Legislature(2001 - 2002)
02/13/2002 03:25 PM House L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ 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.
| Document Name | Date/Time | Subjects |
|---|