Legislature(2003 - 2004)

05/06/2003 07:10 AM W&M

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS                                                                          
                          May 6, 2003                                                                                           
                           7:10 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mike Hawker, Co-Chair                                                                                            
Representative Jim Whitaker, Co-Chair                                                                                           
Representative Cheryll Heinze                                                                                                   
Representative Vic Kohring                                                                                                      
Representative Bruce Weyhrauch                                                                                                  
Representative Peggy Wilson                                                                                                     
Representative Max Gruenberg                                                                                                    
Representative Carl Moses                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Norman Rokeberg                                                                                                  
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Dan Ogg                                                                                                          
Representative Paul Seaton                                                                                                      
Representative John Harris                                                                                                      
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 298                                                                                                              
"An Act relating  to the distribution of  appropriations from the                                                               
Alaska permanent fund under art.  IX, sec. 15(b), Constitution of                                                               
the  State  of  Alaska,  and making  conforming  amendments;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE BILL NO. 293                                                                                                              
"An Act levying and collecting a state sales and use tax; and                                                                   
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
BILL: HB 298                                                                                                                  
SHORT TITLE:DISTRIBUTIONS OF APPROPS FROM PERM FUND                                                                             
SPONSOR(S): WAYS & MEANS                                                                                                        
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
05/05/03     1318       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
05/05/03     1318       (H)        W&M, FIN                                                                                     
05/05/03     1318       (H)        REFERRED TO WAYS & MEANS                                                                     
05/06/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
                                   519                                                                                          
                                                                                                                                
BILL: HB 293                                                                                                                  
SHORT TITLE:STATE SALES AND USE TAX                                                                                             
SPONSOR(S): WAYS & MEANS                                                                                                        
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
04/30/03     1202       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
04/30/03     1202       (H)        W&M, FIN                                                                                     
04/30/03     1202       (H)        REFERRED TO WAYS & MEANS                                                                     
05/01/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
                                   519                                                                                          
05/01/03                (H)        Heard & Held --                                                                              
                                   Teleconference --                                                                            
                                   MINUTE(W&M)                                                                                  
05/06/03                (H)        W&M AT 7:00 AM HOUSE FINANCE                                                                 
                                   519                                                                                          
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ROD SWOPE, Manager                                                                                                              
City and Borough of Juneau                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Expressed concerns with HB 293.                                                                            
                                                                                                                                
DON ANDERSON                                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  His testimony in support of a state sales                                                                  
tax was read by his wife, Dana Anderson, during the hearing on                                                                  
HB 293.                                                                                                                         
                                                                                                                                
LINDA FREED, Manager                                                                                                            
City of Kodiak                                                                                                                  
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT:  Expressed concerns with HB 293.                                                                            
                                                                                                                                
ROY ECKERT, Manager                                                                                                             
Ketchikan Gateway Borough                                                                                                       
Ketchikan, Alaska                                                                                                               
POSITION  STATEMENT:   During the  hearing on  HB 293,  opposed a                                                               
statewide sales tax.                                                                                                            
                                                                                                                                
RAY McCARTHY                                                                                                                    
Wasilla, Alaska                                                                                                                 
POSITION  STATEMENT:   During the  hearing on  HB 293,  testified                                                               
that the  state has no  right to supercede the  local communities                                                               
that already have a sales tax in place.                                                                                         
                                                                                                                                
TOM BOEDEKER, Manager                                                                                                           
City of Soldotna                                                                                                                
Soldotna, Alaska                                                                                                                
POSITION STATEMENT:   Expressed concern with the  structure of HB
293 as well as a number of logistical and policy questions                                                                      
                                                                                                                                
ANDY HARRINGTON                                                                                                                 
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified that  he would reluctantly support                                                               
the statewide sales tax because he  views it as the lesser of two                                                               
evils.                                                                                                                          
                                                                                                                                
GEORGE BRIGGS, Director                                                                                                         
Dillingham Chamber of Commerce                                                                                                  
Dillingham, Alaska                                                                                                              
POSITION  STATEMENT:   During the  hearing on  HB 293,  announced                                                               
that  the  Dillingham  Chamber  of  Commerce  doesn't  support  a                                                               
[state] sales tax.                                                                                                              
                                                                                                                                
MICHAEL CATSI, Member                                                                                                           
Skagway City Council                                                                                                            
Skagway, Alaska                                                                                                                 
POSITION  STATEMENT:   During the  hearing on  HB 293,  testified                                                               
that the City  of Skagway shares the same concerns  about a state                                                               
sales tax as other cities and boroughs.                                                                                         
                                                                                                                                
JOE GRIFFITH, President                                                                                                         
Commonwealth North                                                                                                              
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   During the  hearing on  HB 293,  testified                                                               
that  a [state]  sales tax  is one  part of  a long-range  fiscal                                                               
plan.                                                                                                                           
                                                                                                                                
PAT HOLMES                                                                                                                      
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT:  During the hearing on HB 293, testified                                                                    
that he is opposed to the sales tax proposal.                                                                                   
                                                                                                                                
BOB WEINSTEIN, Mayor                                                                                                            
City of Ketchikan                                                                                                               
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 293.                                                                         
                                                                                                                                
MARCI SCHMIDT                                                                                                                   
(No address provided)                                                                                                           
POSITION STATEMENT:  Expressed concerns with HB 293.                                                                            
                                                                                                                                
LARRY SEMMONS, Finance Director                                                                                                 
City of Kenai                                                                                                                   
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  During the hearing on HB 293, expressed                                                                    
concerns with regard to the creation of differential tax rates.                                                                 
                                                                                                                                
JON BOLLING, Administrator                                                                                                      
City of Craig                                                                                                                   
Craig, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in opposition to HB 293.                                                                         
                                                                                                                                
DR. BOB JOHNSON                                                                                                                 
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in opposition to HB 293.                                                                         
                                                                                                                                
ROGER JENKINS                                                                                                                   
Nikolai, Alaska                                                                                                                 
POSITION STATEMENT:  During the hearing on HB 293, suggested the                                                                
review of a wholesale tax.                                                                                                      
                                                                                                                                
JACK SHAY, Member                                                                                                               
Borough Assembly                                                                                                                
Ketchikan Gateway Borough                                                                                                       
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  During the hearing on HB 293, testified in                                                                 
opposition to a [state] sales tax.                                                                                              
                                                                                                                                
JED WHITTAKER                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During the hearing on HB 293, testified in                                                                 
opposition to a [state] sales tax.                                                                                              
                                                                                                                                
MIKE MILLIGAN, former assemblyman                                                                                               
Kodiak Island Borough                                                                                                           
Kodiak, Alaska                                                                                                                  
POSITION  STATEMENT:   During the  hearing on  HB 293,  testified                                                               
that a flat income tax is the best option.                                                                                      
                                                                                                                                
DOUG WARD, President                                                                                                            
Ketchikan Chamber of Commerce                                                                                                   
Ward Cove, Alaska                                                                                                               
POSITION  STATEMENT:   During the  hearing on  HB 293,  expressed                                                               
concerns with regard  to regional issues related  to the proposed                                                               
sales tax.                                                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 03-22, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
CO-CHAIR JIM WHITAKER called the  House Special Committee on Ways                                                             
and Means meeting to order  at 7:10 a.m.  Representatives Hawker,                                                               
Whitaker,  Heinze,  Kohring,  Weyhrauch, Wilson,  Gruenberg,  and                                                               
Moses  were  present  at  the call  to  order.    Representatives                                                               
Seaton, Ogg, and Harris were also present.                                                                                      
                                                                                                                                
HB 298-DISTRIBUTIONS OF APPROPS FROM PERM FUND                                                                                
                                                                                                                                
CO-CHAIR WHITAKER  announced that  before the committee  is HOUSE                                                               
BILL  NO.   298,  "An  Act   relating  to  the   distribution  of                                                               
appropriations  from the  Alaska  permanent fund  under art.  IX,                                                               
sec.  15(b), Constitution  of  the State  of  Alaska, and  making                                                               
conforming amendments; and providing for an effective date."                                                                    
                                                                                                                                
CO-CHAIR  WHITAKER   informed  the  committee  that   HB  298  is                                                               
statutory language relative to HJR  26, which is a constitutional                                                               
amendment that  will institute a  percent of market  value (POMV)                                                               
methodology for  the permanent fund.   This resolution  would, if                                                               
passed by the  legislature, be placed before the voters.   If the                                                               
resolution is approved  by the voters, HB 298  will prescribe the                                                               
distribution allocation of funds available.                                                                                     
                                                                                                                                
CO-CHAIR HAWKER  moved to adopt  HB 298, Version  23-LS1075\A, as                                                               
the  working document.   There  being  no objection,  HB 298  was                                                               
before the committee.                                                                                                           
                                                                                                                                
CO-CHAIR WHITAKER  announced that  HB 298 would  be heard  in the                                                               
relatively near future.                                                                                                         
                                                                                                                                
[HB 298 was held over.]                                                                                                         
                                                                                                                                
HB 293-STATE SALES AND USE TAX                                                                                                
                                                                                                                                
CO-CHAIR  WHITAKER  announced that  the  next  order of  business                                                               
would be  HOUSE BILL NO.  293, "An  Act levying and  collecting a                                                               
state sales and use tax; and providing for an effective date."                                                                  
                                                                                                                                
Number 0447                                                                                                                     
                                                                                                                                
ROD SWOPE, Manger,  City and Borough of  Juneau, highlighted that                                                               
the  citizens of  Juneau have  elected to  fund the  city's basic                                                               
services  through  property  taxes  as   well  as  a  sales  tax.                                                               
Currently, about $29  million is collected in  property taxes and                                                               
about an  equivalent amount in sales  tax.  The City  and Borough                                                               
of Juneau (CBJ) has  a 5 percent sales tax of  which 1 percent is                                                               
permanent,  3 percent  is temporary  and approved  by the  voters                                                               
every  five  years,  and  1   percent  is  voter-approved  bonded                                                               
indebtedness.   The 3  percent funds  such things  as maintenance                                                               
and  improvements  in  the  areas of  roads,  water,  and  sewer.                                                               
Furthermore,  the 3  percent funds  youth activities.   He  noted                                                               
that some  of the 3 percent  goes to the budget  reserve and some                                                               
of it  supports miscellaneous government services.   He explained                                                               
that the  bonded indebtedness goes  toward a major  project, such                                                               
as a school  or significant harbor improvement.  At  the time the                                                               
bond is  paid off and  the project  is completed, that  1 percent                                                               
tax disappears.   Mr. Swope noted that in the  past the voters in                                                               
Juneau have  been willing  to tax themselves  to provide  for the                                                               
basic services.   However,  in recent years  the votes  for these                                                               
taxes have been  closer and therein lies part of  the concern, he                                                               
said.  Mr.  Swope predicted that it's going to  be more difficult                                                               
for voters  to approve a  3 percent  temporary tax when  there is                                                               
already  an additional  3  percent mandatory  tax  by the  state.                                                               
With regard  to the  suggestion that if  the 3  percent temporary                                                               
tax  isn't approved  by  the  voters the  property  tax could  be                                                               
increased,  Mr. Swope  pointed  out that  CBJ has  a  cap on  the                                                               
property  tax.    The  CBJ  is close  to  the  cap  and  anything                                                               
exceeding the  cap has to be  approved by the voters.   Mr. Swope                                                               
said he  believes it's fair to  assume that if the  voters aren't                                                               
willing to approve a sales  tax increase, then they aren't likely                                                               
to  approve a  property  tax  increase.   "So,  therein lies  the                                                               
dilemma,"  he  remarked.    Furthermore,  if  the  voters  didn't                                                               
approve the 3  percent temporary tax, it would  be disastrous and                                                               
CBJ couldn't function as a city and borough.                                                                                    
                                                                                                                                
MR. SWOPE  turned to exemptions  and noted  that CBJ has  a large                                                               
number of  exemptions.  From  experience, Mr. Swope  related that                                                               
those exemptions were  hard-fought and very contentious.   In his                                                               
view,  exemptions  are and  should  be  a  local decision.    For                                                               
example, health  care services provided are  [tax] exempt because                                                               
the  community believes  health  care services  aren't a  luxury.                                                               
Similarly, CBJ  grants a  number of exemptions  to seniors.   Mr.                                                               
Swope said  that he  didn't know if  there is a  way in  which to                                                               
construct HB 293 to address  the case-by-case situations for each                                                               
community.  Furthermore, he related  his belief that HB 293 would                                                               
have a severe impact on business.   He said he wasn't sure of the                                                               
critical point at which the tax  reaches the level at which there                                                               
is a disincentive  to purchase goods at that  location.  However,                                                               
he guessed that 8 percent would be close to that point.                                                                         
                                                                                                                                
Number 1221                                                                                                                     
                                                                                                                                
DON ANDERSON had  his testimony read by his  wife, Dana Anderson.                                                               
She read his testimony as follows:                                                                                              
                                                                                                                                
     This is a statement in support  of a state sales tax in                                                                    
     preference  to a  state income  tax.   The headline  in                                                                    
     Monday's Anchorage Daily  News (ADN) proclaimed, "Sales                                                                  
     tax  would  fall hardest  on  the  poor, experts  say."                                                                    
     This  is false,  but  to  see why  we  need to  examine                                                                    
     "expert" analyst with  their simple-minded calculations                                                                    
     go wrong.   First, they confuse the incidence  of a tax                                                                    
     with its impact.  For  example, in the ADN article they                                                                    
     claim  the  higher percentage  of  income  paid by  the                                                                    
     poorer of the  poor represents the impact  of this tax.                                                                    
     It does  not.   This is only  the initial  incidence of                                                                    
     the tax and  does not begin to trace its  impact on all                                                                    
     the players  in our highly  complex economy.   In fact,                                                                    
     the poor  pay taxes on  123 percent of their  income in                                                                    
     the ADN  example.  Any  change in  the form or  rate of                                                                    
     taxation sets  off a complex  series of  adjustments in                                                                    
     the  economy  that are  too  elaborate  to model.    In                                                                    
     short,  unless  we  know how  each  person's  situation                                                                    
     changes with  respect to jobs,  work time,  income, and                                                                    
     retirement as well as taxation,  we cannot claim that a                                                                    
     sales tax  impacts the  poor more  than an  income tax.                                                                    
     Only  long-term  empirical   studies  can  provide  any                                                                    
     guidance.   In fact,  empirical evidence  suggests just                                                                    
     the opposite.                                                                                                              
                                                                                                                                
     Second, income tax proponents ignore  the effect on the                                                                    
     economy.    Taxation  does   not  occur  in  isolation.                                                                    
     Federal and  state income and sales  taxes affect where                                                                    
     they  live, where  they set  up business,  who and  how                                                                    
     many they  employee, when they work,  when they retire,                                                                    
     and  a host  of other  economy-affecting decisions.   A                                                                    
     strong  economy can  employ a  very high  percentage of                                                                    
     available  workers.    As an  economy  weakens  of  the                                                                    
     result   of  increased   inappropriate  taxation,   the                                                                    
     marginal workers are often laid  off first.  Losing 100                                                                    
     percent of your income is a  pretty high rate and it is                                                                    
     visited not  as the incidence  of taxation for  none is                                                                    
     paid by the  victim.  Rather, it is the  ugly impact of                                                                    
     perverse    incentives    fostered   [by]    high    or                                                                    
     inappropriate  taxation.   A grim  example of  ignoring                                                                    
     the  effects of  taxation is  the federal  government's                                                                    
     continued use  of "static  scoring" to  predict revenue                                                                    
     changes when they  change the tax rate.   They continue                                                                    
     to use  this model  in spite  of the  fact that  it has                                                                    
     been  wrong every  time it  was applied  to tax  rates.                                                                    
     For example,  it is predicted  a revenue loss  when the                                                                    
     capital gains rate is lower.   They are now wrong eight                                                                    
     for  eight   since  1913,  and   still  failing.     By                                                                    
     comparison,   the   Alaska   Legislature   looks   like                                                                    
     descendants of  Einstein.  A little  thought might show                                                                    
     income tax  proponents that they're  incentive schedule                                                                    
     is  all  wrong.     They  are  discouraging  productive                                                                    
     behavior.   Long  experience  has  shown that  removing                                                                    
     incentives for productive behavior  make us all poorer,                                                                    
     rich and  poor alike.   In  their eagerness  to flatten                                                                    
     apparent income, they end up  ... driving a steamroller                                                                    
     over the poor.                                                                                                             
                                                                                                                                
     Now let's examine the  empirical results of comparisons                                                                    
     between the  growth in  sales tax  base and  income tax                                                                    
     base.  There is a  wealth of evidence from other states                                                                    
     to demonstrate that growth is  suppressed by any income                                                                    
     tax.   Evidence  also demonstrates  that an  income tax                                                                    
     reduces  per capita  income.   Income ...  adjusted per                                                                    
     capita  has increased  89 percent,  since 1970,  across                                                                    
     the U.S.   However, the eight states  without an income                                                                    
     tax,  Alaska  excluded,   has  increases  averaging  96                                                                    
     percent  compared  to  81  in  the  eight  highest  tax                                                                    
     states.   Over a longer  period, since 1948,  income in                                                                    
     zero  income  tax  states grew  faster  than  high  tax                                                                    
     states by 29 percent.   High-income states, as a group,                                                                    
     have a (indisc.) per capita  wage decline to 91 percent                                                                    
     of  the national  average.   Meanwhile, non  income tax                                                                    
     states  have  increased  income  from  well  below  the                                                                    
     national   average.      Nine  states   that   recently                                                                    
     implemented  an income  tax showed  slower growth  than                                                                    
     other states.   A  (indisc.) comparison of  states that                                                                    
     are demographically similar shows  that in each case an                                                                    
     income state has less personal  income growth than a no                                                                    
     income  tax state:    Tennessee  beats Kentucky;  Texas                                                                    
     beats   Oklahoma;   Florida   beats   California;   New                                                                    
     Hampshire beats  Vermont; and South Dakota  beats North                                                                    
     Dakota.      Forget   the  usual   catch   phrases   of                                                                    
     "regressive"  or  "progressive."     These  are  merely                                                                    
     advertising   slogans   dreamed   up  by   income   tax                                                                    
     proponents  to  demonize  other taxes.    Look  at  the                                                                    
     underlying  reality, they  have  defined regressive  to                                                                    
     mean  taxing people  according to  what they  consume -                                                                    
     what  they  take  out  of the  economy  for  their  own                                                                    
     benefit.  Progressive means  taxing people according to                                                                    
     the value of what they  produce, what they do for other                                                                    
     people.   I'll take regressive  tax any day; I  want to                                                                    
     encourage  people to  work,  save,  invest, and  create                                                                    
     wealth not  punish them  for their  socially beneficial                                                                    
     activity.   Proponents of an  income tax  complain that                                                                    
     the  rich  won't  pay  enough   under  the  sales  tax.                                                                    
     (Indisc.) the sales  tax system to be  built to assuage                                                                    
     someone's feelings  of envy.   I  would prefer  a solid                                                                    
     plan  to obtain  revenue with  the least  expense, time                                                                    
     waste, and  economic damage.   Someone who  will accept                                                                    
     an  inferior tax  because it  punishes "the  rich" must                                                                    
     also  accept my  contempt.   Remember, some  people are                                                                    
     looking at the  incidence of an income  tax rather than                                                                    
     its  impact.    If  modeled on  the  federal  law,  the                                                                    
     incidence of the  income tax is primarily  on the upper                                                                    
     half of  the income  earners -  with this  group paying                                                                    
     about 95  percent of the  tax.  However, the  impact of                                                                    
     this tax is  felt most strongly at  lower incomes where                                                                    
     it  leads  to  higher  unemployment.   This  and  other                                                                    
     attempts at shifting the  wealth from more economically                                                                    
     capable  to   less  economically  capable   hands  fail                                                                    
     because  the resulting  damage for  both groups.   Jobs                                                                    
     disappear when  "the wealthy" are unable  to invest and                                                                    
     they often  take their talents  and depart to  more tax                                                                    
     hospitable climes.  I've never  been offered a job by a                                                                    
     "poor" person.                                                                                                             
                                                                                                                                
     Alaska legislators have  done a fine job  over the last                                                                    
     decade  in  resisting  the usual  pressures  to  expand                                                                    
     government to  destructive levels.  Their  job would be                                                                    
     more difficult with  an income tax.   The experience of                                                                    
     other states  shows that the  eight highest  income tax                                                                    
     states spent  40 percent more  per capita than  the non                                                                    
     income tax  states.  An  Ohio University  economist has                                                                    
     calculated   that  personal   [income]  increases   3.6                                                                    
     percent  for every  1 percent  reduction  in state  tax                                                                    
     burden.   I  suspect the  converse  is also  true.   An                                                                    
     economical  government  is  the   best  hope  for  most                                                                    
     citizens as  taxes damage the economy,  in particularly                                                                    
     the least  capable.  The empirical  evidence from other                                                                    
     states shows  that this damage is  accentuated by using                                                                    
     an income tax rather than a retail sales tax.                                                                              
                                                                                                                                
Number 2149                                                                                                                     
                                                                                                                                
LINDA FREED,  Manager, City of  Kodiak, related that the  City of                                                               
Kodiak is very  concerned with regard to the  implementation of a                                                               
statewide sales tax.  Ms. Freed  said that she wanted to echo all                                                               
the comments of  Mr. Swope because most of his  examples are also                                                               
applicable  to   the  City  of   Kodiak.    She   explained  that                                                               
municipalities  around  the state  are  built  on sales  tax  and                                                               
property  tax.   Depending upon  the  year, the  City of  Kodiak,                                                               
which has a 6 percent sales  tax, brings in between 70-80 percent                                                               
of  its general  fund revenue  by  the sales  tax.   The City  of                                                               
Kodiak's  property tax  is  quite  small in  order  to allow  the                                                               
Kodiak Island  Borough to bring  a larger portion of  its revenue                                                               
from property tax  and to pay for the school  education system in                                                               
the region.   With the reduced state  funding for municipalities,                                                               
Kodiak can't afford to reduce  the income and revenue it receives                                                               
from sales tax.   She informed the committee that  from the sales                                                               
tax the  City of Kodiak  funds $1  million for ports  and harbors                                                               
every  year;  $900,000 for  capital  improvements  to roads,  and                                                               
$100,000 for capital activities with  parks and recreations.  The                                                               
balance  of  the  sales  tax  funding  pays  for  all  the  other                                                               
municipal  functions, specifically  police, fire,  and ambulance.                                                               
In fact, the [city sales  tax] subsidizes the community jail that                                                               
[the city] contracted to operate on behalf of the state.                                                                        
                                                                                                                                
MS.  FREED  related  the  belief that  the  implementation  of  a                                                               
statewide sales tax will reduce revenue  to the City of Kodiak in                                                               
two  ways.    One,  people  will shop  elsewhere.    The  current                                                               
legislation doesn't  include a  cap on the  amount of  tax people                                                               
would have  to pay, which  is a feature  of the City  of Kodiak's                                                               
sales tax.  The aforementioned  was done purposefully in order to                                                               
encourage shopping in the community.   Second, the city will lose                                                               
significant  revenue through  the implementation  and enforcement                                                               
of the  sales tax on  the state level.   As Mr.  Swope discussed,                                                               
Kodiak  has  exemptions  based on  specific  community  need  and                                                               
desire.  Furthermore, there is a $500  cap on the sales tax.  Ms.                                                               
Freed informed the committee that  the City of Kodiak anticipates                                                               
that it  could lose at least  20 percent of the  city's sales tax                                                               
with  state administration  attached.   She  emphasized that  the                                                               
City of  Kodiak very  aggressively enforces the  sales tax.   She                                                               
expressed concern  with the  administration of  a sales  tax from                                                               
Anchorage  or Juneau  because [the  city officials]  believe that                                                               
many merchants won't pay the sales tax.                                                                                         
                                                                                                                                
MS. FREED  pointed out that  the City of  Kodiak has had  a sales                                                               
tax system  in place for over  30 years.  Ms.  Freed related that                                                               
if  the legislature  feels the  absolute need  to impose  a state                                                               
sales  tax,  then  municipalities   with  functioning  sales  tax                                                               
systems in place should be  allowed to administer and enforce the                                                               
sales tax in their community on behalf of the state.                                                                            
                                                                                                                                
Number 2534                                                                                                                     
                                                                                                                                
ROY ECKERT,  Manager, Ketchikan  Gateway Borough,  announced that                                                               
the Ketchikan Gateway Borough is  opposed to the state sales tax,                                                               
particularly  the  administration  and collection  of  the  state                                                               
sales tax by  a state agency.  He informed  the committee that he                                                               
has worked  in municipal  government for 26  years.   He recalled                                                               
that when he  was the city manager in Orange  Beach, Alabama, the                                                               
city lobbied to get out from  under the state collection of sales                                                               
tax.  The  first year the city of Orange  Beach collected its own                                                               
sales and  use tax, the revenue  increased by 70 percent.   Every                                                               
city and county  in the State of Alabama  that started collecting                                                               
their  own sales  and  use taxes  saw a  minimum  increase of  30                                                               
percent.   Therefore, he  said he  believes the  earlier estimate                                                               
that  a city  would lose  at least  20 percent  of the  taxes and                                                               
revenues under state collection to be a conservative estimate.                                                                  
                                                                                                                                
MR. ECKERT expressed concern with  the move toward the nationwide                                                               
streamlined sales tax  project.  Twenty states are  trying not to                                                               
opt in.  He read from a position paper as follows:                                                                              
                                                                                                                                
     State level  tax administration of all  state and local                                                                    
     sales  and use  taxes, businesses  will no  longer file                                                                    
     tax returns with each local  government within which it                                                                    
     conducts business in a state.   Each state will provide                                                                    
     a  central point  of administration  for all  state and                                                                    
     local sales  and use taxes  in the distribution  of the                                                                    
     local taxes to the local  governments.  A state and its                                                                    
     local governments will use common tax bases.                                                                               
                                                                                                                                
Therein lies  a problem because  he questioned who will  know who                                                               
is paying taxes as it will be  an honor system for which there is                                                               
no  way to  enforce  it.   This  would especially  be  true in  a                                                               
tourist area.  Other states have  run into the problem that there                                                               
couldn't   be  enough   people  to   enforce  and   collect,  and                                                               
furthermore   there  would   be  no   authority  for   the  local                                                               
governments to enforce this.   Under the uniform audit procedures                                                               
of  the  streamlined  sales  tax  it  specifies:    "Sellers  who                                                               
participate in one of the  certified streamlined sales tax system                                                               
technology  models  will  either  not be  audited  or  will  have                                                               
limited  scope   audits."    Therefore,  that   will  drastically                                                               
decrease the  sales and use  taxes locally as well  as statewide.                                                               
He further quoted:  "Depending  on the technology model used, the                                                               
states   may   conduct   joint  audits   of   large   multi-state                                                               
businesses."  However,  he questioned who in  state government is                                                               
going  to do  this [audit].   He  related that  last year  at the                                                               
State  Revenue Officers  Convention, Alabama's  state comptroller                                                               
admitted  that by  allowing the  cities and  counties to  collect                                                               
their own  sales and  use taxes and  perform their  own auditing,                                                               
the State of Alabama has  saved over $1 billion in administrative                                                               
costs as well  as [eliminated] the need for over  1,500 state tax                                                               
collector positions.   He related  another quote, "To  reduce the                                                               
financial burdens  on sellers, states will  assume responsibility                                                               
for funding some of the  technology models."  Therefore, he hoped                                                               
the  State of  Alaska  would  not get  involved  with  this.   He                                                               
pointed  out that  the  Streamlined Sales  Tax  model says,  "The                                                               
states  are also  participating in  a joint  business, government                                                               
study  of the  cost  of  collection on  sellers."   However,  Mr.                                                               
Eckert submitted that such has  already been done by other states                                                               
that  are opting  out of  the  sales tax  collection business  by                                                               
allowing local entities to collect  and audit their own sales and                                                               
use  tax.    Should  this  legislature go  ahead  with  this,  he                                                               
requested that  those cities and boroughs  already collecting and                                                               
auditing their  sales and use taxes  be allowed to continue.   He                                                               
concluded  by  urging  the  committee  not  to  enter  into  this                                                               
Streamlined Sales  Tax project, but  suggested that if  the state                                                               
does enter  into this project  the cities and boroughs  should be                                                               
allowed to collect and audit their own sales tax users.                                                                         
                                                                                                                                
Number 3136                                                                                                                     
                                                                                                                                
RAY McCARTHY related  his belief that the state  doesn't have the                                                               
right  to  supercede  the  local  communities,  approximately  97                                                               
communities, that  already have a sales  tax in place.   The City                                                               
of Wasilla  has $22 million  in outstanding bonds, of  which $4.5                                                               
million  is for  road projects,  $5 million  for water  and sewer                                                               
projects, and  $14.7 million for a  multi-purpose sports complex.                                                               
If Wasilla has to give up part of  its sales tax, there is no way                                                               
these bonds  can be paid.   Mr. McCarthy  said he could  see that                                                               
[this statewide sales tax] could bankrupt some cities.                                                                          
                                                                                                                                
Number 3334                                                                                                                     
                                                                                                                                
TOM BOEDEKER,  Manager, City of Soldotna,  informed the committee                                                               
that  he  is  also  a  former  borough  attorney  for  the  Kenai                                                               
Peninsula Borough,  and therefore  has been  extensively involved                                                               
in  sales  tax  administration  and enforcement.    Mr.  Boedeker                                                               
expressed  concern with  the structure  of HB  293 as  well as  a                                                               
number  of  logistical  and  policy  questions  that  he  doesn't                                                               
believe have been  addressed nor is there time  to address before                                                               
the end of session.   He noted that he hasn't  had time to review                                                               
this with  the city  council or provide  adequate notice  to meet                                                               
with citizens  on this  matter.  He  questioned when  local taxes                                                               
would be  remitted to the local  government for their share.   He                                                               
asked if the  aforementioned would happen in a  timely fashion in                                                               
order to avoid  cash flow problems for the  municipalities.  This                                                               
legislation proposes  to go  into effect  next January,  which is                                                               
the middle  of the fiscal year  for a number of  the communities.                                                               
Mr. Boedeker  echoed the comments  questioning whether  the state                                                               
tax collection system would be as  good as the local systems with                                                               
which people in  the community are familiar.   Furthermore, small                                                               
amounts [of  unpaid sales tax] may  not be worth pursuing  at the                                                               
state  level,  although it  would  be  significant at  the  local                                                               
level.  Mr.  Boedeker opined that the proposed  staffing for this                                                               
is totally inadequate to have a vigorous pursuit for collection.                                                                
                                                                                                                                
MR.  BOEDEKER said  there  are a  number of  other  issues.   For                                                               
instance, the legislation proposes  to tax out-of-state purchases                                                               
in order  to prevent  people from going  elsewhere.   However, no                                                               
mechanism is provided in the  legislation.  Mr. Boedeker surmised                                                               
that  there  will be  regulations  and  the complexity  of  those                                                               
regulations would make  it virtually impossible to  adopt them by                                                               
January.   Mr.  Boedeker questioned  why  sales by  the state  or                                                               
federal government  should be  exempted, especially  because that                                                               
raises  a  question  with  medical services.    In  general,  Mr.                                                               
Boedeker  related  his belief  that  there  should be  a  maximum                                                               
transaction limit.   For instance, in the City  of Soldotna there                                                               
is  a $500  sale limit.   Without  this limitation,  people would                                                               
drive to  Anchorage to purchase  a vehicle because of  the $1,500                                                               
price  difference.   Mr.  Boedeker said  that  there are  serious                                                               
questions that need  to be weighed.  He asked  if the benefits to                                                               
the  state under  this proposal  would  outweigh the  detrimental                                                               
impacts to the communities.                                                                                                     
                                                                                                                                
Number 3733                                                                                                                     
                                                                                                                                
ANDY HARRINGTON  remarked that he  would reluctantly  support the                                                               
statewide sales  tax because  he views  it as  the lesser  of two                                                               
evils.  He acknowledged that the  incidence and impact of a sales                                                               
tax  falls   on  the  backs   of  poor  Alaskans.     He  further                                                               
acknowledged that  for those 20  percent of Alaskans  who itemize                                                               
an income tax  would be preferable to a sales  tax.  Furthermore,                                                               
a  sales tax  is going  to make  it even  more difficult  for the                                                               
already [struggling] municipalities.   Mr. Harrington related his                                                               
preference for an  income tax.  He expressed the  need to balance                                                               
the  tax on  earnings and  the tax  on consumption.   Given  that                                                               
municipalities in  the state are  allowed to tax  consumption, he                                                               
said he  believes it makes sense  for the state to  tax earnings.                                                               
However,  without  doing  something  the impact  on  the  state's                                                               
credit ratings will  be disastrous.  Therefore,  he supported the                                                               
[sales]  tax, and  with regard  to the  exemptions, he  said they                                                               
should be  geared toward  relieving the  incidence and  impact to                                                               
the state's poor population.   The exemptions should be geared to                                                               
the needs-based criteria to the maximum extent possible.                                                                        
                                                                                                                                
Number 3951                                                                                                                     
                                                                                                                                
GEORGE   BRIGGS,  Director,   Dillingham  Chamber   of  Commerce,                                                               
announced  that  the  Dillingham   Chamber  of  Commerce  doesn't                                                               
support  a  [state]  sales  tax.     Over  the  past  few  years,                                                               
Dillingham has  been hit hard economically  and an implementation                                                               
of a statewide sales tax would  be a further burden.  He informed                                                               
the  committee that  Dillingham  has  a 6  percent  sales tax  in                                                               
place, and  therefore with  an additional  3 percent  people will                                                               
start shopping  elsewhere.  This  lose of revenue  would possibly                                                               
bankrupt several  businesses in  place.  If  the state  chooses a                                                               
sales  tax,   Mr.  Briggs  questioned  whether   cities  such  as                                                               
Dillingham  would  receive a  type  of  credit.   "We  feel  it's                                                               
necessary that  in some form  we have  to recoup this  money that                                                               
would be leaving," he said.   He indicated the need to exempt the                                                               
state sales  tax on items that  are crucial in the  economy, such                                                               
as  retail food  sales and  pharmaceuticals.   He noted  that the                                                               
local  sales  tax  is  imposed  on  the  retail  food  sales  and                                                               
pharmaceuticals because  those are  the items  that are  the most                                                               
purchased  in  the  economy.   Dillingham  experiences  a  strong                                                               
influx of seasonal people who  purchase food [and other items] in                                                               
large  quantities,  and therefore  an  additional  sales tax  may                                                               
force them to shop elsewhere.                                                                                                   
                                                                                                                                
MR. BRIGGS  turned to the collection  of the tax and  opined that                                                               
the local  government is a  crucial player in  the implementation                                                               
of  a statewide  sales  tax.   Having  the  state administer  and                                                               
collect the  tax leaves  open many questions  with regard  to how                                                               
fair a statewide sales tax would be.                                                                                            
                                                                                                                                
Number 4254                                                                                                                     
                                                                                                                                
MICHAEL CATSI, Member,  Skagway City Council, said  that the City                                                               
of Skagway  shares the same concerns  about a state sales  tax as                                                               
does  the   City  and  Borough  of   Juneau,  Ketchikan,  Kodiak,                                                               
Dillingham, and Soldotna.                                                                                                       
                                                                                                                                
JOE GRIFFITH, President, Commonwealth  North, began by applauding                                                               
the efforts  to develop a fiscal  plan.  Clearly, one  leg in the                                                               
fiscal plan  is a taxation  plan, and therefore sales  taxes have                                                               
to  be considered.    Mr. Griffith  said that  there  is a  track                                                               
record in this  country that clearly supports the sales  tax.  He                                                               
expressed the  hope that  a [long-range fiscal  plan] will  be in                                                               
place that  will satisfy the  state's needs  as well as  those of                                                               
the credit rating agencies.                                                                                                     
                                                                                                                                
Number 4518                                                                                                                     
                                                                                                                                
PAT  HOLMES informed  the committee  that  he is  opposed to  the                                                               
sales  tax  proposal.    He   related  his  belief  that  it  was                                                               
inappropriate to have dropped the  state income tax because if it                                                               
was maintained there probably would've  been an endowment fund by                                                               
now.  He also related his  belief that a sales tax is repressive,                                                               
punitive,  and  has  serious  impacts on  local  economies.    He                                                               
mentioned that  there are already  places in the  Aleutians where                                                               
hamburger meat is  $5 per pound and with the  implementation of a                                                               
sales  tax, those  folks simply  aren't going  to purchase  their                                                               
food.   Furthermore, there  will be a  serious impact  on seniors                                                               
and retired individuals  because the sales tax will  be placed on                                                               
health care  and medical services.   Mr. Holmes said  he strongly                                                               
disfavored a graduated [tape ends]                                                                                              
                                                                                                                                
TAPE 03-22, SIDE B                                                                                                            
                                                                                                                                
Number 4625                                                                                                                     
                                                                                                                                
BOB  WEINSTEIN,  Mayor,  City of  Ketchikan,  announced  that  on                                                               
behalf of the  City of Ketchikan he is speaking  in opposition to                                                               
HB 293.   He  echoed the  concerns expressed by  Mr. Swope.   Mr.                                                               
Weinstein recognized that  the state faces a  fiscal problem, but                                                               
he  pointed out  that  it should  be addressed  by  a variety  of                                                               
tools.   However,  some communities  like  Ketchikan have  fiscal                                                               
problems and have  less tools available to address them.   In the                                                               
last few  years, this issue  has become exacerbated as  the state                                                               
reduces  its   support  to   municipalities.     Therefore,  it's                                                               
important for  the communities to  protect the few tools  they do                                                               
have to address  the revenue situation.  In  Ketchikan most sales                                                               
are  subject to  a  5.5 percent  tax, which  breaks  down to  3.5                                                               
percent city  and 2 percent  borough.  City residents  have voted                                                               
to   pay  for   public   safety,  public   works,  and   building                                                               
improvements for  the city-owned hospital.   The city  has chosen                                                               
to  have a  number of  exemptions for  seniors, health  care, and                                                               
those  portions of  sales  in  excess of  $1,000.   The  proposed                                                               
legislation doesn't have  similar exemptions.  He  noted that the                                                               
City  of Ketchikan  owns and  operates the  electric, water,  and                                                               
telephone  utilities in  Ketchikan, and  the city  has chosen  to                                                               
exempt  such  utility  sales  from  the local  sales  tax.    The                                                               
proposed legislation does not, and  therefore would represent a 3                                                               
percent rate increase for Ketchikan customers.                                                                                  
                                                                                                                                
MR.  WEINSTEIN related  his understanding  that the  proposed use                                                               
tax applies  to all  property acquired outside  of the  state for                                                               
which  a  similar sales  tax  wasn't  collected.   Mr.  Weinstein                                                               
questioned who  would know  when someone  purchases say,  a shirt                                                               
from Nordstrom and  doesn't pay tax.  Mr.  Weinstein also related                                                               
his understanding  that by enacting  a moratorium on  taxation of                                                               
Internet sales, the federal government  has precluded states from                                                               
taxing such sales regardless of  the language in legislation such                                                               
as HB 293.   There can't be  a direct or indirect  sales tax such                                                               
as the  proposed use tax for  Internet sales.  With  the proposed                                                               
tax,  citizens in  Ketchikan would  face an  8.5 percent  tax and                                                               
thus he predicted there would be  a diversion of sales to outside                                                               
the city  and state.   Mr. Weinstein concluded by  expressing the                                                               
need for  an Alaskan solution to  the fiscal gap rather  than the                                                               
implementation of  a nationwide  cookie cutter sales  tax project                                                               
approach.   Mr.  Weinstein  said that  if HB  293  is passed,  he                                                               
requested that  there be  an exemption  for sales  in communities                                                               
with a population below 50,000.                                                                                                 
                                                                                                                                
Number 4247                                                                                                                     
                                                                                                                                
MARCI  SCHMIDT, a  small business  owner, informed  the committee                                                               
that the state sales tax would  probably run her out of business.                                                               
She related that her customers  would probably go to Anchorage to                                                               
shop because there  isn't a [local] sales tax.   Ms. Schmidt said                                                               
that  this [sales  tax proposal]  is not  the way  [to deal  with                                                               
Alaska's  fiscal  problems].    She  said  that  this  is  merely                                                               
taxation  without proper  representation because  this should  be                                                               
placed  before the  voters in  Alaska, which  should be  the case                                                               
with  any tax  before it's  implemented.   Ms. Schmidt  said that                                                               
"we" are still waiting for the  government to cut back on some of                                                               
its spending.                                                                                                                   
                                                                                                                                
Number 4148                                                                                                                     
                                                                                                                                
LARRY  SEMMONS,  Finance  Director,  City of  Kenai,  echoed  the                                                               
concerns expressed  by other municipalities.   The City  of Kenai                                                               
has a  3 percent  tax and the  borough has a  2 percent  tax, and                                                               
therefore adding  this proposed 3  percent state sales  tax would                                                               
bring  the tax  to 8  percent.   The  City of  Kenai already  has                                                               
extreme  revenue problems.   One  of  the problems  in the  Kenai                                                               
Peninsula  Borough  is  differential  tax rates;  that  is  areas                                                               
outside of the city are taxed at  a 2 percent rate.  Therefore, a                                                               
3 percent  addition on the  full amount  of the sale  will create                                                               
differential tax zones  throughout the state.   He predicted that                                                               
there won't be any automobile  dealerships on the Kenai Peninsula                                                               
if the tax is implemented as  it is currently written because the                                                               
incentive to drive to Anchorage would be great.                                                                                 
                                                                                                                                
MR. SEMMONS  recalled his  15 years with  the collection  side of                                                               
the enforcement  actions and related  his view that the  state is                                                               
wildly optimistic  in its administrative  costs, as  reflected in                                                               
the  fiscal notes.   Mr.  Semmons remarked  that he  is convinced                                                               
there is  a lack of understanding  of what it will  actually take                                                               
to  do a  good  job administering  the sales  tax.   Mr.  Semmons                                                               
concluded by thanking the House for doing all the hard work.                                                                    
                                                                                                                                
Number 3908                                                                                                                     
                                                                                                                                
JON  BOLLING,   Administrator,  City  of  Craig,   announced  his                                                               
opposition to HB  293.  Like many communities, the  City of Craig                                                               
has tailored specific exemptions that  he didn't believe could be                                                               
accounted  for in  state legislation.   Mr.  Bolling pointed  out                                                               
that the  state has revenue-generating  options not  available to                                                               
municipalities and  the state should  place its primary  focus on                                                               
those  powers.   He noted  that the  City of  Craig supports  the                                                               
comments  of other  communities, especially  those of  Ms. Freed.                                                               
He highlighted  that other alternatives  for the  legislature can                                                               
be found in HB  11 as well as the possibility  of amending HB 293                                                               
such that it  would exempt communities that already  have a sales                                                               
tax of at least 3 percent.                                                                                                      
                                                                                                                                
Number 3801                                                                                                                     
                                                                                                                                
DR.  BOB JOHNSON  testified in  opposition to  HB 293  because he                                                               
believes that  a sales tax  is a punitive tax,  particularly when                                                               
it's superimposed on taxes that  already exist in a community for                                                               
the  reasons that  many of  the administrators  have stated.   He                                                               
said  that what  bothers  him  the most  is  those in  borderline                                                               
income  status who  have trouble  purchasing enough  food at  the                                                               
present [tax levels].   Dr. Johnson opined that HB  293 should be                                                               
put  aside  and  a  graduated income  instituted  because  it  is                                                               
straightforward and fair.                                                                                                       
                                                                                                                                
Number 3617                                                                                                                     
                                                                                                                                
ROGER JENKINS  related his belief  that a wholesale tax  would be                                                               
easier to  collect.   He recalled  that when  he was  in Whittier                                                               
there  was a  sales  tax  and about  half  of  those in  business                                                               
automatically  paid their  sales tax  while the  other half  [did                                                               
not].   This proposal  would increase  the costs  in a  city like                                                               
Nikolai.  He noted his preference for a lottery.                                                                                
                                                                                                                                
Number 3401                                                                                                                     
                                                                                                                                
JACK SHAY,  Member, Borough Assembly, Ketchikan  Gateway Borough,                                                               
reiterated earlier  opposition to a  sales tax.  Mr.  Shay stated                                                               
that Ketchikan  is in fiscal  difficulty and this  proposal would                                                               
create an  additional burden.  At  a recent meeting of  the board                                                               
of  directors and  the  Alaska Conference  of  Mayors, there  was                                                               
discussion of  the sales  tax and  a revenue  tax similar  to the                                                               
former  employment tax.    During that  discussion,  there was  a                                                               
suggestion to  exempt the person  who pays  the use tax  from the                                                               
statewide   sales   tax.     Therefore,   it   would  stand   the                                                               
constitutional test of equal protection  under the privileges and                                                               
immunities clause of the constitution.   Furthermore, there would                                                               
be the opportunity to exempt  almost all Alaskan citizens who pay                                                               
the employment tax.   The employment tax seems to  be a source of                                                               
revenue that  would impact everyone  equally and  would eliminate                                                               
the need to review a seasonal sales tax.                                                                                        
                                                                                                                                
Number 3059                                                                                                                     
                                                                                                                                
JED WHITTAKER  pointed out that  the War  on Iraq is  costing the                                                               
U.S.  $70  billion,  which  is  approximately  the  total  budget                                                               
shortfall  of all  50  states.   He  said,  "It's  a question  of                                                               
prioritizing  our   resources  and  using   them  appropriately."                                                               
Having  said  that,  Mr.  Whittaker noted  his  opposition  to  a                                                               
[state]  sales tax,  which he  characterized as  regressive.   He                                                               
said  it is  inappropriate  for the  legislature  to meet  behind                                                               
closed doors  and bring this  up at  the last minute  with little                                                               
time for public  comment.  Mr. Whittaker urged  the committee not                                                               
to support  [HB 293] because  there are other  alternatives, such                                                               
as the economic  limit factor on the oil  companies and adjusting                                                               
the  oil  pipeline tariff  rates.    Mr. Whittaker  reminded  the                                                               
committee  that  the legislators  are  present  to represent  the                                                               
people of the state not the oil companies.                                                                                      
                                                                                                                                
Number 2845                                                                                                                     
                                                                                                                                
MIKE  MILLIGAN,   former  assemblyman,  Kodiak   Island  Borough,                                                               
remarked that  [HB 293] is  the worst idea  that has come  out of                                                               
Juneau  in the  last decade.   Mr.  Milligan commented  that this                                                               
proposal, the  permanent dividend,  the Patriot  Act, and  the No                                                               
Child Left Behind  Act all tend to be questions  of power and who                                                               
is  best at  administering that  power.     A sales  tax is  best                                                               
administrated  by local  government.   Mr.  Milligan said,  "What                                                               
this issue  for me is really  about isn't so much  that the state                                                               
needs revenues as much as  Fairbanks and Anchorage don't have the                                                               
guts to  institute a sales tax."   He highlighted that  there are                                                               
90  communities in  Alaska  that have  chosen a  sales  tax as  a                                                               
method  of generating  revenue and  those  revenues are  tailored                                                               
under Title  29 in order to  meet the local needs.   For example,                                                               
in Kodiak there is a $500  cap which allows car dealers in Kodiak                                                               
to remain viable.                                                                                                               
                                                                                                                                
MR. MILLIGAN  recalled 1974  when he worked  on the  pipeline and                                                               
lived in  Fairbanks.  He recalled  that people from all  over the                                                               
world came  to Alaska because of  the recession in the  Lower 48.                                                               
If the  Arctic National Wildlife  Refuge (ANWR) is  developed, he                                                               
predicted that  the checks would  be sent  to Juneau -  the money                                                               
isn't going  to be collected  locally.   He recalled his  time on                                                               
the borough assembly  when a former city manager  of Fairbanks in                                                               
the  1970s was  working as  a lobbyist  for the  assembly.   This                                                               
lobbyist claimed that in 1974,  when Fairbanks was at its height,                                                               
the city  had $25 million in  extra revenue.  Fairbanks  chose to                                                               
get rid of its  sales tax and Anchorage has chosen  not to have a                                                               
sales  tax.   Again, if  ANWR is  developed and  there is  a boom                                                               
economy in Alaska  while there is a recession in  the Lower 48, a                                                               
statewide sales tax  will mean that the money is  sent to Juneau.                                                               
Mr. Milligan emphasized  his belief that the best idea  is a flat                                                               
income tax.                                                                                                                     
                                                                                                                                
Number 2412                                                                                                                     
                                                                                                                                
DOUG  WARD, President,  Ketchikan  Chamber of  Commerce, said  he                                                               
would like to  highlight some of the  regional complications that                                                               
the committee might not be fully  aware.  For Ketchikan, the next                                                               
closest  shopping area  is Puget  Sound.   With the  additional 3                                                               
percent proposed under  HB 293, the 8.5 percent  total tax begins                                                               
to  approach the  cost  of  shipping goods  from  Puget Sound  to                                                               
Ketchikan,  particularly with  large  ticket items.    In 1996  a                                                               
Puget  Sound   Chamber  of  Commerce  study   found  that  Alaska                                                               
represented   a  $7   billion  export   value  to   Puget  Sound.                                                               
Therefore,  he said  he believes  an additional  3 percent  would                                                               
contribute to that shopping outside.                                                                                            
                                                                                                                                
CO-CHAIR  WHITAKER  announced  that  testimony on  HB  293  would                                                               
continue tomorrow.  Therefore, HB 293 was held over.                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special  Committee on  Ways and  Means meeting  was adjourned  at                                                               
8:23 a.m.                                                                                                                       
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects