01/28/2016 02:00 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| HB249 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 249 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
January 28, 2016
2:03 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Shelley Hughes, Co-Chair
Representative Benjamin Nageak
Representative Louise Stutes
Representative Matt Claman
Representative Dan Ortiz
MEMBERS ABSENT
Representative Charisse Millett
COMMITTEE CALENDAR
HOUSE BILL NO. 249
"An Act requiring the electronic submission of a tax return or
report with the Department of Revenue; relating to the motor
fuel tax; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 249
SHORT TITLE: ELECTRONIC TAX RETURNS & MOTOR FUEL TAX
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/19/16 (H) READ THE FIRST TIME - REFERRALS
01/19/16 (H) TRA, FIN
01/28/16 (H) TRA AT 2:00 PM CAPITOL 17
WITNESS REGISTER
JERRY BURNETT, Deputy Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Assisted with providing a presentation
regarding HB 249.
MARK LUKIN, Commissioner
Department of Transportation & Public Facilities
Juneau, Alaska
POSITION STATEMENT: Assisted with providing a presentation
regarding HB 249.
STEVE ST. CLAIR
Wasilla, Alaska
POSITION STATEMENT: Testified in opposition to the HB 249.
ACTION NARRATIVE
2:03:10 PM
CO-CHAIR HUGHES called the House Transportation Standing
Committee meeting to order at 1:45 p.m. Representatives Nageak,
Stutes, Claman, Ortiz, Foster, and Hughes were present at the
call to order.
[CO-CHAIR HUGHES turned the gavel over to Co-Chair Foster.]
HB 249-ELECTRONIC TAX RETURNS & MOTOR FUEL TAX
[Due to technical difficulties, portions of the audio are
indiscernible throughout.]
2:04:08 PM
CO-CHAIR FOSTER announced that the first order of business would
be HOUSE BILL NO. 249, "An Act requiring the electronic
submission of a tax return or report with the Department of
Revenue; relating to the motor fuel tax; and providing for an
effective date."
2:05:22 PM
JERRY BURNETT stated that he would be giving a presentation
discussing HB 249, one of several tax increases outlined in the
governor's "Sustainable Alaska" Plan. Slide 2 of his
presentation displayed the title of the bill: "An act requiring
the electronic submission of a tax return or report with the
Department of Revenue; relating to the motor fuel tax; and
providing for an effective date." He stated that all of the
smaller tax bills under consideration by the legislature would
require electronic submission of tax returns, as it makes the
process more efficient, but there are ways of dealing with
(indisc.). He transitioned to slide 3, titled "Motor Fuel Tax
History," and explained that there have been taxes on motor
fuels in Alaska since 1945. He stated that the tax rates have
increased over time, but the per-gallon tax structure has
remained unchanged. He said the last increase for the highway
tax was in 1970, when it was changed to eight cents per gallon.
He recounted that in 1970 gas was 30 cents per gallon, and he
said an eight cent tax was a large portion of the price for a
gallon of gas. He stated that the tax has less of an impact
today. He said in 1977 marine fuel taxes increased to 5 cents
per gallon, and the tax on aviation fuel was last increased in
1994.
2:07:02 PM
CO-CHAIR HUGHES said she was still chewing on Mr. Burnett's
opening statement that this is part of the governor's
"Sustainable Alaska" plan. (indisc.) She said she does not see
it as sustainable considering the amount of money [Governor Bill
Walker's] plan pulls from the private sector and Alaskan
families and businesses. She said she is very concerned about
that and does not consider it sustainable for Alaska or
Alaskans. She asked if Mr. Burnett could say whether the
governor is prepared to have his budget decreased if pieces,
such as this tax, valued at $49 million, do not make it through.
2:08:05 PM
MR. BURNETT replied that he cannot speak for the governor on
that particular issue, but he said there are many parts to the
"Sustainable Alaska" plan and budget. Each of these would make
a contribution and, depending upon which parts pass, others
would need to be adjusted, either with spending cuts or
additional revenue from another source. He said the outcome
would be a matter for the legislature to determine, pending
review by the governor. He said there are a lot of pieces,
which all have to work together one way or another. He
reiterated that if one increase does not go through, something
else would have to increase more or there would have to be a
decrease in another area.
2:08:58 PM
CO-CHAIR HUGHES thanked Mr. Burnett for his response and said
she wanted to express for the record that the public should not
be confused by the word sustainable. She posited that what
might be sustainable in terms of keeping the doors of government
open, might not be sustainable for families.
2:09:15 PM
MR. BURNETT continued to slide 4, titled "Motor Fuel Tax History
(Continued)," and stated that the highway fuel tax was suspended
from September 1, 2008, to August 31, 2009, due to extremely
high gas prices, which were in the $4-plus range. He said there
was one month in 2008 when oil tax brought in $1 billion, so the
state was not concerned with revenues from small taxes. In 2015
HB 158 added a $0.0095 surcharge on motor fuels and some other
refined fuels, which was intended for the spill prevention and
response fund.
2:10:12 PM
MR. BURNETT moved on to slide 5, titled "Motor Fuel Tax
Proposal," and explained that the proposed motor fuel tax would
increase tax rates on all types of motor fuels. He said the
rates would increase from 8 to 16 cents per gallon for highway
fuel; from 5 to 10 cents per gallon for marine fuel; from 3.2 to
10 cents per gallon for jet fuel; and from 4.7 to 10 cents per
gallon for aviation gas. The "off-road use" credit would
increase from 6 to 12 cents per gallon. He explained that the
"off-road use" credit applies if fuel is bought for use off the
highway system. At the time of purchase, the full tax is paid
on the fuel, and the credit is applied for and returned
retroactively.
2:11:13 PM
REPRESENTATIVE NAGEAK (indisc.) consideration of the high cost
of fuel in the villages of rural Alaska. He stated that his
village is 150 miles from the source of Alaska's wealth and the
starting point of the pipeline, from whence oil is transported
to the Lower 48 before being shipped back as a refined product.
He stated that he pays $6.50 per gallon at home, and in some
locations in rural Alaska it is $20 per gallon. He said adding
additional tax on $20 per gallon would have a tremendous impact
on rural Alaskans.
2:12:20 PM
MR. BURNETT explained that motor fuel taxes are per-gallon
taxes, meaning that changes will have differential impacts based
on how many gallons are used, not the price of the fuel. He
allowed that people who already pay a high price would
experience an increase. He said he did not know how
distributors and retailers set prices or how prices would be
affected by a tax increase. He stated that some people use a
lot more fuel, some people will pay a higher price, and nothing
about that part of the current system would change.
REPRESENTATIVE NAGEAK replied that there are two locations near
Prudhoe Bay - Nuiqsut and Kaktovik - where it is very expensive
to get to the rest of the world. He said it used to be
affordable, but now there is a monopoly [on fuel in the region]
and it has an impact on those two places in particular,
especially if there is an additional tax on gasoline.
2:14:25 PM
CO-CHAIR HUGHES noted that the numbers in the right hand column
of the chart on slide 5 are round numbers. She asked what type
of analysis was conducted to produce those figures and if they
were based on comparisons with other states or comparisons of
the impacts on people in regions of the state. She pointed out
that the jet fuel tax rate would be tripled, but the others
appear to be doubled. She asked if there was a basis for
doubling or tripling the tax or if instead the [administration]
started with the goal of finding $49 million in revenue and then
asked how it could be acquired.
2:15:12 PM
MR. BURNETT replied that there are many considerations in the
process of choosing tax rates. He stated that jet fuel and
aviation gas tax rates would be increased by a greater factor in
part because members of the Aviation Advisory Committee - most
of whom, he noted, were present at the meeting - decided, after
great consideration, to increase aviation fuel tax rates rather
than raise landing fees at certificated airports in Alaska to
help offset the cost of repairs. He stated that all aviation
fuel taxes have to be spent at airports; it is a requirement of
the Federal Aviation Administration (FAA) for grant eligibility.
He said all the money that is collected for aviation fuel taxes
is spent by the Department of Transportation and Public
Facilities (DOTPF) or local governments at the airport where it
is collected.
2:16:37 PM
CO-CHAIR HUGHES stated her understanding that there is a foreign
exemption for jet fuel taxes. She asked if that is based in
Alaska statute and if the Department of Revenue (DOR) had
considered changing it. She stated her understanding that
foreign carriers account for the largest portion of jet fuel
purchases, and she offered that [by removing the exemption] the
state may be able to bring in more revenue with a smaller tax
increase.
2:17:05 PM
MR. BURNETT stated his understanding that the exemption is in
Alaska statute but is also required because these companies are
involved in international commerce, and the U.S. Constitution
mandates that their fuel cannot be taxed. He stated that Co-
Chair Hughes was correct in her understanding that far more jet
fuel is sold to international carriers than any others at the
Ted Stevens Anchorage International Airport and Fairbanks
International Airport.
2:17:44 PM
CO-CHAIR HUGHES (indisc.) She requested that Mr. Burnett provide
the information to the committee so the members could better
understand. She said she thought that the statute was changed
and that some states were opting out of it. She said she was
under the impression that the exemption was designed to
encourage business and the use of the Ted Stevens Anchorage
International Airport and Fairbanks International Airport,
reasoning she said she could understand. She stated that she
also knows that as prices have fluctuated, the carriers have not
cancelled flights to Alaska; however, she allowed that they may
do so if [removing the exemption] were allowed.
2:18:40 PM
CO-CHAIR FOSTER asked, in reference to slide 5, if the [current]
"off-road use" credit applies to vehicles used in construction
projects and if he is correct in his understanding that after
the proposed credit those vehicles would only be paying four
cents per gallon in taxes. He asked if the credit would also
apply in villages where four-wheelers are used.
2:19:20 PM
MR. BURNETT stated that Co-Chair Foster's understanding is
correct in both circumstances. He stated that a person can
apply for a credit for a four wheeler, or even a lawn mower,
noting that it would be a small amount. He stated that DOR does
get some very small applications for credits. He said an
individual can get a six cent return if the department can
verify that the fuel was not used on a highway, and the same
applies if diesel is purchased and used for home heating
purposes.
2:19:54 PM
CO-CHAIR FOSTER stated that in some villages there are no
vehicles or cars. He asked if it is even possible for a local
retailer to apply for the credit [on behalf of the consumer].
MR. BURNETT stated that he did not know the answer to the
question, but he offered to find out for the committee.
2:20:21 PM
REPRESENTATIVE CLAMAN requested clarification that the
international cargo carriers at Ted Stevens Anchorage
International Airport and Fairbanks International Airport, which
he said constitute the majority of international traffic, do not
pay the 3.2-cent and would not [under the proposed legislation]
pay the proposed 10-cent aviation fuel tax when they fuel;
whereas, Alaska Airlines, Delta Airlines, United Airlines, Jet
Blue, or any other domestic carrier do and would have to pay the
tax.
2:20:58 PM
MR. BURNETT replied that is correct.
2:21:03 PM
REPRESENTATIVE CLAMAN asked if the aforementioned foreign
exemption also applies to landing fees.
2:21:13 PM
MR. BURNETT replied no, international carriers do pay landing
fees. He stated that since Anchorage is the second largest
freight airport in the United States and one of the largest in
the world, many landing fees are collected from international
flights.
2:21:34 PM
REPRESENTATIVE STUTES inquired if any user groups were involved
in the process of developing the proposed tax rates.
2:21:49 PM
MR. BURNETT replied no, other than the Aviation Advisory
Committee there were no specific user groups that gave input.
He clarified that there was significant input from the general
public. He indicated that [DOR] held several public meetings,
attended by the Commissioner of Revenue and others, throughout
the state since June, during which various proposals were
discussed. He stated that there had been a lot of public input,
but that he was uncertain who might be considered the highway
user group. He speculated that a trucking association may fall
into the category.
2:22:28 PM
CO-CHAIR FOSTER stated his understanding that the administration
accepted the recommendations of the Aviation Advisory Committee,
with the exception of indexing, which would have stipulated -
given a scenario where oil prices were to climb significantly -
for example to $100 per barrel, that the tax rate could be
reduced. He stated that he personally likes the idea of
indexing, because sometimes government operates under the
concept that if the money is there, it must be spent. He asked
whether Mr. Burnett had a particular viewpoint on the topic.
2:23:15 PM
MR. BURNETT stated that Department of Revenue Commissioner
Hoffbeck and he spoke with the Aviation Advisory Committee
regarding the topic. He stated that [indexing] was not included
in the bill, and he related there are no projections of oil
prices increasing to that level in the near term. He said the
administration is open to discussing that type of change.
2:23:53 PM
CO-CHAIR FOSTER stated that this will not be the only hearing on
the topic. He said one reason he likes the idea and likes
talking about it moving forward is that although he agrees that
oil prices aren't going that high anytime soon, it would be a
difficult change to make later.
2:24:28 PM
MR. BURNETT moved on to slide 6, titled "Relative Motor Fuel Tax
Rate," and said it compares Alaska's current motor fuel tax
rates to those of other states. He stated that Alaska's current
highway fuel tax rate is the lowest, but there are some states
that are close. He stated that the jet fuel tax rate is thirty-
fifth out of fifty, the aviation fuel tax rate is twenty-fourth
out of fifty, and most other states do not have a specific
marine fuel tax. He said this is likely because most states
don't sell much marine fuel and people in those states are
paying highway tax rates for marine fuel. He stated that under
HB 249, Alaska tax rates would still be below the national
average of 20.17 cents [per gallon] for highway fuel and above
the national average for jet and aviation fuel. He restated
that there was no national average that [DOR] could find for
marine fuel tax rates.
2:25:35 PM
CO-CHAIR HUGHES stated her understanding that the tax rates may
be below national average, but asked how total fuel costs would
compare with the addition of the proposed tax.
2:25:51 PM
MR. BURNETT stated that he had not checked how Alaska's fuel
costs are ranked compared to other states recently, but he said
it has been among the highest. He stated that it is high in
Juneau, slightly lower in Anchorage, and much higher in rural
areas. The proposed tax increase would raise fuel prices by at
least the amount of the tax.
2:26:31 PM
CO-CHAIR HUGHES requested that before the next committee
meeting, Mr. Burnett gather information comparing fuel prices
across the nation, with tax included, for the purpose of
comparing our fuel costs with the proposed tax increase.
2:26:47 PM
MR. BURNETT responded that would not be a problem, and he
relayed that the information is available on gasbuddy.com at any
time. He offered an example to put the tax increase in
perspective: a person who drives 20,000 miles per year, in a
car that gets 20 miles per gallon, using 1,000 gallons of fuel
per year, would experience an increase of $80.00 per year in
his/her fuel bill. For the construction or trucking businesses,
this would equate to a significant amount of money.
2:27:27 PM
MR. BURNETT, in response to Co-Chair Hughes, clarified his
example. He added that the figure would vary based on the
length of commute, how much a person drives, and the vehicle's
gas mileage. He said the tax would impact every consumer
differently.
2:27:53 PM
MR. BURNETT transitioned to slide 7, titled "The New Sustainable
Alaska Plan," which displayed a chart titled "Per-Capita Broad-
Based State Tax Revenues, by State, 2014." He said he included
the chart in the presentation at the request of Co-Chair Hughes'
staff. He stated that it is a chart showing the tax burden for
per capita, broad-based tax revenues. He stated that Alaska is
represented by the bar on the far left of the chart, and he
noted that the black portion of Alaska's bar comprises all the
new taxes proposed in the governor's "Sustainable Alaska Plan."
He stated that the area below the black bar represents the
general sales taxes, selective sales taxes, and license taxes,
but noted that it does not include individual income tax, as
Alaska does not have one. He said University of Alaska
Anchorage's (UAA's) Institute for Social and Economic Research
(ISER) produced the information on the slide, and he said he was
uncertain as to the source of the data. He stated that he did
check the Alaska data with the Revenue Sources Book, and he said
the $500 per year, per capita figure - which yields
approximately $370 million per year - is consistent with the
Revenue Sources Book for non-petroleum license fees.
2:29:18 PM
CO-CHAIR HUGHES stated that at first glance it appears that
Alaska is doing pretty well in terms of per capita broad-based
tax rates, but she said it must be taken into consideration that
[Alaskans] corporately own sub-surface rights. She said
[Alaskans] have heard for years that oil revenues pay for 90
percent of state government, and although that is currently not
the case, it remains true that the money, which belongs to
Alaskans, has been paid into the state's general fund. She
suggested that it could have been set up such that rather than
the money being paid into the general fund each year, it would
be divided and paid out to all Alaskans, and a chunk of that
paid back as a state income tax. She stated that these oil
revenues are not reflected in the bar, and she requested the per
capita amount Alaska was receiving into the general fund from
oil revenues prior to the decrease in prices.
2:30:26 PM
MR. BURNETT stated that the oil revenues in Alaska for the past
several years have run at a high of approximately $10 billion
per year, which, when divided by a population of approximately
700,000, yields a per capita revenue of about $7,000 to $8,000
per person. He said Article XI of the Alaska Statehood Act
granted subsurface rights to the state for the purpose of
building infrastructure, operating schools, et cetera. He said
it was a bargain that the federal government made with the
people of Alaska in order to become a state - to sacrifice
subsurface rights and use that money to fund government. He
said this has basically occurred since Prudhoe Bay came online
in the 1960s. He stated that now [the state] doesn't have
enough revenue from those rights, and "we are where we are."
2:32:04 PM
CO-CHAIR HUGHES thanked Mr. Burnett and stated that if the low
figure of $7,000 per capita oil revenue were added to Alaska's
bar on the chart, the figure is much higher, and "we the people"
have a lot of skin in the game.
2:32:26 PM
MR. BURNETT transitioned to slide 8, titled "Impacts of Tax
Proposal," and stated that gas prices at the pump would increase
relative to prices without the tax. He stated that there would
be more aviation taxes to fund certificated urban and rural
airports. He noted that the tax was requested by the Aviation
Advisory Committee as preferable to landing fee increases.
2:32:52 PM
REPRESENTATIVE ORTIZ asked whether the aviation taxes are
currently dedicated and returned directly to urban and rural
airports.
2:33:04 PM
MR. BURNETT stated that the FAA requires, in order to
participate in federal programs, that revenue from aviation fuel
taxes is allocated to urban and rural airports. He stated that
the revenue acts as a dedicated fund and in the Revenue Sources
Book it shows up as general fund money. He said it is collected
and kept in a sub-account of the general fund, but an amount
equal to it is spent for these purposes.
REPRESENTATIVE ORTIZ asked whether that was true of automobile
fuel taxes.
2:33:45 PM
MR. BURNETT stated that no other taxes have a dedication in the
state constitution or a requirement under federal law to be
spent for any specific purpose.
2:34:06 PM
REPRESENTATIVE CLAMAN inquired where the FAA requirement can be
found.
2:34:27 PM
MR. BURNETT replied that [the requirement for aviation fuel tax
distribution] is in federal regulation and is part of the grant
assurance agreements between the State of Alaska and the FAA in
order to receive federal dollars for airports. In response to a
follow-up question Mr. Burnett said DOTPF would provide the
specific location, under which the regulation exists.
2:35:00 PM
REPRESENTATIVE ORTIZ inquired what percentage of Alaska's
airport operational costs are covered by federal funding.
2:35:25 PM
MR. BURNETT replied that DOR would provide the information to
the committee.
2:35:36 PM
REPRESENTATIVE NAGEAK asked how many certificated urban airports
are in the Alaska.
2:35:49 PM
MARK LUKIN, Commissioner, Department of Transportation & Public
Facilities, stated that there are a total of [247] state owned
and operated airports. In response to a follow up question, he
relayed that of those, 21 are certificated, which essentially
means those are the airports with jet service. He stated that
this tax would actually fund all 247 airports. He stated that
DOTPF would deliver the exact number to the committee, and he
said the number may be slightly higher.
2:36:56 PM
REPRESENTATIVE NAGEAK said 247 (indisc.).
2:37:09 PM
CO-CHAIR HUGHES requested that Mr. Burnett return to slide 8,
regarding the impacts of the tax proposal, and stated that there
is an important bullet missing. She said not only would gas
prices at the pump rise, but so would the price of goods and
travel. She asked if there had been any analysis regarding the
increased costs to the consumers.
2:37:34 PM
MR. BURNETT stated that Co-Chair Hughes is correct in her
assessment that consumer prices would increase. He stated that
[DOR] can't predict the precise effect but may be able to
predict relative effects. He stated that it is a per gallon tax
and price has varied tremendously over the past two years; if an
eight-cent tax is added to a gallon of fuel today, the total
cost of the gallon is still much lower than it was then. He
stated that it might be less expensive next year or it might be
more expensive. He said it is not technically possible to give
an exact answer to Co-Chair Hughes' question; however, the tax
increase would affect airline ticket prices, parking prices, and
anything else related to transportation.
2:38:45 PM
REPRESENTATIVE NAGEAK asked if this increase would extend to the
United States Postal Service (USPS), freight, and similar
expenses.
2:38:58 PM
MR. BURNETT replied that it is likely there would be some effect
on the cost of those types of services. He suggested that for
air carriers the effect would be less than a needed landing fee
increase. He pointed out that there are no toll roads in Alaska
yet, and [the state] would probably like to avoid that. He
stated there are some countries where people pay every time they
travel anywhere. He stated that many effects are unknown, but
the goal of [tax] increases is to avoid the known effects of not
having enough funding.
2:39:47 PM
REPRESENTATIVE NAGEAK said the tax increase would have a
tremendous impact on rural customers. He said the cost of
freight to his town is much more than it used to be; the cost of
living, including goods and services, is already extremely high;
and this would increase it further. He said there are few jobs
and few avenues for taxation, and he stated that there are many
people in rural Alaska who wish they had a tax to pay, because
that would mean they had a job.
2:41:37 PM
CO-CHAIR FOSTER stated that even with the proposed tax, the
price of fuel is substantially lower than it was two years ago.
He said the proposed tax could be doubled or tripled and prices
would still be lower than they were two years ago, but in places
like Western Alaska, Nome, or Bethel, fuel prices do not change
monthly as they might in a place like Anchorage. He said this
is because rural areas get a shipment of fuel in September and
lock in a price, which remains steady for the winter and, in
some cases, until the following June. He said the public does
not realize some of the challenges that rural Alaska has.
2:42:46 PM
REPRESENTATIVE CLAMAN stated that [the committee] must keep in
mind the other side of the equation, which is that if [the
legislature] does not close the fiscal gap, there will be dire
consequences to the state on all levels as well. He said there
are also broad impacts of doing nothing with regard to the
substantial deficit.
2:43:20 PM
MR. BURNETT concurred and said [Representative Claman's
observations] relate to a complex problem that [state
government] must address.
2:43:31 PM
CO-CHAIR FOSTER mentioned that this was not the only meeting
that the committee will hold regarding HB 249, and he suggested
that members take as much time as they want in terms of
questions.
2:43:46 PM
CO-CHAIR HUGHES referred to the slide relating to impacts of the
tax proposal and asked if there was any consideration for the
specific regional impacts of the proposed tax increase, such as
cost of freight in rural areas. She posited that people in the
Matanuska-Susitna (Mat-Su) region probably put more miles on
their vehicles than anyone else in the state, with the possible
exception of Kenai Peninsula residents. She said this
especially applies to people who commute, but even for those who
do not, a round trip to the grocery store may be 20 miles as
everything is so spread out. She surmised that a large portion
of the $49 million on the revenue impact slide would come from
her region, but because these are not designated funds, it would
not necessarily benefit the people of her region. She stated
that a user fee may be more palatable in the sense that a user
would know that the road would be well maintained by their fee.
She asked if she was correct in her understanding that the funds
from the motor fuel tax are not dedicated.
2:45:21 PM
MR. BURNETT replied that Co-Chair Hughes was correct in her
understanding that other than the aviation fuel tax, the
legislature is free to spend the money however it chooses, so it
is incumbent upon the legislature and the governor to propose a
budget that utilizes whatever tax revenues are collected. He
said [the legislature] could choose to spend motor fuel tax
revenues at DOT or somewhere else, and that is something they
could explain to constituents in the future.
2:46:03 PM
MR. BURNETT, in response to Co-Chair Hughes, stated his
understanding that there was regional consideration for the
impacts of the bill. He said although [a motor fuel tax] is not
a user fee, there are similarities. He stated that the cost of
maintaining highways is greater than the amount of money
collected from taxes. He said the tax does offset costs, and
the amount of use of the highways and airports varies directly
proportional to how much fuel is purchased. In that sense,
regional impacts have been taken into consideration.
2:46:59 PM
CO-CHAIR HUGHES stated that although the committee is
considering this proposal in isolation from all other proposals,
the income tax proposal combined with the proposal in HB 249
would disproportionately burden the Mat-Su region due to the
number of people who are employed and the number of miles they
drive, and she said she views this as problematic.
2:47:25 PM
REPRESENTATIVE NAGEAK said (indisc.) rural Alaska, especially.
He stated that residents of the region "do not have [the money]
to pay that in the first place," and they don't know how much
will be charged. He said with the level of employment in rural
Alaska (indisc.). He said [the proposed legislation] would have
a tremendous impact on the people who depend on fuel for their
livelihood, including subsistence hunting, fishing, and all
other aspects of their lives. [The proposed legislation] would
have a disproportionate impact on the pumps in rural Alaska when
compared to the effects on people who live on the road system.
He said the high cost of transporting fuel had not been taken
into consideration. He said most of the fuel is paid for at a
market price based on the rest of the United States, and prices
are incredibly high. He concluded by stating his belief that
the effects of HB 249 would be disproportionate and unfair
[toward rural Alaskans].
2:49:34 PM
MR. BURNETT continued his presentation on slide 9, titled
"Revenue Impact," and stated that the tax increase would be
expected to generate approximately $49 million per year in
additional revenue, of which $200,000 would be shared with
municipally owned airports. These include airports in Juneau,
Kenai, Palmer, and Wasilla.
2:50:00 PM
CO-CHAIR HUGHES inquired as to the amount shared with
municipally owned airports, and she asked if there was another
amount that was always in the budget set aside for those
airports. She stated that she was under the impression that
there was some sort of reduction for municipal airport funding
in this year's budget.
2:50:18 PM
MR. BURNETT responded that the shared taxes are in the range of
$140,000 per year at the current rates. He suggested that
perhaps Commissioner Lukin could speak to any other reductions
in funding.
2:50:36 PM
COMMISSIONER LUKIN stated that under HB 249, the state
contribution to municipal airport match funding for capital
projects would be reduced. He said it is a large difference, as
those are state match funds that used to be paid optionally to
municipal airports. He said at this point, with the federal
program, [DOTPF] has elected not to continue [state match funds
for capital projects to municipal airports].
2:51:14 PM
CO-CHAIR HUGHES inquired how much the funds are being reduced.
2:51:16 PM
COMMISSIONER LUKIN stated that it used to be a 50 percent match
and now there is no match.
2:51:23 PM
CO-CHAIR HUGHES asked for the total dollar figure that would be
removed from the program.
2:51:32 PM
COMMISSIONER LUKIN replied that he would get the exact figure
for the committee.
2:51:36 PM
CO-CHAIR FOSTER asked how many municipal airports exist in the
state.
COMMISSIONER LUKIN offered his understanding that there are
five; they are located in Juneau, Wasilla, Palmer, Soldatna, and
Kenai.
2:51:58 PM
REPRESENTATIVE CLAMAN asked if the airport in Ketchikan is a
municipal airport.
COMMISSIONER LUKIN stated that the Ketchikan International
Airport is a state owned airport, but DOTPF has an agreement
with the Ketchikan Gateway Borough such that the borough will
run the airport, which allows it to charge landing fees.
2:52:22 PM
MR. BURNETT presented slide 10, titled "Revenue Impact
(continued)," and said the estimates are based on the fall 2015
forecast and do not account for changes in demand or
stockpiling. He stated that [DOR] expects a small amount of
stockpiling to occur, where people buy fuel in anticipation of
the tax increase, specifically at the distributor level.
MR. BURNETT transitioned to slide 11, titled "Implementation
Cost," and stated that there would be an implementation cost for
the proposal. He explained that under HB 249, DOR would have to
update the Tax Revenue Management System (TRMS) and change the
tax return forms, among other things. He stated that DOR
expects a one-time implementation cost of $50,000 and does not
expect any ongoing additional cost related to administering the
tax program.
2:53:12 PM
MR. BURNETT stated that slides 12 and 13 discuss how the budget
gap would be closed with the governor's sustainable plan. He
said he would not be speaking on that but did point out on slide
13 where the proposed motor fuel tax would fit within the new
revenue components of the governor's plan.
2:53:31 PM
CO-CHAIR HUGHES asked, in reference to slide 12, about the $850
million from existing taxes and fees (indisc.).
2:54:01 PM
MR. BURNETT replied that those are existing revenues, not new
revenues, and includes components like corporate income tax,
personal taxes like those in an earlier chart, some license
fees, direct charges, and some other types of revenues. He also
pointed out the "earnings on savings" line item.
2:54:29 PM
MR. BURNETT, in response to Co-Chair Hughes, stated that all of
the new revenue components can be found on slide 13, which shows
all of the new proposals, including a change to the mining
license tax, an increase to the fishing landing tax, increased
taxes on cruise ship passengers, the proposed motor fuel tax,
increased alcohol tax, tobacco tax, hardening the floor on oil
and gas taxes, and an income tax, all of which would add up to
$457 million dollars.
2:55:16 PM
CO-CHAIR FOSTER asked for clarification that the $5.242 billion
figure for reductions and new revenue is not the Fiscal Year
2017 (FY 17) total operating budget.
MR. BURNETT replied that it is the amount that approximates the
FY 17 budget, including the capital budget and other statewide
expenditures like retirement; not only the agency operations,
but also all unrestricted general fund spending.
2:56:01 PM
REPRESENTATIVE ORTIZ requested confirmation that if the
legislature accepted all of the governor's plan, the budget
would be roughly balanced.
MR. BURNETT replied that is correct and stated that if any part
of the package is altered, it must be offset by a reciprocal
action.
MR. BURNETT stated that the last two slides are a sectional
analysis of HB 249, and he indicated he could discuss the
specifics of HB 249 at the committee's request.
CO-CHAIR FOSTER stated that it appears as though the major
components of the sectional analysis were discussed previously
in the meeting.
2:56:55 PM
REPRESENTATIVE NAGEAK stated his opinion that [the sectional
analysis] would be good information to have when it comes time
to discuss the bill on the floor.
MR. BURNETT stated that he would be willing to present the
sectional analysis and that it would not take long. He stated
that Section 1 would add a $25 or 1 percent tax penalty for
failure to file electronically unless the taxpayer received an
exemption. Section 2 would require the electronic submission of
tax returns. He stated that this is a common element of all the
smaller tax proposals. He said HB 249 would change the general
tax statutes and apply to all tax types administered by DOR.
2:57:44 PM
REPRESENTATIVE CLAMAN asked whether the owners of the gas
stations would be responsible for electronic filing and paying
the tax.
MR. BURNETT stated that the tax is payed farther up the supply
chain, at the distributor level. He stated that last year there
were 243 motor fuel tax payers.
2:58:23 PM
REPRESENTATIVE CLAMAN asked for clarification that the only
instance where the average consumer would need to pay attention
to the electronic filing requirement is in relation to the
proposed income tax.
MR. BURNETT stated that there are no taxes currently paid
directly by consumers; however, there is a car tax and a tire
tax that are added at the point of sale. Other taxes are paid
at the distributor level or are direct business taxes.
2:59:25 PM
CO-CHAIR HUGHES asked who, under HB 249, would qualify for an
exemption from electronic filing.
MR. BURNETT replied that the exemptions would be for cases where
the distributor may operate in rural Alaska and may not have the
ability to file electronically. He said most businesses that
pay this tax would not be exempt.
3:00:02 PM
CO-CHAIR HUGHES clarified that the exemption would be from
electronic filing, not from payment of the tax.
REPRESENTATIVE NAGEAK asked if the tax would specifically apply
to business enterprises.
MR. BURNETT responded that the tax would be collected at the
distributor level and passed on to the user.
REPRESENTATIVE NAGEAK asked whether, under HB 249, it would be
the individual's responsibility to file electronically unless
they receive an exemption. He said a lot of people in rural
Alaska don't have computers and cannot file electronically, and
the $25 penalty is another disproportionate impact on rural
Alaskans.
MR. BURNETT clarified that the individual Alaskan does not [and
would not] file a tax return for this tax. It is paid at the
distributor level. He clarified, in response to Representative
Nageak that the tax payer is the distributor.
3:01:33 PM
CO-CHAIR FOSTER (indisc.), opened the meeting to public
testimony on HB 249.
3:02:07 PM
STEVE ST. CLAIR stated that he does not have any direct
affiliation with any groups or organizations and is testifying
on behalf of himself as a concerned Alaskan. He stated that he
would like to discuss the proposed motor fuel tax, aviation fuel
tax, and marine fuel tax. He read a definition of the word tax:
"a compulsory contribution to a state revenue, rendered by the
government on worker's income, business profits, et cetera." He
stated that the second definition is "a strain or heavy burden."
He said as he was listening to the committee meeting he heard
Representative Nageak discuss increased prices of goods and
services. He stated that in Alaska the cost of living is
already higher than most other places and there are secondary
and tertiary effects when transportation is taken into account.
He said increased costs may create a situation where people who
are on a fixed income cannot afford to live in Alaska. He
stated his belief that before any taxation occurs, government
needs to be "right-sized." He indicated that government has
grown disproportionately and out of control.
MR. ST. CLAIR stated that based on a previous conversation with
Co-Chair Hughes, he understands that $4.5 billion is the target
budget for FY 17. He said this [target budget] is supported by
ISER recommendations, Mr. Goldsmith, Brad Keithly, and an oil
and gas consultant. He stated that before there is discussion
of taxes or revenue sources, [the state] needs to make sure that
it can afford the budget. He said the legislators were elected
to represent constituents in Juneau. He stated that in line
with the second definition of taxes, [the legislature] would be
putting a strain or heavy burden on constituents by approving or
recommending this tax. He stated that his district is
represented by Representative Cathy Tilton and Senator Bill
Stoltze. He said he speaks with his representatives, is
actively engaged with them, and they know how he feels about
this topic and several others. He said Alaska is a vast state
without much infrastructure; many of the villages can only be
accessed by flight or watercraft. He opined that increasing
fuel costs would increase ticket prices, which would will place
an undue burden or strain on constituents. He stated that
synonyms of the word tax include: strain, stretch, burden,
load, encumber, and "push too far." He thanked the committee
for its time and service.
3:06:21 PM
CO-CHAIR FOSTER (indisc.) or Kimberly in Co-Chair Hughes' office
and they can direct people on how to testify. He drew attention
to two emails included in the committee packet. The first email
was from Tim Ivanitskiy, a 15-year Wasilla resident, who wrote
in opposition to the proposed fuel tax increase and to relay
that his parents and brother also oppose it. The second email
was from Katie Sinclair, a Houston/Big Lake resident and
Anchorage taxi driver, who said she opposes the bill due to her
commute, and the increase in the overhead costs associated with
driving a taxi.
[HB 249 was held over.]
3:07:35 PM
ADJOURNMENT
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at 3:08
p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB249 ver A.pdf |
HTRA 1/28/2016 2:00:00 PM |
HB 249 |
| HB249 Fiscal Note-0912-DOR-TAX-01-13-16.pdf |
HTRA 1/28/2016 2:00:00 PM |
HB 249 |
| HB249 Sectional Analysis.pdf |
HTRA 1/28/2016 2:00:00 PM |
HB 249 |
| HB249 Sponsor Statement - Governor's Transmittal Letter.pdf |
HTRA 1/28/2016 2:00:00 PM |
HB 249 |
| Motor Fruel Tax FAQ.docx |
HTRA 1/28/2016 2:00:00 PM |
|
| Tax presentation MOTOR FUEL 1-22-16 with comparison slide.pdf |
HTRA 1/28/2016 2:00:00 PM |