tailspin and  should be easily                                                                    
     recognized   by  anyone   with   any  business   sense.                                                                    
     Businesses have  no way of taxing  increased costs onto                                                                    
     the  consumer.     Many  businesses  will   go  out  of                                                                    
     business.                                                                                                                  
                                                                                                                                
MR. LOHMAN  explained that [Alaskan]  businesses have  to compete                                                               
with the Lower  48, for example, Internet and catalog  sales.  He                                                               
offered  that  if  prices increase  in  Alaska,  businesses  will                                                               
close, jobs  will be  lost, and unemployment  will increase.   He                                                               
noted that  unemployment is funded by  those who still work.   He                                                               
stated, "Anyone voting  in favor of this bill  doesn't care about                                                               
Alaska or  its economy.  Maybe  you should pass a  bill requiring                                                               
anyone  proposing a  tax  in  Alaska [to]  complete  a course  in                                                               
economics and pass successfully."                                                                                               
                                                                                                                                
Number 490                                                                                                                      
                                                                                                                                
GARY  WEBER, Wasilla  Chevron, testified  via teleconference  and                                                               
noted that he went into business  in 1976 when there was a "gross                                                               
revenue tax."   He  stated, "We  called it  a grossly  unfair tax                                                               
back then."   He said that each  of the three years  that he paid                                                               
the tax he had to go to the  bank and borrow money because it was                                                               
a new business.  He mentioned  that of his $11,000 net profit, he                                                               
was paying $5,500 in the state  revenue tax, which was 50 percent                                                               
of  his  net  profit.    Now,   22  years  later,  his  gross  is                                                               
$5,600,000, versus  $2,100,000 in  1979.   He mentioned  that the                                                               
gross revenue  tax would take 64  percent of his net  profit.  He                                                               
stated:                                                                                                                         
                                                                                                                                
     I'm working on a 1.6  [percent] profit margin.  And I'm                                                                    
     not ready to start paying  out 64 percent of my profit,                                                                    
     which   will   keep   me   from   doing   any   capital                                                                    
     improvements.   ...   It'd just  make it  impossible to                                                                    
     even  do any  major maintenance  in my  business.   ...                                                                    
     It's an unfair tax and I adamantly oppose it.                                                                              
                                                                                                                                
Number 515                                                                                                                      
                                                                                                                                
JAMES MORGAN, Sand Lake  Automotive, testified via teleconference                                                               
in opposition to HB  258.  He expressed that it  is an unfair tax                                                               
because there is no consideration  to the [business owner].  It's                                                               
definitely  a backdoor  sales tax.    He stated  his support  for                                                               
having taxes  on sales because  "it gets everybody."   Businesses                                                               
not making any profit would still have to pay the tax.                                                                          
                                                                                                                                
MR. MORGAN  said [business owners] may  not be able to  pass that                                                               
[tax]  on  to the  consumer  because  "it's just  in  competition                                                               
itself."  He  explained that a business owner might  want to "put                                                               
that  2 percent  on there,"  but then  customers will  go to  the                                                               
competitor, and  the business  ends up  "eating that  sales tax."                                                               
He asked,  "Are taxes really necessary?   We don't know  that for                                                               
sure."   He voiced that moving  the Capitol would save  money for                                                               
the state.                                                                                                                      
                                                                                                                                
Number 538                                                                                                                      
                                                                                                                                
CHAIR MURKOWSKI said  she appreciates hearing those  ideas on how                                                               
to  deal with  the fiscal  gap.   She noted  to those  waiting to                                                               
testify to  take this as an  opportunity to speak about  any form                                                               
of new revenue that one would find acceptable.                                                                                  
                                                                                                                                
Number 544                                                                                                                      
                                                                                                                                
FRED ROSENBERG,  Vice President,  Alaska Restaurant  and Beverage                                                               
Association  (ARBA), testified  via teleconference  in opposition                                                               
to  HB 258.   He  noted that  the tax  would result  in a  severe                                                               
negative  economic impact.   A  lot of  restaurants, particularly                                                               
the  fast-food businesses  and some  of  the larger  restaurants,                                                               
have  very  tight [profit]  margins.    It's  not unusual  for  a                                                               
business to  operate between a  3 and 7  percent net profit.   If                                                               
someone  were operating  on a  5 percent  net profit,  that would                                                               
mean 20  percent of  the net  profit would  go to  this tax  at 1                                                               
percent.   If  a  business  were operating  on  a  4 percent  net                                                               
profit, 25 percent  of the net profit would be  paid to this tax.                                                               
He stated that  this would be "a very inequitable  tax and a very                                                               
inappropriate tax."                                                                                                             
                                                                                                                                
MR. ROSENBERG  stated that a business's  costs associate directly                                                               
with  income.    If  a  business  raises  its  prices,  which  is                                                               
difficult to do, the business will  pay more in expenses in other                                                               
areas,  such as  liability  insurance.   Mr. Rosenberg  explained                                                               
that  since he  is in  a franchise  restaurant business,  he pays                                                               
royalties,  advertising,  and  marketing fees  to  a  franchisor,                                                               
which are based on the gross revenue.  He stated:                                                                               
                                                                                                                                
     So, you can  see a lot of business would  be taxed in a                                                                    
     lot of  areas that  haven't been considered  today, and                                                                    
     I'm not  sure have been considered  at all.  I  do feel                                                                    
     it's an unfair tax.   I don't think it's an appropriate                                                                    
     way to  tax.  It's  not invisible to the  consumer, ...                                                                    
     but   ultimately   this   would  prove   to   be   very                                                                    
     inflationary, and  the consumer is the  one who's going                                                                    
     to suffer the most.                                                                                                        
                                                                                                                                
Number 565                                                                                                                      
                                                                                                                                
JOSEPH HENRI testified  via teleconference.  He  mentioned he was                                                               
the chair of the municipal  league legislative committee in 1970.                                                               
Every town that was a member  of that group, the Alaska Municipal                                                               
League, was  against this [form  of] tax.   He offered  that this                                                               
tax was  opposed back then  for the  same reasons that  have been                                                               
mentioned in  previous testimony today.   [A gross  receipts tax]                                                               
leads to  a lot  of bankruptcy.   Mr.  Henri said  he appreciates                                                               
Representative Scalzi's  effort to try  to close the  fiscal gap,                                                               
but "that this is the worst vehicle."                                                                                           
                                                                                                                                
MR. HENRI stated  that he believes only two or  three states have                                                               
a gross receipts  tax, and Alaska is unique because  it does have                                                               
a permanent fund  dividend (PFD).  He believes up  to 100 percent                                                               
of  the receipts  of the  PFD should  be available  to close  the                                                               
fiscal gap.  He  said while he served on the  Board of Regents he                                                               
"asked  everybody"  whether  they  would be  willing  to  have  a                                                               
personal income tax  "to help pay for some of  these things."  He                                                               
reported, "Everyone  said they  would."   He expressed  that when                                                               
these people  were asked if  they would  be willing to  reduce or                                                               
rescind  the  dividend,  they replied  that  they  would  because                                                               
education  is more  important than  getting free  money from  the                                                               
state.                                                                                                                          
                                                                                                                                
Number 589                                                                                                                      
                                                                                                                                
MR.  HENRI said  he  hopes [HB  258] doesn't  pass,  but he  does                                                               
"appreciate [Representative Murkowski's]  work and Representative                                                               
Scalzi's work trying to close the fiscal gap."                                                                                  
                                                                                                                                
TAPE 02-18, SIDE B                                                                                                              
Number 590                                                                                                                      
                                                                                                                                
ROCKY FLINT, Rocky's Marine,  Inc., testified via teleconference.                                                               
He  said most  of  what he  wished to  address  had been  covered                                                               
already.  He  offered that although he  isn't personally involved                                                               
in a fishing  business, he thinks [the gross  receipts tax] would                                                               
affect the fishing industry dramatically  because the industry is                                                               
vastly different  than it was  when [the gross receipts]  tax was                                                               
in  effect previously.   He  voiced that  he thinks  it would  be                                                               
devastating if fish products had  "any kind of pyramid tax effect                                                               
before they  get to [a] market."   He stated, "I  also think this                                                               
is ... a  hidden tax.  ...   There's no real oversight.   ...  If                                                               
you're going to have income tax,  well, then, you're going to get                                                               
people  right  in   the  wallet  and  they're   going  to  know."                                                               
[Indisc.--testimony cut in and out due to bad phone reception.]                                                                 
                                                                                                                                
Number 574                                                                                                                      
                                                                                                                                
NANCY BERG, Viking Travel, Inc.,  testified via teleconference in                                                               
opposition  to HB  258.   She  said she  agreed  with the  points                                                               
already brought  up in testimony [in  opposition to HB 258].   In                                                               
[Petersburg],  with a  fishing  industry  struggling, there  have                                                               
been small  businesses closing every  year.  She stated  that one                                                               
of the reasons  that people live in Petersburg is  the quality of                                                               
life in  a small community with  lots of services.   She said, "I                                                               
don't want to walk  through our town and see a  ghost town in the                                                               
retail business."  Ms. Berg  offered that it's very difficult for                                                               
people to  compete with the  Internet and catalog sales,  and the                                                               
quality  of  life  in  Petersburg would  really  suffer  if  more                                                               
businesses were lost.                                                                                                           
                                                                                                                                
MS. BERG mentioned  she would be more in favor  of a state income                                                               
tax that  gave some form of  a tax credit to  local residents who                                                               
live  and  work [in  Alaska].    The  people who  are  purchasing                                                               
products through  the Internet or  catalog sales would  be taxed,                                                               
whereas now they aren't.                                                                                                        
                                                                                                                                
Number 562                                                                                                                      
                                                                                                                                
BEN  PHILLIPS, Tongass  Marine, testified  via teleconference  in                                                               
opposition to  HB 258,  and said  he is a  new business  owner in                                                               
Petersburg and  "that kind  of scares me."   After  reviewing the                                                               
books for the  last ten years of the business  that he took over,                                                               
he  found the  gross sales  were about  $1,000,000.   The average                                                               
profit for the business over the  last ten years was $30,000.  He                                                               
explained that he  then figured out "what we pay  Uncle Sam."  He                                                               
stated, "I looked  at 2 percent of one million  dollars, which is                                                               
$20,000,  and I  put those  together  and my  business no  longer                                                               
makes money.  So, I think this thing stinks."                                                                                   
                                                                                                                                
Number 551                                                                                                                      
                                                                                                                                
KATHY   HANSEN,  representing   herself,  testified   before  the                                                               
committee,  and  stated  that  she  and  her  husband  own  three                                                               
businesses.   Under HB 259,  all three of those  businesses would                                                               
close.   She explained  that she and  her husband  are commercial                                                               
fishermen  and also  do some  dock sales,  which is  very minimal                                                               
compared to  the overall  amount of  fish that  they catch.   She                                                               
offered  that most  years the  dock sales  are under  $500.   She                                                               
stated, "I would no longer  do dock sales, definitely, under this                                                               
kind of  scenario.  You  could not afford to  pay on all  of your                                                               
other fishing income at the same time."                                                                                         
                                                                                                                                
MS. HANSEN  described that her  second business is  a gear-supply                                                               
business for commercial fishermen.  She informed the committee:                                                                 
                                                                                                                                
     The  only reason  that that  gear supply  works is  two                                                                    
     things:   I  basically  charge the  same  price as  the                                                                    
     Seattle gear companies.  The  two additional costs that                                                                    
     they  have is  the shipping  - which  they get  cheaper                                                                    
     because we're  able to  ... ship a  whole bunch  at one                                                                    
     time,  rather than  individual items  - and  sales tax.                                                                    
     My profit  margin is  probably under  5 percent  on the                                                                    
     majority of that stuff.   To pay a gross receipts sales                                                                    
     tax on nets that cost  a couple thousand dollars, there                                                                    
     would be no  reason to do it, and it's  not a cost that                                                                    
     you  could pass  on to  the consumer  because they  can                                                                    
     call up, make the phone  call to Seattle, and just have                                                                    
     it shipped up to them direct.                                                                                              
                                                                                                                                
MS. HANSEN next  addressed some possible alternatives  to a gross                                                               
receipts tax.   She said, "I even  hate to say it,  but it really                                                               
is coming down  to this legislature needs to pass  a state income                                                               
tax."   She  mentioned that  she  has been  talking to  a lot  of                                                               
fishermen who are  saying that same thing.  She  pointed out that                                                               
one  fisherman made  the comment  that with  a state  income tax,                                                               
people are going to be more  likely to watch how [the legislature                                                               
is]  spending  that  money  and actually  engage  more  with  the                                                               
legislature regarding  finances.   She thought  this was  a valid                                                               
point.                                                                                                                          
                                                                                                                                
Number 525                                                                                                                      
                                                                                                                                
CHAIR  MURKOWSKI said,  "I appreciate  how uncomfortable  you are                                                               
saying that you  would support [a state income tax],  and I think                                                               
most of  us around  here would definitely  concur."   She offered                                                               
that she thinks [the legislature  is] recognizing that the reason                                                               
it's talking about these very  difficult subjects is because "the                                                               
time has  come, and many  of us feel that  the time came  a while                                                               
ago, and we need to move on it."                                                                                                
                                                                                                                                
REPRESENTATIVE MEYER  asked Ms. Hansen  if she prefers  the state                                                               
income  tax to  capping the  permanent fund  dividend (PFD)  at a                                                               
certain level.                                                                                                                  
                                                                                                                                
MS.  HANSEN replied  that she  hasn't given  much thought  to the                                                               
PFD.  She  explained that she likes the state  income tax because                                                               
there are  a lot of business  that conduct business in  the state                                                               
of Alaska, for  example, commercial fishing, and  [then leave the                                                               
state].    She  offered  another idea  of  raising  the  business                                                               
license fee  to raise a little  more revenue, and said  that "the                                                               
$25 business license is incredibly cheap."                                                                                      
                                                                                                                                
MS.  HANSEN  commented that  she  understands  how difficult  the                                                               
fiscal situation is to  work on, and that it needs  to be done in                                                               
an overall package.  She said  this makes the process even harder                                                               
because if [the legislature] "piecemeals  ... these little taxes,                                                               
... it's really hard for a  businessperson to ... get a handle on                                                               
it."  She asked, "How do you  put all of the pieces together, and                                                               
then how does it affect everything?  I don't know."                                                                             
                                                                                                                                
Number 498                                                                                                                      
                                                                                                                                
THYES  SHAUB, Lobbyist  for  National  Federation of  Independent                                                               
Business (NFIB), testified before  the committee, noting that she                                                               
was "the  one that send  the fax alert  out last Thursday."   She                                                               
said she  has been lobbying for  NFIB for a number  of years, and                                                               
has sent out fax alerts before,  but never received a response as                                                               
she did to [HB 258].  She  explained that her phone number was on                                                               
the  "fax alert"  and  she  was able  to  speak  with "all  these                                                               
people,  and it  actually  was  very educational  for  me."   She                                                               
stated she  thinks that a  lot of  people's first reaction  to HB
258 is in regard to the  2 percent gross [receipts].  She further                                                               
explained:                                                                                                                      
                                                                                                                                
     As  was mentioned  by the  Department  of Revenue,  the                                                                    
     pyramiding effect  really adds on  to your rent.   I've                                                                    
     heard from  property managers  who ...  have to  pay on                                                                    
     their ...  gross income.   The property manager  has to                                                                    
     pay on  his income; he  collected it.   ...   Those are                                                                    
     two  different  businesses.   So  on  that rent  alone,                                                                    
     then, you have to increase  your rents to the business.                                                                    
     Small   businesses  oftentimes   don't  have   in-house                                                                    
     bookkeepers.    They  hire a  bookkeeping  service,  so                                                                    
     they're going to pay a little  more there.  They hire a                                                                    
     janitorial service.   You start adding  ... this little                                                                    
     2 percent more  on all those things, and it  adds up to                                                                    
     a  much higher  expense, ...  and ...  it takes  off of                                                                    
     your profit.                                                                                                               
                                                                                                                                
MS. SHAUB said,  "Some businesses can't add on  the extra, others                                                               
can."    If a  business  is  in a  market  situation  that is  so                                                               
competitive, such  as competing against Internet  sales, it can't                                                               
[afford to pass  the 2 percent to the consumer].   She noted that                                                               
she did include  [in the members' packets] the  NFIB statement of                                                               
opposition  [to HB  258].   She  next addressed  the NFIB  ballot                                                               
results,  which  were  focused  on balancing  the  budget.    She                                                               
explained  that the  strongest response  was in  opposition to  a                                                               
gross receipts  tax.  Although  NFIB members  collectively didn't                                                               
like any  of [the  options], there wasn't  a 50  percent majority                                                               
that voted  in favor of  any [one  option].  When  members called                                                               
Ms.  Shaub this  week, she  reported that  she'd asked  them what                                                               
they thought  could be  a solution, other  than a  gross receipts                                                               
tax.   She  stated, "I  would say  about half  of them  mentioned                                                               
income  tax, and  about half  of them  mentioned earnings  of the                                                               
permanent fund.  Sales tax was actually less popular."                                                                          
                                                                                                                                
MS. SHAUB offered that it's  not surprising when people are asked                                                               
to vote  on taxes that  they usually vote  no, but when  asked to                                                               
help  solve a  problem, they  will  offer some  examples of  what                                                               
might work.                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI asked  Ms. Shaub how many  survey responses she'd                                                               
received.                                                                                                                       
                                                                                                                                
MS. SHAUB explained that NFIB's  requirement is 10 percent of the                                                               
members.  She stated, "It goes  out to 2,500 members, so probably                                                               
250."   The responses are  received by the NFIB  headquarters and                                                               
the results are then forwarded to Ms. Shaub.                                                                                    
                                                                                                                                
Number 455                                                                                                                      
                                                                                                                                
PAMELA  LaBOLLE, President,  Alaska  State  Chamber of  Commerce,                                                               
testified  before the  committee in  opposition to  HB 258.   She                                                               
said  [HB 258]  puts Alaskan  business  at a  disadvantage.   She                                                               
commented on the slim profit  margin that some businesses operate                                                               
on.   She  stated, "I  know there's  a misconception  ... in  the                                                               
public  that ...  [if]  a  business has  a  larger percentage  of                                                               
profit that it [will do] better.   House Bill 258 puts businesses                                                               
on the brink of making no money  at all."  She noted, "Of all the                                                               
taxes  that have  been  mentioned,  this ...  one  ... isn't  the                                                               
greatest."                                                                                                                      
                                                                                                                                
Number 434                                                                                                                      
                                                                                                                                
DONNA ISAAK,  Owner, Ike's Fuel,  testified before  the committee                                                               
in opposition to  HB 258, and explained that she  and her husband                                                               
have been in  the heating-oil business in Juneau  since 1966, and                                                               
were affected  by the gross receipts  tax then.  She  stated, "We                                                               
really  had to  struggle to  stay in  business.   Our predecessor                                                               
only had about 200 customers, and  so our profit margin back then                                                               
-- our  $400 price  of fuel  is 18  cents a  gallon.   Of course,                                                               
after the fuel crisis in 1973, that really spiked up."                                                                          
                                                                                                                                
MS.  ISAAK  referred  to  a  memo that  she'd  forwarded  to  the                                                               
committee members, which indicated that  her business was able to                                                               
support  more community  activities  and nonprofit  organizations                                                               
after  the tax  was repealed.   She  explained that  she and  her                                                               
husband  wanted  to  put  money  back  into  the  community,  for                                                               
instance, by  supporting many high  school activities.   As she'd                                                               
indicated  in   the  memo,  her   business's  support   of  these                                                               
activities  could end  if  the gross  receipt  tax were  adopted.                                                               
[Referring to her business's contribution]  she said, "Ours would                                                               
be  somewhere   in  the  neighborhood  of   $85,000  to  $100,000                                                               
annually.  That's a big chunk."                                                                                                 
                                                                                                                                
Number 419                                                                                                                      
                                                                                                                                
MS. ISAAK said, "A  lot of that money is going  ... back into the                                                               
community."   She suggested the  only other alternative  would be                                                               
to  raise the  price of  oil  per gallon  because she  is in  the                                                               
retail business.  She explained:                                                                                                
                                                                                                                                
     I can  tell you  right now,  I will  have had  a colder                                                                    
     winter this year  than we did last.  ...   Many more of                                                                    
     our customers had  to resort to using  the state energy                                                                    
     assistance  program.   So, that  money is  coming right                                                                    
     back out  of the state  when we  raise our prices.   We                                                                    
     have seen a  big increase, and I  think it's primarily,                                                                    
     partly due to the colder  winter, but I think that it's                                                                    
     just the price of fuel is so high.                                                                                         
                                                                                                                                
     Now, ... the  market ... goes up and down,  and it's on                                                                    
     its way back  up because the oil  technicians have said                                                                    
     that they're going  to cut production.   And the minute                                                                    
     they  do that,  then the  big oil  companies start  up.                                                                    
     So, ... [it's]  20 cents a gallon less  than last year,                                                                    
     but yet  still those  customers are  having to  use the                                                                    
     state energy assistance program's money.                                                                                   
                                                                                                                                
MS. ISAAK  emphasized that she  wouldn't want to  stop supporting                                                               
community activities after being in  business 36 years.  She said                                                               
she opposes HB 258 because her customers will have to pay more.                                                                 
                                                                                                                                
MS. ISAAK stated:                                                                                                               
                                                                                                                                
     My daughter-in-law  had just started her  own business.                                                                    
     She was a  travel agent for 11 years for  her aunt, and                                                                    
     she  did  just  a  whopping  business  from  her  home.                                                                    
     Everybody likes  her so much,  she did  over $1,500,000                                                                    
     this  year,  and she's  really  trying.   This  is  her                                                                    
     first,  and she  said that  will do  it for  her.   ...                                                                    
     She'll  have to  go out  of business.   And  so I  just                                                                    
     think  it's going  to be  irreparable  damage to  many,                                                                    
     many businesses.                                                                                                           
                                                                                                                                
Number 396                                                                                                                      
                                                                                                                                
MS. ISAAK said  she was fortunate because she "was  so tight with                                                               
every  little  penny"  after  she  and  her  husband  bought  the                                                               
business.  She  explained that they started with  $600 in savings                                                               
and really  struggled.  She wanted  to make sure that  they never                                                               
would have  to borrow any  money to  pay [a gross  receipts] tax.                                                               
She offered  that she probably  wouldn't have to borrow  now, but                                                               
the consumer is going to pay.                                                                                                   
                                                                                                                                
Number 383                                                                                                                      
                                                                                                                                
RICK WITHROW, Alsek  Freight, testified in opposition  to HB 258.                                                               
He offered  that a  lot of people  are overlooking  the permanent                                                               
fund, and there is  a lot of talk about an income  tax.  He said,                                                               
"I could  easily see  the permanent fund  being what  your income                                                               
tax is."  He offered that it  is ridiculous to have an income tax                                                               
and  then [receive]  a  permanent fund  that's  exactly the  same                                                               
amount or  less.  He said  he would rather forfeit  his permanent                                                               
fund than pay any tax.  He stated:                                                                                              
                                                                                                                                
     This is  probably the richest  state in the  Union: $30                                                                    
     billion in the  bank, or more.  And people  want to pay                                                                    
     ... [an]  income tax, or  any tax?   That's ridiculous.                                                                    
     I don't believe  in handing the permanent  fund over to                                                                    
     this  state because  I  know how  quickly  it could  be                                                                    
     spent.   ...   I  could see  it being  used to  pay for                                                                    
     times like  this.  That's what  it was set up  for, was                                                                    
     for times  like this.   The only people that  are going                                                                    
     to be hurt  by using the permanent fund  are people who                                                                    
     don't work,  or people  who rely on  that check  all by                                                                    
     itself.   I'll work.   I  don't need  the check,  and I                                                                    
     don't need the tax.                                                                                                        
                                                                                                                                
Number 365                                                                                                                      
                                                                                                                                
REPRESENTATIVE KOTT asked Mr. Withrow about his occupation.                                                                     
                                                                                                                                
MR.  WITHROW replied  that he  is  a professional  mariner and  a                                                               
general laborer.                                                                                                                
                                                                                                                                
UNIDENTIFIED SPEAKER  asked, "Can  I just add  one thing  to mine                                                               
too?   ...  We  would much prefer  you taking our  permanent fund                                                               
rather than a tax.  ...  That's just much more paperwork."                                                                      
                                                                                                                                
Number 359                                                                                                                      
                                                                                                                                
BERNIE SMITH, Chugiak-Eagle River  Chamber of Commerce, testified                                                               
before  the committee  in opposition  to HB  258.   He said  that                                                               
Eagle  River and  Chugiak basically  just have  small businesses.                                                               
He offered that  it isn't a large community, even  though it is a                                                               
part of  the municipality.  He  has been told by  some businesses                                                               
that they  will go out  of business if  HB 258 goes  into effect.                                                               
This  is not  a good  bill  for taxes.    He said  that since  he                                                               
doesn't  have the  ability, through  the chamber,  to comment  on                                                               
other  taxes, he  will  not  comment on  that  issue.   He  said,                                                               
"Personally, I  like a lot of  other different ones that  we have                                                               
here."    He said  HB  258  would  harm  the key  development  of                                                               
[Alaska's] society, which is small businesses.                                                                                  
                                                                                                                                
Number 342                                                                                                                      
                                                                                                                                
REPRESENTATIVE  HAYES asked  Mr.  Smith if  he  had any  personal                                                               
ideas  that [the  legislature  could use  to  address the  fiscal                                                               
gap].                                                                                                                           
                                                                                                                                
MR. SMITH  responded, "I work  for the state.   I hadn't  been in                                                               
the  private  industry all  my  life,  except  for the  last  two                                                               
years."   He  said  that  as an  individual  he  thinks that  the                                                               
permanent fund is  a opportunity to be used,  because that's what                                                               
it was  meant to be when  it was set  up.  The only  problem with                                                               
the permanent fund  is that it hurts the people  who depend on it                                                               
and  have no  other  income.   He offered  that  it also  doesn't                                                               
capture [money from] the "people  that come [to Alaska], that use                                                               
our facilities, use our services, and leave without paying."                                                                    
                                                                                                                                
Number 323                                                                                                                      
                                                                                                                                
SUSAN W.  SPRINGER, Owner, Herring Bay  Mercantile, testified via                                                               
teleconference in opposition to HB 258.   She said, "In this time                                                               
of a softer national economy,  and reluctance of people to travel                                                               
to  Alaska, the  last thing  ... small  rural businesses  need is                                                               
another increase  in the  cost of doing  business."   She offered                                                               
that this will make those  rural businesses less competitive, and                                                               
there will  be "enough challenges in  the next few years  just to                                                               
keep  our  noses above  the  waterline."    She stated  that  she                                                               
supports the  efforts of  the fiscal policy  caucus in  trying to                                                               
craft a  long-range fiscal plan  for Alaska, but  doesn't support                                                               
HB 258.   She asked  [the legislature]  to instead draft  "a well                                                               
thought out and comprehensive plan  that includes budget cuts, as                                                               
well as taxes."                                                                                                                 
                                                                                                                                
MS. SPRINGER offered:                                                                                                           
     I am  only one  voice, but  I can  speak in  support of                                                                    
     Representative   Moses'  and   Mulder's  bill   to  cap                                                                    
     permanent fund dividends  in order to create  a new and                                                                    
     alternate source  of funding [for]  community services.                                                                    
     I supported Governor  Hickel's community permanent fund                                                                    
     concept when I  first heard about it at  an AML [Alaska                                                                    
     Municipal   League]  convention   a   few  years   ago.                                                                    
     Representative Moses  and Mulder's  plan strikes  me as                                                                    
     being in  keeping with  that concept.   Please  give it                                                                    
     your consideration  when it comes  before you  and make                                                                    
     it,  and not  bills like  this, be  [a] centerpiece  of                                                                    
     your long-range fiscal plan.                                                                                               
                                                                                                                                
Number 289                                                                                                                      
                                                                                                                                
CHAIR MURKOWSKI  offered that if  HB 258  was passed to  the next                                                               
committee  of referral,  it would  be  considered as  part of  "a                                                               
bigger plan."                                                                                                                   
                                                                                                                                
Number 281                                                                                                                      
                                                                                                                                
KAC'E  McDOWELL,  Executive   Director,  Alaska  Cabaret,  Hotel,                                                               
Restaurant    and    Retailers   Association,    testified    via                                                               
teleconference in opposition  to HB 258.  She said,  "I think all                                                               
has been said, and I have nothing much more to add to it."                                                                      
                                                                                                                                
Number 272                                                                                                                      
                                                                                                                                
MARTHA  J.   ROGERS,  Owner,  Peters  Creek   Inn  and  Catering,                                                               
testified via teleconference  in opposition to HB 258.   She said                                                               
HB 258  would put her  bed and  breakfast out of  business, which                                                               
she has  operated for six  years.  She  offered that is  has been                                                               
difficult enough  competing with  the new  hotel chains  that are                                                               
coming into  the city.   She explained  that all of  the profits,                                                               
which right  now are very small,  are going back into  making the                                                               
business a better place for people to stay.                                                                                     
                                                                                                                                
Number 255                                                                                                                      
                                                                                                                                
DIXIE  WADDELL,  Owner,  Rural  Discount  Center,  testified  via                                                               
teleconference  in opposition  to  HB 258.    She explained  that                                                               
although she [employs]  just a few people, she  still feels "like                                                               
we're  important to  the  community,  and I  think  that this  is                                                               
something that  would be  disastrous to us."   She  addressed the                                                               
impact   that  the   pyramiding  effect   would  have   on  small                                                               
businesses.                                                                                                                     
                                                                                                                                
Number 231                                                                                                                      
                                                                                                                                
JON NAUMAN,  Owner, Horse Drawn  Carriage Company,  testified via                                                               
teleconference in opposition to HB 258.   He offered that from an                                                               
operational viewpoint it  would be a nightmare to  try to collect                                                               
additional  fees to  cover the  additional  taxes.   He said  his                                                               
costs have been going up regularly,  and he has been in operation                                                               
for about 20  years.  A couple  of times he raised  his rates and                                                               
found it is  better to keep the  rates down to cater  to a larger                                                               
population.   He argued  that a personal  income tax  is probably                                                               
the way to go, but he doesn't like that option either.                                                                          
                                                                                                                                
REPRESENTATIVE KOTT  asked Mr. Nauman  what he thought  about the                                                               
utilization of the PFD versus an income tax.                                                                                    
                                                                                                                                
MR.  NAUMAN replied  that  he  is "torn"  on  that issue  because                                                               
Alaskans are very  fortunate to have the PFD.   He explained that                                                               
he would  like to see "some  percentage of that be  ... taken out                                                               
for  the state  and the  rest  comes ...  to the  people who  are                                                               
getting  the check."    He emphasized  that the  PFD  is "a  real                                                               
boost" for the entire state.                                                                                                    
                                                                                                                                
Number 196                                                                                                                      
                                                                                                                                
SUSIE GORSKI, Executive Director,  Chugiak-Eagle River Chamber of                                                               
Commerce,  testified  via  teleconference.     She  informed  the                                                               
committee, "Our phones  have been ringing off the  hook for about                                                               
the last  three days, and I  promise you, there was  not one call                                                               
in  the affirmative  for this  particular piece  of legislation."                                                               
She mentioned that [the Chugiak-Eagle  River Chamber of Commerce]                                                               
empathizes  with the  efforts  of the  legislature  in trying  to                                                               
solve  the fiscal  problem.   She stated,  "We believe  first and                                                               
foremost that  the economic viability  of the private  sector has                                                               
[to come first]."                                                                                                               
                                                                                                                                
MS. GORSKI argued  that the most important point  [of this issue]                                                               
is that  industry and  commerce provide  the backbone  upon which                                                               
all  government   funding  runs.    Businesses   will  be  facing                                                               
additional taxes  that could  easily cost  jobs and  affect their                                                               
stability.   She said, "I  find this [particularly]  egregious in                                                               
tough  times  when  expenses  exceed revenue."    She  urged  the                                                               
committee  to  look for  other  alternatives,  which might  be  a                                                               
combination of "some  of the other types  of revenue alternatives                                                               
that have been presented [today in testimony]."                                                                                 
                                                                                                                                
Number 164                                                                                                                      
                                                                                                                                
BURL  A. ROGERS,  Owner, Burl's  Aircraft Rebuild,  testified via                                                               
teleconference in  opposition to  HB 258.   He explained  that he                                                               
was  affected by  the old  gross receipts  tax; one  "unfortunate                                                               
year," things didn't  go quite right and his  business suffered a                                                               
$7,000 to $8,000  loss.  He said,  "I still got to  pony up about                                                               
$500 - $600, which I really didn't have."                                                                                       
                                                                                                                                
MR.  ROGERS stated  that he  currently is  engaged in  a aircraft                                                               
manufacturing facility.  He emphasized  that the costs associated                                                               
with  aircraft  are "absolutely  horrendous."    He has  been  in                                                               
business for  21 months, and  any profits  he has made  have been                                                               
reinvested  in   the  business  to   buy  more   materials,  more                                                               
engineering, and  more production equipment.   He stated, "[House                                                               
Bill 258]  would be  the straw  to break the  camel's back."   He                                                               
voiced:                                                                                                                         
                                                                                                                                
     There is no way that  I would even consider taking what                                                                    
     I  have invested  so far  and pushing  it to  the point                                                                    
     where I'd just be working for  the state to give them a                                                                    
     tax.  ...   If you think 2 percent  isn't very much, we                                                                    
     could drop the  legislators' per diem by  2 percent and                                                                    
     then start dropping  all the state employees'  pay by 2                                                                    
     percent, starting  with the executive branch,  and then                                                                    
     maybe cap the dividend.                                                                                                    
                                                                                                                                
Number 131                                                                                                                      
                                                                                                                                
DEBORAH LUPER,  Director of  Business Development,  Eklutna Inc.,                                                               
testified  via teleconference.   She  said, "I  believe that  [HB
258] would  put such a  damper on  Alaska business that  it could                                                               
very well  impede future  economic growth."   She  mentioned that                                                               
while  it is  wise to  bring up  a discussion  on this  topic, it                                                               
scares her  that [HB  258] was  introduced and  could conceivably                                                               
gain a  life of  its own  and pass the  legislature, even  if the                                                               
sponsor really has no intent of that happening.                                                                                 
                                                                                                                                
MS.  LUPER  offered   that  she  is  fairly   familiar  with  the                                                               
challenges   that  are   put  before   the  homebuilders.     The                                                               
homebuilders  would also  pay a  great deal  of tax  because most                                                               
homebuilders  use  a large  number  of  subcontractors.   That  2                                                               
percent  tax would  be  added on  to  a house  many  times.   She                                                               
referred to a  statistic that showed approximately  60 percent of                                                               
those who  live in Anchorage  cannot afford to  buy a home.   She                                                               
informed  the committee  that  this figure  was  taken when  home                                                               
prices  were  significantly   less  than  they  are   now.    She                                                               
emphasized that  [a gross receipts  tax] would "shut  more people                                                               
into the rent world."                                                                                                           
                                                                                                                                
MS.  LUPER offered  that [HB  258] would  require onerous  record                                                               
keeping on the  part of the business.  Not  only would it require                                                               
extra bookkeeping, but also a  business would most likely have to                                                               
purchase software  specifically catering to  this sort of  tax in                                                               
order to calculate [the tax] on  every transaction.  Not only are                                                               
[businesses]  going to  see a  decrease in  the bottom  line, but                                                               
expenses will increase  as well.  She offered that  it is a "wise                                                               
move" to require the department to prioritize its spending.                                                                     
                                                                                                                                
Number 078                                                                                                                      
                                                                                                                                
DEBRA  LEWIS,  Realtor,  RE/MAX of  Eagle  River,  testified  via                                                               
teleconference in opposition to HB 258.   She offered that she is                                                               
in agreement  with pretty much  all the previous testimony.   She                                                               
argued  that with  the current  state of  the economy  across the                                                               
nation,  the   [Alaska  State]   Legislature  would   be  putting                                                               
[Alaska's]  economy in  a  situation in  which  it "could  spiral                                                               
down."  Referring to alternative  sources of revenue, she offered                                                               
that  the permanent  fund should  be looked  at, and  also budget                                                               
cuts.                                                                                                                           
                                                                                                                                
Number 064                                                                                                                      
                                                                                                                                
AL  ROMASZEWSKI, Realtor,  RE/MAX of  Eagle River,  testified via                                                               
teleconference in  opposition to HB  258.  He stated  his concern                                                               
that HB  258 is really  regressive.   Not only does  it devastate                                                               
startup  businesses, but  all  businesses.   He  offered that  in                                                               
Alaska  most, if  not all,  businesses are  "small mom  and pops"                                                               
that  operate "just  by the  ... the  skin of  their teeth."   He                                                               
argued that these business owners  are operating their respective                                                               
businesses  because "they're  proud  of  their business,  they're                                                               
supporting themselves, and they're not on  a public dole."  If HB
258 is  allowed to pass, he  said that "will drive  the nail into                                                               
the  coffin."   The  results  of HB  258  passing  could be  that                                                               
businesses will  go under and more  people will be on  the public                                                               
dole, which doesn't help the state economy.                                                                                     
                                                                                                                                
MR. ROMASZEWSKI suggested as an  idea to "maybe not [utilize] one                                                               
thing or  two things, but a  variety of items."   He offered that                                                               
budget cuts,  reduction in  government, and a  form of  an income                                                               
tax and  sales tax to  capture some  of the money  that's leaving                                                               
Alaska  and going  to the  Lower 48  might be  good options.   He                                                               
offered that there  might be a need to adjust  the permanent fund                                                               
[dividend] also.   He reemphasized that the  legislature needs to                                                               
look at a combination of options.  He stated:                                                                                   
                                                                                                                                
     Somebody mentioned that they  would hope that this bill                                                                    
     is left to  die.  I don't think we  can afford to leave                                                                    
     it to die.  I think we  need to sink it before it sinks                                                                    
     our economy.                                                                                                               
                                                                                                                                
Number 006                                                                                                                      
                                                                                                                                
CHAIR  MURKOWSKI  asked  if  there  were  any  additional  people                                                               
waiting to testify.  She then closed public testimony on HB 258.                                                                
                                                                                                                                
TAPE 02-19, SIDE A                                                                                                              
Number 001                                                                                                                      
                                                                                                                                
CHAIR MURKOWSKI  stated that this  is the first bill  hearing she                                                               
has  participated  in  where  there   was  absolutely  no  public                                                               
support,  either  in  verbal  testimony or  in  "the  volumes  of                                                               
written correspondence that [the committee] received."                                                                          
                                                                                                                                
Number 021                                                                                                                      
                                                                                                                                
REPRESENTATIVE  KOTT  agreed  with Representative  Murkowski  and                                                               
said,  "I can  say that  in  ten years  of being  down here  I've                                                               
never,  never  had  that  many   people  testify  on  an  issue."                                                               
Testimony was heard from around the  state from a large number of                                                               
constituents,  and not  one person  testified in  support of  [HB
258].  He stated  that if HB 258 were to become  part of a bigger                                                               
package, he  couldn't support it.   He  stated that he  thinks HB
258 would  create less prosperity,  would create a  taxing system                                                               
that would  stifle entrepreneurship, and would  hinder productive                                                               
behavior.  He  argued that Alaska is trying to  grow its economy,                                                               
and  the testimony  has been  that HB  258 will  have a  negative                                                               
impact  on the  economy, with  people going  out of  business and                                                               
perhaps businesses moving to another state.                                                                                     
                                                                                                                                
Number 048                                                                                                                      
                                                                                                                                
REPRESENTATIVE KOTT argued that it  isn't necessary for the House                                                               
Finance  Committee to  have to  hear the  same testimony  because                                                               
"they'll probably  end up at  the same  verdict."  He  stated his                                                               
opposition to moving HB 258 from committee.                                                                                     
                                                                                                                                
Number 053                                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG said  that as a small  business owner his                                                               
thoughts  were directly  expressed by  all the  witnesses and  he                                                               
agrees with  Representative Kott.   He stated,  "This would  be a                                                               
... retrograde disincentive to  our business community throughout                                                               
the  state."    He  voiced  that the  House  Labor  and  Commerce                                                               
Standing Committee  should not  move HB  258 from  committee, and                                                               
that there should be a vote.                                                                                                    
                                                                                                                                
Number 077                                                                                                                      
                                                                                                                                
REPRESENTATIVE  HALCRO  said  that  of all  of  the  tools  being                                                               
discussed to  try to fix  the fiscal  problem, none of  which are                                                               
pleasant, [a  gross receipts tax]  "is probably the worst  of the                                                               
bunch."  He explained:                                                                                                          
                                                                                                                                
     This is the problem with the  gross receipts tax:  If I                                                                    
     make  a hammer  for $13,  and sell  it Norm's  Hardware                                                                    
     Store for  $20, my ... profit  is $7.  But  I don't pay                                                                    
     the 2  percent on the  $7, I pay  the 2 percent  on the                                                                    
     $20 that  ... Norm's  Hardware Store has  paid me.   So                                                                    
     I'm paying 40 cents of tax  on a $7 profit, and then if                                                                    
     Norm's Hardware Store turns around  and sells it to the                                                                    
     public  for $25,  he's got  to pay  50 cents.   So  you                                                                    
     basically paid 90  cents on a $12  profit margin, which                                                                    
     is not  2 percent,  it's 7.5 percent.   And  ... that's                                                                    
     without ... attempting  in any way to pass  the cost to                                                                    
     the  consumer.   And  ...  even if  you  took that  $20                                                                    
     hammer and made it $20.40,  and the $25 hammer and made                                                                    
     it $25.50,  you still end  up coming up with  a 92-cent                                                                    
     tax burden  on a $12.50  profit margin, which  is still                                                                    
     7.5 percent,  not 2 percent.   ...  It's just  a killer                                                                    
     for  any  kind of  economy,  whether  we're enjoying  a                                                                    
     prosperous economy  or we're trying to  solve a billion                                                                    
     dollar budget deficit.                                                                                                     
                                                                                                                                
Number 108                                                                                                                      
                                                                                                                                
REPRESENTATIVE CRAWFORD  said, "I feel  that I can speak  for the                                                               
Democratic  side of  the aisle  that there's  no support  on this                                                               
side for this gross receipts tax."                                                                                              
                                                                                                                                
Number 115                                                                                                                      
                                                                                                                                
REPRESENTATIVE   HAYES   applauded  Representative   Scalzi   for                                                               
bringing HB 258  before the committee because  the discussion was                                                               
needed.    He stated  that  he  thinks it  was  one  of the  best                                                               
discussions that the committee has  had from folks all across the                                                               
state  actually  addressing  the  fact that  there  really  is  a                                                               
problem.  He  stated, "To hear folks say that  they think that we                                                               
need  a combination,  it was  like  sitting in  a caucus  almost,                                                               
because ultimately it's going to  take a combination of things to                                                               
actually get us out of this situation."                                                                                         
                                                                                                                                
Number 131                                                                                                                      
                                                                                                                                
REPRESENTATIVE MEYER  agreed with Representative Hayes  and said,                                                               
"I  think it's  an  extremely bad  bill."   There  is a  negative                                                               
effect  on business,  which will  have a  negative effect  on the                                                               
economy, which  will have  a negative effect  on employment.   He                                                               
said there were  some good ideas and  suggestions brought forward                                                               
today on how to approach filling the fiscal gap.                                                                                
                                                                                                                                
Number 141                                                                                                                      
                                                                                                                                
CHAIR  MURKOWSKI   agreed  that  it   was  a  good   and  healthy                                                               
discussion.   Although people don't  like taxes any more,  it may                                                               
have to  be one of  the options [to close  the fiscal gap].   She                                                               
mentioned that she  has "great empathy" for those  people who are                                                               
in the  business world making a  living in a small  operation and                                                               
who  may  be  very  concerned  that  [HB  258]  might  move  from                                                               
committee.  She stated:                                                                                                         
                                                                                                                                
     To those people,  I think we as a committee  can make a                                                                    
     statement that  you can sleep better  tonight, that [HB
     258] is  not going to  be part  of a package,  that [HB
     258] is,  for all intents and  purposes, something that                                                                    
     has been taken off the table.                                                                                              
                                                                                                                                
CHAIR MURKOWSKI stated  that she has been very  consistent in her                                                               
correspondences  in saying  that  "everything is  on the  table."                                                               
She  offered that  she doesn't  think  the members  of the  House                                                               
Finance Committee  are going  to come  to a  different conclusion                                                               
than  the  House Labor  and  Commerce  Standing Committee.    She                                                               
invited Representative  Scalzi to  make a  statement if  he would                                                               
like to.                                                                                                                        
                                                                                                                                
Number 171                                                                                                                      
                                                                                                                                
REPRESENTATIVE SCALZI  agreed with everything that  the committee                                                               
members had mentioned  and stated, "I would  obviously concur and                                                               
would vote it down."  He  said he appreciated the House Labor and                                                               
Commerce Standing  Committee's hearing HB  258, and this  was one                                                               
way to get the people involved  throughout the state.  There were                                                               
good suggestions made, and he felt  that was positive.  He stated                                                               
that  he has  sat in  "so many  caucuses with  our fiscal  policy                                                               
group where we go round and  round too much, and ... haven't come                                                               
to a focal point of what a good package is."                                                                                    
                                                                                                                                
Number 186                                                                                                                      
                                                                                                                                
REPRESENTATIVE  KOTT offered  that  it is  important as  [Alaska]                                                               
faces the fiscal situation to look  "at all the tools in the tool                                                               
bag."  He stated:                                                                                                               
                                                                                                                                
     I think we can take one  of those tools and drop it out                                                                    
     of the bag now.  ...   That's the importance of working                                                                    
     these issues  through the  process.   We can  take them                                                                    
     off the table.                                                                                                             
                                                                                                                                
Number 200                                                                                                                      
                                                                                                                                
REPRESENTATIVE  SCALZI informed  the  committee  that he'd  never                                                               
done any  lobbying in favor  of [HB 258].   He said  he'd thought                                                               
that  the House  Labor and  Commerce Standing  Committee and  the                                                               
Alaska  State Legislature  should hear  the dialog  and make  the                                                               
decision.  He thanked the committee for hearing the testimony.                                                                  
                                                                                                                                
Number 208                                                                                                                      
                                                                                                                                
REPRESENTATIVE   HALCRO   said  he   appreciated   Representative                                                               
Scalzi's  elevating  the discussion.    He  then addressed  those                                                               
folks  who are  listening  on teleconference,  and  said that  he                                                               
hopes that  the "demise of  ... House Bill  258 won't be  kind of                                                               
the last  stop for you folks  out there."  He  urged those people                                                               
to stay involved  and realize that "if it's not  a gross receipts                                                               
tax, there's going to be something coming down the road."                                                                       
                                                                                                                                
Number 213                                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG said, "We  shouldn't kill the messenger."                                                               
He  offered that  Representative Scalzi  should be  congratulated                                                               
for the  courage to bring  [HB 258]  forward for discussion.   He                                                               
emphasized that  through his own discussions  with Representative                                                               
Scalzi  "he's not  ...  a  proponent of  this  type  of a  taxing                                                               
method."    He  encouraged  people  to  forward  any  unique  and                                                               
different types  of proposals [to the  legislature], for example,                                                               
indexing any kind  of taxes to the price of  natural resources in                                                               
Alaska.                                                                                                                         
                                                                                                                                
Number 236                                                                                                                      
                                                                                                                                
REPRESENTATIVE  SCALZI said  he  appreciated what  Representative                                                               
Rokeberg mentioned about  his not being a proponent  of this type                                                               
of  taxing  method, but  rather  "a  proponent  of dialog."    He                                                               
offered that he  doesn't know whether it would be  easier for the                                                               
committee to vote HB 258 down, or if he should withdraw it.                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  said he would  prefer to have a  vote on                                                               
[HB 258] on the record.                                                                                                         
                                                                                                                                
CHAIR  MURKOWSKI  said, "Well,  we  can  certainly just  vote  it                                                               
down."                                                                                                                          
                                                                                                                                
REPRESENTATIVE  ROKEBERG  suggested  [to  Representative  Scalzi]                                                               
that he can also  stand up on the floor and ask  that [HB 258] be                                                               
withdrawn.                                                                                                                      
                                                                                                                                
REPRESENTATIVE SCALZI replied, "Okay."                                                                                          
                                                                                                                                
Number 248                                                                                                                      
                                                                                                                                
REPRESENTATIVE KOTT declared  that he has a  conflict of interest                                                               
and asked to be excused from voting.  [There was objection.]                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG  stated that  he also  has a  conflict of                                                               
interest.  [There was objection.]                                                                                               
                                                                                                                                
Number 258                                                                                                                      
                                                                                                                                
REPRESENTATIVE KOTT moved to report CSHB 258, version 22-                                                                       
LS0920\L,  Kurtz,  2/5/02,  out   of  committee  with  individual                                                               
recommendations and  the accompanying  fiscal notes.   [There was                                                               
objection by numerous members.]                                                                                                 
                                                                                                                                
A  roll call  vote  was taken.    Representatives Halcro,  Meyer,                                                               
Kott,  Rokeberg, Crawford,  Hayes,  and  Murkowski voted  against                                                               
moving CSHB 258.  Therefore, CSHB  258(L&C) failed to move out of                                                               
the House Labor  and Commerce Standing Committee by a  vote of 0-                                                               
7.                                                                                                                              
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
5:15 p.m.                                                                                                                       
                                                                                                                                
                                                                                                                                

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