Legislature(2015 - 2016)BARNES 124

02/24/2016 03:15 PM LABOR & COMMERCE

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Audio Topic
03:17:12 PM Start
03:17:26 PM HB304
03:47:56 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 304 ELECTRNC TAX RETURNS;TOBACCO & E-CIGS TAX TELECONFERENCED
Heard & Held
-- Public Testimony <Time Limit May Be Set> --
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                       February 24, 2016                                                                                        
                           3:17 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Kurt Olson, Chair                                                                                                
Representative Shelley Hughes, Vice Chair                                                                                       
Representative Jim Colver                                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Cathy Tilton                                                                                                     
Representative Andy Josephson                                                                                                   
Representative Sam Kito                                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Mike Chenault (alternate)                                                                                        
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 304                                                                                                              
"An Act  requiring the electronic  submission of a tax  return or                                                               
report with the  Department of Revenue; relating to  the taxes on                                                               
cigarettes  and  tobacco   products;  taxing  electronic  smoking                                                               
products; adding  a definition  of 'electronic  smoking product';                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 304                                                                                                                  
SHORT TITLE: ELECTRNC TAX RETURNS;TOBACCO & E-CIGS TAX                                                                          
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/08/16       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/08/16       (H)       L&C, FIN                                                                                               
02/19/16       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/19/16       (H)       Heard & Held                                                                                           
02/19/16       (H)       MINUTE(L&C)                                                                                            
02/22/16       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/22/16       (H)       Heard & Held                                                                                           
02/22/16       (H)       MINUTE(L&C)                                                                                            
02/24/16       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ISAAC HOWELL, Owner                                                                                                             
Cold Vapes 907                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 304.                                                                       
                                                                                                                                
SHEB GARFIELD                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 304.                                                                       
                                                                                                                                
STEVEN MAPES                                                                                                                    
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in opposition to HB 304.                                                                       
                                                                                                                                
WILLIAM BOYLES                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 304.                                                                       
                                                                                                                                
EMILY NENON, Director                                                                                                           
Alaska Government Relations                                                                                                     
American Cancer Society Cancer Action Network                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in favor of HB 304.                                                                            
                                                                                                                                
ANGELA CARROLL, Spokesperson                                                                                                    
Smoke Free Alternatives Trade Association                                                                                       
Wasilla, Alaska                                                                                                                 
POSITION STATEMENT:  Provided comments that were not on topic                                                                 
with the published agenda on HB 304.                                                                                            
                                                                                                                                
JENNIFER VARGASON                                                                                                               
North Pole, Alaska                                                                                                              
POSITION STATEMENT:  Testified in opposition to HB 304.                                                                       
                                                                                                                                
PATRICIA PATTERSON                                                                                                              
Lucky Raven Inc.                                                                                                                
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in opposition to HB 304.                                                                       
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:17:12 PM                                                                                                                    
                                                                                                                                
CHAIR KURT  OLSON called  the House  Labor and  Commerce Standing                                                             
Committee meeting to  order at 3:17 p.m.   Representatives Olson,                                                               
LeDoux,  Tilton, Hughes,  and Kito  were present  at the  call to                                                               
order.    Representatives Josephson  and  Colver  arrived as  the                                                               
meeting was in progress.                                                                                                        
                                                                                                                                
        HB 304-ELECTRNC TAX RETURNS;TOBACCO & E-CIGS TAX                                                                    
                                                                                                                                
3:17:26 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that the  only order of business  would be                                                               
HOUSE BILL NO.  304, "An Act requiring  the electronic submission                                                               
of  a  tax return  or  report  with  the Department  of  Revenue;                                                               
relating to the taxes on  cigarettes and tobacco products; taxing                                                               
electronic smoking  products; adding a definition  of 'electronic                                                               
smoking product'; and providing for an effective date."                                                                         
                                                                                                                                
CHAIR OLSON opened public testimony.                                                                                            
                                                                                                                                
3:18:30 PM                                                                                                                    
                                                                                                                                
ISAAC HOWELL  informed the  committee he owns  Cold Vapes  907 in                                                               
Anchorage  and  stated his  opposition  to  HB 304,  which  would                                                               
increase  his  wholesale  tax  by  100  percent.    He  has  five                                                               
employees, pays  taxes and  insurance on  his business,  and also                                                               
supports  other  businesses  that  would  be  affected,  such  as                                                               
delivery  companies and  other related  businesses in  Anchorage.                                                               
Cold Vapes  907 is a  small family-run  business and is  not "big                                                               
tobacco" or  "big pharmaceutical."   In the U.S., smoking  is the                                                               
leading  cause  of  preventable  deaths;  however,  nine  million                                                               
former smokers  have reduced or eliminated  putting tobacco smoke                                                               
in  their lungs  by their  use of  vaping products.   Mr.  Howell                                                               
related his  personal experience  using a  vaping device  to quit                                                               
smoking.   Passing HB 304 would  shut down "local vape  shops and                                                               
force smokers  to struggle, as  I did,  to get the  right setup."                                                               
He urged  the committee not to  pass the bill and  put his family                                                               
out  of business  and cause  his  employees to  lose their  jobs.                                                               
Although  vapers  will  continue  to vape  by  ordering  products                                                               
online,  Mr.  Howell pointed  out  that  the state  is  currently                                                               
profiting from his business.   He referred to a document provided                                                               
in  the committee  packet entitled,  "Peering Through  the Mist,"                                                               
which  found no  apparent concern  for bystanders  exposed to  e-                                                               
cigarettes and vapor.                                                                                                           
                                                                                                                                
3:21:59 PM                                                                                                                    
                                                                                                                                
SHEB GARFIELD said he is an  avid vaper and previously smoked for                                                               
twenty years before  he quit three years ago by  using vapes.  He                                                               
expressed his opposition to HB 304.   The device he uses does not                                                               
contain  nicotine,  but under  HB  304  the components  would  be                                                               
taxed,  as would  the  e-liquid which  is  composed of  propylene                                                               
glycol  and  flavorings.   Mr.  Garfield  said he  switched  from                                                               
combustible tobacco to  a vapor device for health  reasons and to                                                               
save money; however,  the tax would cause the  e-liquid to double                                                               
in price.  There are reserve  e-liquids that cost from $20 to $40                                                               
per bottle  wholesale, which would  be double or triple  the cost                                                               
of cigarettes, thus  the tax would make it cheaper  for people to                                                               
smoke than  use e-cigarettes.   He read from a  document provided                                                               
in the  committee packet  entitled, "Electronic  Cigarettes" that                                                               
advocated  making  alternative   sources  of  medicinal  nicotine                                                               
available  to smokers  as a  non-medical alternative  to tobacco.                                                               
Mr. Garfield  concluded that taxing vaping  devices and e-liquids                                                               
would cause  a decrease in users  and thereby more harm,  such as                                                               
increased health care  rates, which have decreased  due to vaping                                                               
devices and vape shops in the state.                                                                                            
                                                                                                                                
3:25:19 PM                                                                                                                    
                                                                                                                                
STEVE  MAPES said  he was  speaking on  behalf of  adults on  the                                                               
Kenai  Peninsula who  have made  the  choice to  vape instead  of                                                               
smoke.  He read from a  document provided in the committee packet                                                               
entitled, "Peering  Through the  Mist," published in  2013, which                                                               
found that the threshold limit  values (TLVs) of the contaminants                                                               
produced from  the vapor of  vapor devices were  magnitudes below                                                               
the involuntary workplace exposure  level established by the U.S.                                                               
Department   of    Labor,   Occupational   Safety    and   Health                                                               
Administration  (OSHA).   Mr. Mapes  continued to  read from  the                                                               
document which  concluded that Alaskan smokers  who have switched                                                               
to vaping have saved thousands  of dollars and enjoyed a positive                                                               
impact on their lives.  He  opined a draconian tax would severely                                                               
reduce Alaskans' choices for a better nicotine delivery system.                                                                 
                                                                                                                                
3:28:23 PM                                                                                                                    
                                                                                                                                
WILLIAM  BOYLES said  he  is  strongly opposed  to  HB  304.   He                                                               
started  vaping two  years ago  after  death of  his father  from                                                               
smoking-related illness.   Mr. Boyles  tried to quit  smoking and                                                               
learned of a vape pen from  his neighbor.  He has been smoke-free                                                               
for two years and this has resulted in better health.                                                                           
                                                                                                                                
3:30:30 PM                                                                                                                    
                                                                                                                                
EMILY  NENON,  Director,  Alaska Government  Relations,  American                                                               
Cancer Society  Cancer Action  Network, described  her experience                                                               
working on local  and statewide tobacco tax policy  in Alaska for                                                               
15 years.  She pointed out  that this issue first and foremost is                                                               
a public  health measure  that has the  side benefit  of reducing                                                               
costs to the  state.  The tax  income would be of  little help to                                                               
offset  smoking attributable  costs;  in fact,  the state  health                                                               
department has reported  that the costs of smoking  in Alaska per                                                               
pack averages  $20 per pack, thus  the tax would not  recoup said                                                               
cost.   Ms. Nenon said  her concern is  not about revenue  but is                                                               
focused on  the impact of youth  use; in the last  20 years there                                                               
has been  a 70 percent  decline in youth  smoking in Alaska.   In                                                               
addition,   she  characterized   e-cigarettes,  as   a  pediatric                                                               
epidemic.  She expressed her best  wishes for those who have been                                                               
able  to   switch  from   traditional  cigarettes,   however,  e-                                                               
cigarettes  are an  unregulated product,  and their  contents are                                                               
unknown  to consumers  and retailers.   More  Alaska high  school                                                               
students who smoke are using  e-cigarettes and many products that                                                               
have been tested contain nicotine.   She cautioned that the level                                                               
of nicotine  can vary, although  this is  not a problem  with the                                                               
retailers,  but with  the system.   E-cigarettes  are not  an FDA                                                               
regulated cessation  product.  Ms.  Nenon reminded  the committee                                                               
that nicotine  is a neurotoxin and  a pesticide, and in  any form                                                               
contributes to addiction in youth.                                                                                              
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  asked  for the  meaning  of  pediatric                                                               
epidemic.                                                                                                                       
                                                                                                                                
MS. NENON explained  that she used the phrase because  there is a                                                               
public health epidemic.  She remarked:                                                                                          
                                                                                                                                
     In terms of, while not the  same as a classic virus, it                                                                    
     is moving in the same  manner of seeing this tremendous                                                                    
     uptick  in e-cigarette  use among  youth, and  then the                                                                    
     corollary  being  we're  seeing this  on  the  national                                                                    
     level, we'll know  in another year when  we have Alaska                                                                    
     data on this, seeing kids  that are, have never smoked,                                                                    
     starting  with e-cigarettes  and  moving into  smoking.                                                                    
     We are already seeing that  trend on a national level -                                                                    
     it's very disturbing.                                                                                                      
                                                                                                                                
3:37:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON asked  for written  information related                                                               
to the  inaccurate labeling of  the abovementioned products.   He                                                               
then  asked whether  Ms. Nenon  believes that  using e-cigarettes                                                               
"beats tobacco."                                                                                                                
                                                                                                                                
MS.  NENON clarified  that  a combusted  cigarette  has 69  known                                                               
human carcinogens  and over 3,000  chemical compounds  thus "it's                                                               
not  actually difficult  to be  less harmful  than the  combusted                                                               
cigarette."     She added  that there  are additional  dangers of                                                               
toxins,  volatile  organic  compounds,  carcinogens  specific  to                                                               
tobacco, and ultrafine particles from heating the products.                                                                     
                                                                                                                                
3:39:07 PM                                                                                                                    
                                                                                                                                
ANGELA CARROLL provided comments that  were not on topic with the                                                               
published agenda of HB 304.                                                                                                     
                                                                                                                                
3:42:00 PM                                                                                                                    
                                                                                                                                
JENNIFER VARGASON  informed the  committee that vaping  saved her                                                               
family "from the ball and chain  of tobacco use, and I'm thankful                                                               
for that."   She, her husband, and her family  are healthier now,                                                               
and she  opined that the bill  should not tax vaping  products as                                                               
the same  thing as  tobacco products  because vaping  products do                                                               
not contain  tobacco, and there  is no combustion.   Ms. Vargason                                                               
said  that reports  have  found  that vaping  does  not have  the                                                               
harmful  effects  of  smoking,  and there  are  no  concerns  for                                                               
bystanders [report  not provided].  The  ingredients in e-liquids                                                               
are  in  everyday  foods,  and  although  e-liquids  can  contain                                                               
nicotine,  studies  have  shown  that  nicotine  is  as  safe  as                                                               
caffeine  [study not  provided].   Ms.  Vargason  referred to  an                                                               
article entitled, "Everything we  know about nicotine wrong" that                                                               
said  that  nicotine  helps  certain   conditions,  and  in  some                                                               
demographics  tobacco use  is higher,  which could  be helped  by                                                               
alternatives.    She  related   her  personal  experience,  using                                                               
tobacco since she was about 9  years old and unable to quit until                                                               
using vaping  products; however, she has  been tobacco-free since                                                               
December 2014,  and feels  much better.   Ms. Vargason  urged the                                                               
committee to reconsider HB 304.                                                                                                 
                                                                                                                                
3:44:48 PM                                                                                                                    
                                                                                                                                
PATRICIA PATTERSON,  Owner of  the Lucky  Raven Inc.,  stated her                                                               
opposition to  HB 304.   Ms. Patterson said  HB 304 is  not about                                                               
prevention  or tobacco,  but is  primarily  designed to  generate                                                               
more revenue  for the  state, which  is suffering  from financial                                                               
issues; however,  she pointed  out that  one-half of  the taxable                                                               
items could  be purchased from  another state, which  is directly                                                               
opposite of making  more money for Alaska.   Currently, her store                                                               
is one of three stores left  in Alaska that sells premium cigars,                                                               
and cigars  for personal use can  be sold tax-free in  any state.                                                               
She  supported previous  testimony  that  increasing taxes  would                                                               
cause the  vape industry  to go  away, as  happened to  the cigar                                                               
industry.  Ms.  Patterson expressed her desire to  help the state                                                               
find needed  revenue to  fund programs,  but increasing  taxes or                                                               
taxing products that can be easily bought in another state is                                                                   
not the way.                                                                                                                    
                                                                                                                                
3:47:51 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON announced that public testimony would remain open.                                                                  
                                                                                                                                
[HB 304 was held over.]                                                                                                         
                                                                                                                                
3:47:56 PM                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Labor and Commerce Standing Committee meeting was adjourned at                                                                  
3:47 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB304 Supporting Documents-Email and attachments-Marge Stoneking 02-19-16.pdf HL&C 2/24/2016 3:15:00 PM
HB 304
HB304 Opposing Documents-Email-Mike Coons 02-23-16.pdf HL&C 2/24/2016 3:15:00 PM
HB 304
HB304 Opposing Documents-Email-Malcohlm McBride-02-19-16.pdf HL&C 2/24/2016 3:15:00 PM
HB 304
HB304 Supporting Documents-Email-Thomas Moran 02-23-16.pdf HL&C 2/24/2016 3:15:00 PM
HB 304
HB304 Opposing Documents-Email-Dave West-02-22-16.pdf HL&C 2/24/2016 3:15:00 PM
HB 304
HB304 Opposing Documents-Email-David Day 02-24-16.pdf HL&C 2/24/2016 3:15:00 PM
HB 304