Legislature(2003 - 2004)
03/26/2004 07:05 AM House W&M
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
March 26, 2004
7:05 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Chair
Representative Bruce Weyhrauch, Vice Chair
Representative Vic Kohring
Representative Dan Ogg
Representative Norman Rokeberg
Representative Ralph Samuels
Representative Peggy Wilson
Representative Max Gruenberg
Representative Carl Moses
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Paul Seaton
COMMITTEE CALENDAR
HOUSE BILL NO. 538
"An Act relating to taxes on cigarettes and tobacco products;
relating to tax stamps on cigarettes; relating to forfeiture of
cigarettes and of property used in the manufacture,
transportation, or sale of unstamped cigarettes; relating to
licenses and licensees under the Cigarette Tax Act; and
providing for an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 538
SHORT TITLE: TOBACCO TAX; LICENSING; PENALTIES
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
03/18/04 (H) READ THE FIRST TIME - REFERRALS
03/18/04 (H) W&M, L&C, FIN
03/24/04 (H) W&M AT 7:00 AM HOUSE FINANCE 519
03/24/04 (H) Heard & Held
03/24/04 (H) MINUTE(W&M)
03/26/04 (H) W&M AT 7:00 AM HOUSE FINANCE 519
WITNESS REGISTER
JOHANNA BALES, Excise Audit Manager
Tax Division
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Explained aspects of HB 538 and answered
questions.
MIKE ELERDING, Owner
Northern Sales
Ketchikan, Alaska
POSITION STATEMENT: Testified during the discussion of HB 538.
MICHAEL BARNHILL, Assistant Attorney General
Commercial/Fair Business Section
Civil Division
Department of Law (DOL)
Juneau, Alaska
POSITION STATEMENT: Answered legal questions pertaining to HB
538.
MEGAN TACK, Member
Teens Against Tobacco Use
Juneau, Alaska
POSITION STATEMENT: Spoke in favor of HB 538.
JENNIFER APP, Advocacy Director
American Heart Association
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 538.
DORIS ROBBINS, Member
Juneau Clean Air
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 538.
VANESSA SALINAS, Coordinator
Smoke Free Anchorage Coalition
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 538.
CHRISTIE GARBE, Chief Executive Officer
American Lung Association
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 538.
CHAD BURNETTE
Juneau, Alaska
POSITION STATEMENT: Spoke in favor of HB 538.
STEVEN PORTER, Deputy Commissioner
Office of the Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Clarified aspects of HB 538 and answered
questions.
ACTION NARRATIVE
TAPE 04-17, SIDE A
Number 0001
CHAIR MIKE HAWKER called the House Special Committee on Ways and
Means meeting to order at 7:05 a.m. Representatives Hawker,
Samuels, Kohring, Weyhrauch, Wilson, Gruenberg, and Moses were
present at the call to order. Representatives Ogg and Rokeberg
arrived as the meeting was in progress.
HB 538-TOBACCO TAX; LICENSING; PENALTIES
[Contains discussion of SB 168]
Number 0100
CHAIR HAWKER announced that the only order of business would be
HOUSE BILL NO. 538, "An Act relating to taxes on cigarettes and
tobacco products; relating to tax stamps on cigarettes; relating
to forfeiture of cigarettes and of property used in the
manufacture, transportation, or sale of unstamped cigarettes;
relating to licenses and licensees under the Cigarette Tax Act;
and providing for an effective date.
Number 0125
JOHANNA BALES, Excise Audit Manager, Tax Division, Department of
Revenue (DOR), introduced herself as the product manager for
cigarette and tobacco products tax.
CHAIR HAWKER asked Ms. Bales to explain the bonding requirements
in HB 538.
MS. BALES explained that the licensees who purchase tax stamps
from DOR and don't wish to pay at that time are allowed to make
a deferred payment. For example, if a person purchases tax
stamps in January the payment would not be due until the end of
February. In order to do this the licensee has to post a bond
worth twice the amount of purchase. Ms. Bales gave an example
of a person who wanted to purchase $5,000 worth of tax stamps in
a given month. He or she would have to post a bond for $10,000,
which would allow for a $5,000 purchase in January and a $5,000
purchase in February, and the January payment would not be due
until the end of February and, therefore, the bond would be
sufficient to cover the entire $10,000 in tax stamps received
without paying for them. If a person does not want to post a
bond, he or she can pay for the tax stamps upon purchase, she
added.
Number 0333
CHAIR HAWKER asked if bonding is a common procedure in Alaska.
MS. BALES replied that it is. Bonds are required in alcoholic
beverage, motor fuel, and fisheries excise taxes, she said.
CHAIR HAWKER redirected his question to ask if, within the
excise tobacco tax, bonding is a common procedure utilized by
commercial businesses.
MS. BALES responded that about 50 percent of businesses use
them.
CHAIR HAWKER asked Ms. Bales if she could characterize those who
do use the deferred bond procedure.
MS. BALES characterized those who do make use of the bonds as
the larger taxpayers - the smaller taxpayers just pay for the
stamps.
Number 0436
REPRESENTATIVE WILSON asked how many people buy cigarettes and
sell them.
MS. BALES answered that there are about 75 licensees, a
combination of cigarette licensees, and other tobacco products
(OTP). She noted that only the cigarette tax licensees are
required to have a bond for the tax stamp.
CHAIR HAWKER asked Mike Elerding to testify as a case in point
as to how the bonding process works, and to speak about his
concerns regarding an increase in tax and potential consequences
from it.
MIKE ELERDING, Owner, Northern Sales, related that his business
is required to post a bond for the payment of the cigarette
stamps purchased from the state. He said his bond at the
current tax rate is $700,000, and he has been working with his
insurance agent to secure a larger bond of $1,000,000 due to an
increase in sales. However, it has been a challenging process
to obtain the larger amount, and a tax rate increase would
require a bond of $2,000,000, which he predicts would be an even
greater challenge. He said his other choice is to pay cash for
the stamps, and the money is just not there. He called it an
unintended consequence of the bill.
MR. ELERDING pointed out that he has been paying a cigarette tax
for over 20 years, and his payment record with the state has
been above reproach as a valuable partner helping to collect the
excise taxes. He emphasized that this legislation does not seem
to recognizes the value of his entity's services as a partner
for collecting the stamps. He questioned who would provide this
service if distributors such as himself are out of the picture.
Number 0909
CHAIR HAWKER asked Mr. Elerding if he agrees with the logic
applied by DOR as to how a 200 percent of monthly sales bond
requirement is determined.
MR. ELERDING replied that he understands it and does not
disagree with it. He mentioned talking to his insurance agent
about putting a cap on the bond amount, but said he is not
comfortable with that idea. He said he is looking for a
creative way to solve the problem of having to come up with
another $1,000,000 bond for his company caused by the doubling
of the bond amount.
CHAIR HAWKER asked that Mr. Elerding think about offering
components of a solution to that problem later on in the
hearing.
Number 1059
REPRESENTATIVE GRUENBERG asked where in the statutes it talks
about bonding.
MS. BALES replied, AS 43.50.550.
CHAIR HAWKER indicated that copies of that citation have been
distributed [to the members of the committee].
REPRESENTATIVE GRUENBERG inquired if there is a way of solving
the aforementioned bonding issue. He noted that a few days ago
on the House floor, there was an issue of reclamation bonds for
mining, and the Department of Natural Resources (DNR) suggested
a change in the wording that allowed other forms, such as
letters of credit, for security. He asked for Ms. Bale's
opinion of that concept.
MS. BALES replied that DOR is not opposed to that concept, and
it is allowed for other types of excise tax such as the
alcoholic beverage excise tax where unencumbered properties are
allowed to be posted to secure the tax owed.
Number 1238
REPRESENTATIVE GRUENBERG asked for a citation on that concept.
MS. BALES said she believes that is in DOR's regulations, which
is 15 AAC, Chapter 60.
REPRESENTATIVE GRUENBERG asked if there is a statute that
authorizes that regulation.
MS. BALES replied she would get back to the committee with that
citation.
REPRESENTATIVE GRUENBERG asked if, conceptually, [DOR] would not
be opposed to that concept.
MS. BALES replied she does not believe [DOR] would be opposed to
it.
REPRESENTATIVE GRUENBERG asked Mr. Elerding if he has heard the
dialogue between Ms. Bales and himself.
MR. ELERDING replied that he has.
REPRESENTATIVE GRUENBERG inquired if it would be an acceptable
solution.
Number 1338
MR. ELERDING, speaking from past experience as a banker,
replied, "Partially." He related that he is familiar with
securities that could be used, such as a letter of credit, but
he opined it would be equally challenging. He explained that he
already has had to boost his line of credit to pay for
additional business expenses, and financing costs will increase
again when the new tax is applied due to carrying more valuable
inventory.
REPRESENTATIVE WILSON referred to a letter from Mr. Elerding and
asked about the state charging no excise tax for mail order or
Internet companies to ship OTP to Alaska, but charging tax to
companies in the state. She noted that it is a problem and
asked Mr. Elerding to respond.
MR. ELERDING explained that OTP are cigars and other non-
cigarette products more adult in nature. All wholesale
businesses in Alaska are required to pay 75 percent OTP tax.
For example, if a product costs $10, the excise tax on it is
$7.50 so the total cost of the product without markup or
anything else would be $17.50. If a mail order business from
another state sells OTP to a consumer in Alaska, they are not
required to pay the 75 percent excise tax, and the cost of the
same product is only $10. The consequence is that the state
does not collect a lot of OTP tax from Alaska distributors
because they cannot afford to sell those products. Mr. Elerding
said this looks like a loophole that needs to be closed. He
suggested not increasing the OTP tax to 100 percent, but rather
collecting the tax from out-of-state mail order companies.
CHAIR HAWKER asked Ms. Bales to comment.
Number 1914
MS. BALES corrected a few statements made by Mr. Elerding saying
that any out-of-state distributor who holds an Alaska license to
sell cigarettes into the state is required to pay the OTP tax.
She explained that the loophole for OTP is when an individual
buys from an out-of-state retailer on-line and the distributor
is not licensed in Alaska, then the individual is not required
to remit the OTP tax like they would if they purchased
cigarettes from an unlicensed distributor. She said the
loophole is smaller, but still a legitimate concern.
CHAIR HAWKER asked if the state has the authority to require all
out-of-state sellers to register with the state.
MS. BALES said no. She referred to a U.S. Supreme Court case
called [Quill Corporation vs. North Dakota], a sales tax case,
that states "if an out-of-state entity does not have physical
presence or nexus in your state, the state cannot be required to
have those companies collect excise or use tax for the state.
That's why, in the cigarette tax arena, we look to the
individual who imported the product to pay the tax," she said.
REPRESENTATIVE WILSON asked if there is any way this could be
dealt with.
MS. BALES answered that [the legislature] could pass a statute
that requires the individual who imports OTP into the state to
remit the tax, similar to retail distributors, on that product.
REPRESENTATIVE WILSON asked if there already is a law in place
for people who resell tobacco products.
MS. BALES replied yes, and that a new statute would have to
address paying a tax for bringing OTP into the state for
personal consumption, which is already in place for cigarettes.
REPRESENTATIVE GRUENBERG requested that Mr. Barnhill join Ms.
Bales to testify. He noted that [Quill Corporation vs. North
Dakota] and the issue of nexus are major issues dealing with
sales and excise taxes. He summarized [the Quill case] by
saying "to levy a tax on an out-of-state merchant, you have to
show that there is a physical presence of some kind in the
state." He asked Mr. Barnhill for further clarification.
Number 2430
MICHAEL BARNHILL, Assistant Attorney General, Commercial/Fair
Business Section, Civil Division, Department of Law (DOL),
explained that the Quill case was a case that involved the Quill
pen company, a mail order company selling pens and having no
physical presence in North Dakota. North Dakota attempted to
get the Quill Corporation to collect a use tax on the pens, the
company appealed it, and it went all the way to the U.S. Supreme
Court. He explained:
In a decision that has been harshly criticized by
academic commentators, the Supreme Court concluded
that North Dakota did have jurisdiction over Quill
under the due process clause, because ... Quill had
minimum contacts with the state. However, under the
commerce clause, the U. S. Supreme Court concluded
that physical presence was required. And it's that
aspect of the decision that's been very controversial
and there's been discussion amongst the states - that
case came out in 1992 - but there's been discussion
recently about finding a test case to take it back up
and challenge that decision.
MR. BARNHILL mentioned that Senator Ben Stevens' sales tax bill,
recently introduced in the Senate, has a provision called a
"Quill provision, which extends the state's jurisdiction to
collect taxes under that bill to the folks in the U. S.
Constitution." He added, "If that tax is enacted the state
could take a Quill test case back up."
Number 2613
REPRESENTATIVE GRUENBERG requested that Mr. Barnhill provide the
location of that particular clause, and asked for his opinion if
an amendment addressing that issue were to be added to [HB 538].
MR. BARNHILL replied that in the context of cigarette sales for
most out-of-state sales, including Indian reservations,
collectability is an issue. He opined it is probably not the
best context in which to do a Quill test case.
REPRESENTATIVE GRUENBERG suggested that if DOL were to take on a
test case, it should be an off-reservation distribution.
MR. BARNHILL said that type of distributor might be paying the
tax already. He mentioned that several states were in the
process of testing Quill.
REPRESENTATIVE GRUENBERG asked if there are other ways of
meeting the Quill criteria. He said there is a provision in
Alaska law that provides for a non-state resident driving in
Alaska to authorize a governmental agency to be an agent for
service of process if the person is sued. Those cases have
survived a court challenge. He inquired if a distribution
business with minimum contacts in the state could authorize DOR
to be its nexus for the purpose of collecting taxes.
MR. BARNHILL replied that is almost identical to the Quill facts
except an agent is being deemed for service of process. He
opined, "It would not get you any further." [A case] has to go
back before the U.S. Supreme Court to be tested because 1992 was
pre-Internet, the market place has changed radically, and the
law has to catch up, he concluded.
REPRESENTATIVE GRUENBERG asked if any other states have come up
with creative ways to [deal with this problem].
MR. BARNHILL said he did not know, but believed that way to do
it is to take the same fundamental question back to the U.S.
Supreme Court.
CHAIR HAWKER opened public testimony.
Number 3030
MEGAN TACK, Member, Teens Against Tobacco Use, related that her
organization lets youth know about all of the harmful effects of
tobacco and tries to prevent its use. She said that money
motivates people and if the price of cigarettes is raised it
could motivate people to stop smoking or not to start. She
explained that a pack of cigarettes costs $5, and by not smoking
for four years during high school she could afford to take a
trip around the world, to pay for her first year in college, or
to buy a small car. She said that [HB 538] will help prevent
smoking by teens.
CHAIR HAWKER asked Ms. Tack if she attends school in Juneau.
MS. TACK replied she does.
CHAIR HAWKER asked if smoking amongst her peers is fairly
common.
MS. TACK said it is. She related her experience attending the
Gold Medal Tournament dance where she saw many under-aged teens
smoking. She shared that her parents both use tobacco products
and it bothers her.
Number 3317
REPRESENTATIVE SAMUELS asked Ms. Tack how her friends get the
cigarettes and whether they get older friends to buy them.
MS. TACK replied that she doesn't have many friends that smoke,
but acquaintances have older friends that buy [cigarettes] for
them.
REPRESENTATIVE WEYHRAUCH asked if Ms. Tack is familiar with the
smoking court for youth who smoke.
MS. TACK said she is somewhat familiar with that. She mentioned
she is on the Juneau Youth Court which has recently started
taking tobacco cases.
REPRESENTATIVE WEYHRAUCH asked if it has had any effect to deter
smoking.
MS. TACK replied that she is not sure.
CHAIR HAWKER stated his support for youth courts and mentioned
the commitment by the legislature in the social services part of
the budget to put extra money in for youth courts. He thanked
Ms. Tack for her part in the Juneau Youth Court.
Number 3444
REPRESENTATIVE OGG thanked her for her testimony and then asked
her how much she thought students would pay for a pack of
cigarettes.
MS. TACK said her mom pays around $5 to $6 for a pack, which
makes her mad because the money could be going toward buying
clothes.
REPRESENTATIVE OGG wondered what students were paying for
cigarettes when their older friends were buying them.
MS. TACK replied that she did not know.
REPRESENTATIVE WILSON thanked Ms. Tack for her testimony.
Number 3608
JENNIFER APP, Advocacy Director, American Heart Association,
stated that this is a health issue because smoking is the
leading cause of cardiovascular death in Alaska, and is
responsible for one out of every five deaths. She said that
this legislation will decrease that number, generate revenue,
and save money. She noted that 67 percent of Alaskans like this
bill. She spoke about the "red-herring", the concern that this
bill would increase the tax evasion problem, mentioned by Emily
Nenon in the last hearing. Every state that has significantly
increased its tax rate, has received substantially more state
revenue than it would have otherwise received despite
consumption declines or any increase in smuggling or tax
avoidance, she pointed out.
MS. APP, referring to the discussion during the last hearing
about the problems New York has encountered with smuggling, said
she looked for a state that might be more similar to Alaska for
comparison. She explained that Hawaii in 2001 established a
stamp tax requirement like Alaska did [in 2003] and also raised
the tax. They generated $75 million last year, up from $61
million before the increase in tax. She opined that Alaska,
with the stamp tax and the proposed tax increase, as well as
with the enforcement programs, has the tools in place to
effectively increase the tax like Hawaii did.
MS. APP noted that only 4 percent of smokers buy their
cigarettes on-line or through mail order. She said that that
number is not expected to change because over 80 percent of
smokers are trying to quit, which means that their smoking
purchasing habits tend to be to buy one pack at a time. That
population is not seeking out Internet sales to buy in bulk, she
concluded. She stated her strong support for the bill.
Number 4021
REPRESENTATIVE OGG asked what the decrease of youth smoking was
in Hawaii.
MS. APP said she could get that information for the committee.
REPRESENTATIVE OGG asked what the impact of advertising has on
youth smoking.
MS. APP replied that from 1995 to 2003 there has been a 50
percent decrease in Alaska of high school student smoking.
During that time the tobacco tax increased up to $1 a pack in
1997, and at the same time, the money for the 1998 Master
Settlement Agreement started being put towards tobacco
prevention and control, a counter-marketing campaign. Because
of the overlap of those two factors, it is very hard to
determine what was responsible for the decline. For every 10
percent decrease in the price of cigarettes, there is about a 7
percent decrease in youth smoking, she related. Other states
that have not increased the tobacco tax, but have started a
prevention campaign with the money from the Master Settlement
Agreement, have also seen a decrease.
Number 4300
REPRESENTATIVE OGG, referring to the increase in tax and the
potential increase in bootlegging, inquired if the people who
are dealing in black-market cigarettes are making a profit off
of youth.
MS. APP deferred to Ms. Bales for the answer. She noted that
because of the continued decrease in youth smoking it doesn't
seem to be true that youth are taking advantage of bootlegged
cigarettes. She pointed out that in the years that the tax was
increased, 1997 to present, there has been an increase in
revenue generated by the tax, about $47 million a year, and
there has not been a dip or drop that would suggest effective
bootlegging.
REPRESENTATIVE OGG said the present tax seems to be doing the
job of decreasing smoking.
MS. APP agreed but said that there are still some pretty high
smoking statistics: 44 percent of Alaska Native youth smoke,
26-27 percent of adults smoke, which is more than most states.
She mentioned that other states are increasing the tobacco tax
to keep up with inflation so that it has an impact.
Number 4646
DORIS ROBBINS, Member, Juneau Clean Air, said she also
volunteers for the Alaska for Tobacco Free Kids.
TAPE 04-17, SIDE B
MS. ROBBINS continued to say that she supports Teens Against
Tobacco, also. Preventing kids and adults from smoking is the
most important goal of this bill. She said in 1998 the cost to
Medicaid from tobacco caused illnesses was $60 million. She
suggested that increasing the tobacco tax will help recover some
of those costs, and she called it a pre-insurance charge for
when smokers have exhausted their own funds and must go on
Medicaid. She cited an example of a friend who died about a
year ago who was in this situation.
CHAIR HAWKER requested that Ms. Robbins provide a copy of her
written testimony for the members of the committee.
MS. ROBBINS continued saying that protection from smokers in
U.S. Department of Housing and Urban Development (HUD) and
Alaska Housing needs to be considered in this bill. Secondhand
smoke is a problem for the elderly, she explained, saying that
she, herself, has had chronic illness caused by secondhand
smoke. She concluded by saying that tobacco must begin to
accept responsibility for its costs and she asked the committee
to consider all that she has said and raise the tobacco tax.
Number 3905
VANESSA SALINAS, Coordinator, Smoke Free Anchorage Coalition,
related that she works with youth groups in Anchorage who
educate their peers on the dangers of tobacco use and secondhand
smoke. She said the youth in her group are aware of advertising
tactics used to make smoking attractive, as well as the
consequences of smoking. The kids are telling her that the use
of chew is on the rise in Anchorage. She pointed out that the
more cigarettes cost, the less likely kids are to buy them and
get addicted. Raising taxes will saves lives, she concluded.
CHAIR HAWKER noted that Representatives Ogg, Rokeberg, and
Seaton were in attendance.
Number 3630
CHRISTIE GARBE, Chief Executive Officer, American Lung
Association, spoke in support of [HB 538]. She remarked that
the tobacco tax increase is one strategy along with the counter
marketing pieces, youth activism, community activism, and
enforcement all working together to create the 50 percent
reduction in youth smoking. She advocated for keeping the price
of cigarettes high, because an estimated 12,000 lives have been
saved because of the reduction in youth smoking. It costs the
state and citizens of Alaska over $6.38 per pack in healthcare
costs and lost productivity, so even at $2.00 per pack, this
activity is still being subsidized, she noted. She stated the
importance of keeping the price of cigarettes high and her
appreciation for the committee's work.
REPRESENTATIVE ROKEBERG asked Ms. Garbe to describe the history
of the use of the funds from the [1998 Master Settlement
Agreement] for tobacco prevention and control programs, and the
status of the current budget.
MS. GARBE responded that Alaska brings in about $25 million each
year from the Master Settlement Agreement and 80 percent is
being used for capital projects, and 20 percent, $4 million to
$5 million per year, could be used for tobacco prevention and
control programs. The Center for Disease Control and Prevention
recommend a minimum of $8 million a year for those programs;
however, since FY 99 only $1.4 million, a small portion of that
$20 million, has been used for that purpose. She explained that
the tobacco control community works each year to get more of the
$20 million left for tobacco prevention and control programs.
REPRESENTATIVE ROKEBERG asked about the latest budget figures
related to Medicaid and tobacco cessation programs.
MS. GARBE said it is her understanding that $1,000,000 has been
put into a budget amendment to be returned to the tobacco
prevention and control programs, but the other $500,000 still
needs to returned so that the full 20 percent is available for
use. Only in FY 03 was the full 20 percent actually available
to be used, she said.
REPRESENTATIVE ROKEBERG asked if there is a connection between
those programs and this legislation.
Number 3141
MS. GARBE replied absolutely not and emphasized, "We are only in
favor of the tax because its health benefits. We're not
interested, nor do we expect any of the revenue for these
programs." She maintained that the moral fiber of the Master
Settlement Agreement funds should be the funds that are used for
these tobacco prevention and control programs.
REPRESENTATIVE ROKEBERG said he wanted to make a point to the
committee that this has been an on-going battle for a number of
years. He said, "All of this should be weaved together in the
web of our lawmaking in terms of public policy and where we are
going. You folks should be aware that the Master Settlement
Agreement money comes from a 45 cent tax per pack to the
smoker." One of the portions of the agreement is to put money
into tobacco prevention and cessation programs, which, he
opined, has failed to be adequately done. He said he is
concerned about going forward and increasing taxes on the
smoking public, but not funding the programs that they have paid
for. He stated his concern about not having control over where
the money collected by the tax is going.
Number 3000
CHAD BURNETTE shared personal insights about growing up in a
smoking family. He surmised that if it had cost more to smoke
it is possible that members of his family might have quit or not
smoked as much. He mentioned the cost to taxpayers in terms of
money and loss of income from tobacco-related illness. He said
he isn't sure a tax could be created that is big enough to
offset those costs. He posed the question, "What's costing us
more, doing nothing about it, or perhaps, implementing a tax
that could save lives and money."
Number 2715
MR. ELERDING related that even though the tobacco tax of 1997
was successful in cutting the numbers of people who smoke, every
tax has unintended consequences. He urged the legislature to
exercise caution and use laws already on the books to deal with
underage smoking, and not "trample the rights of legitimate
Alaska business interests and of Alaska's adult smokers by
raising the tax to fix the problem because, invariably, it will
create unintended consequences."
CHAIR HAWKER thanked Mr. Elerding for pointing out the technical
aspects that would affect his business. He related that [the
committee] would be working its way through [those issues] in
the bill.
REPRESENTATIVE ROKEBERG asked Mr. Elerding if he is involved
with vending machines in his business.
MR. ELERDING replied that he has one vending machine in Kodiak.
REPRESENTATIVE ROKEBERG said it has been suggested that the
licensing fee for vending machines be increased from $25 to $50.
He asked Mr. Elerding for his opinion on the impact this would
have.
Number 2254
MR. ELERDING opined that most people who have vending machines
are operating in a bar environment where there are adult
consumers, and an increase would not be a large burden to them.
CHAIR HAWKER clarified that the amount is $50 per license, not
per machine.
REPRESENTATIVE ROKEBERG wondered what amount other municipal
governments are charging for tobacco tax.
CHAIR HAWKER closed public testimony. He noted, with some
consternation, that public testimony had been specifically
extended at the request of the [tobacco] industry who elected
not to testify today.
Number 2103
MS. BALES, in response to Representative Rokeberg's question
about municipal excise taxes, related that Anchorage, Juneau,
and Fairbanks levy such taxes. Anchorage and Juneau levy a tax
on cigarettes of 30 cents per pack, and Fairbanks charges a
straight 8 percent excise or sales tax.
REPRESENTATIVE ROKEBERG asked if the local municipalities
collect the tax similar to the way DOR collects it, and if DOR
works with them in any way.
MS. BALES replied that DOR does not collect the tax on their
behalf. She said it is her understanding that the taxpayer base
is very similar to DOR's.
REPRESENTATIVE ROKEBERG asked if any city could levy a tax for
tobacco products.
MS. BALES said she believes so.
REPRESENTATIVE SAMUELS inquired what the penalty is for giving
tobacco products to minors.
MS. BALES deferred to Mr. Barnhill.
MR. BARNHILL replied it is a criminal law question and he does
not know.
REPRESENTATIVE SAMUELS responded that he can find out.
Number 1842
REPRESENTATIVE OGG related a conversation with Steve Porter
[Deputy Commissioner, Office of the Commissioner, DOR], of a
discussion of page 2 [of the bill]. Representative Ogg
requested clarification of whether the provision applies to an
individual who imports [cigarettes] or just to a business that
does.
MR. BARNHILL explained the aspects of the bill beginning on page
4. Under the Alaska State Constitution an innocent owner is
protected from by a due process right and all statutes [in the
bill] have been drafted to protect that right, he said.
Equipment and material used in the manufacturing, sale, offering
for sale, or possession for sale, barter, or exchange of
cigarettes can be seized during criminal activity such as
selling unstamped cigarettes, he explained. Aircraft, vehicles,
or vessels used to transport, as well as money, can be seized.
The seizure process involves going to court to get a court order
and showing probable cause, he said. There is a provision for
seizing property without getting a court order, but it has to be
incident to a valid arrest or search, subject to a prior
judgment, or if there is probable cause, he noted. The courts
are always involved and notice in various forms has to be given
to owners after the seizure has taken place. Next is a court
hearing to decide what happens to the property, he said.
MR. BARNHILL referred to page 6, subsections (e) and (f), as the
provisions that protect innocent owners. Subsections (h) and
(i) [on page 7] state where the property is going to go. He
termed subsection (j), [page 7], as a unique section that goes
beyond what Alaska constitutional law requires. If the vessel
or vehicle is in a village and is the sole means of
transportation for a family residing in the village, then there
is an option for the court to give that property back. Great
lengths have been taken to protect the rights of innocent
owners, he concluded. He said this does not apply to persons
ordering cigarettes through the Internet for personal
consumption, only businesses that are in violation of Alaska
law.
MR. BARNHILL, referring to questions from Representative Ogg
about bootlegging in Alaska, said he does not know of any
studies; however, he said he does have information on smuggling
in other states and countries.
Number 1236
STEVEN PORTER, Deputy Commissioner, Office of the Commissioner,
Department of Revenue, in response to an earlier question by
Representative Ogg, clarified that the language in the bill does
not apply to individuals. He cited the language on page 5, line
4, "manufactured, sold, offered for sale, possessed for sale" as
evidence that applies only to businesses and not private
properties.
REPRESENTATIVE OGG offered two examples of where an individual
may be liable for forfeiture consequences. The first example is
if someone in a village goes to the airport in their car and
picks up a package of cigarettes they ordered through the mail.
Then, they barter cigarettes with a kid for salmon. He noted
that that person would fit under the stipulations on [page 5,
lines 3-6]. He also pointed out that on page 2, [lines 10-16],
an individual who imports cigarettes is required to pay the tax.
He said he doesn't see the difference between an individual and
a business, as far as forfeiture is concerned, as Mr. Porter
tried to point out. He voiced a concern about creating a
criminal class of people who are just addicted to cigarettes.
MR. PORTER replied that [page 2, lines 10-16] applies to the
liability for the tax itself. A person who imports is liable to
pay the tax, and that clause only applies to those responsible
for paying the tax, he explained. The forfeiture provision is
the penalty side of the tax, and only those people who are
liable to pay the tax, those who manufacture, sell, or resell
cigarettes, are subject to forfeiture, he said. In response to
Representative Ogg's first example, Mr. Porter said
Representative Ogg is probably correct [in assuming the person
would be liable for forfeiture] because that person has entered
the next stage, which is to barter or sell.
Number 0737
REPRESENTATIVE OGG restated his concern about the forfeiture
part of the bill when the price of the cigarette tax is raised
above other states and a criminal element is potentially created
in Alaska. "Why should we put ourselves at that height so that
we have to adopt these kind of penalties?" he asked. He
predicted the penalties will have an impact on villages.
MR. PORTER asked Representative Ogg if he is concerned with the
commercial businesses or just the private parties.
REPRESENTATIVE OGG replied that he is more concerned with
individual citizens because the tax will be aimed at addicted
adult smokers creating a prohibition status on cigarettes.
MR. PORTER responded that he feels page 5, [lines 3-6] are of
the most concern to Representative Ogg, and he suggested
deleting six or seven words out of that section after first
talking to Legislative Legal and Research Services about the
legal implications of doing so.
Number 0358
REPRESENTATIVE ROKEBERG asked at what point the regulatory
enforcements take place.
MS. BALES replied that last year SB 168, the cigarette Stamp Tax
Act became effective on January 1, 2004. One provision states
that an individual can bring five packs of cigarettes into the
state each month without paying tax.
REPRESENTATIVE ROKEBERG replied that five packs is half a
carton, so anyone who brings back a carton of cigarettes from
Seattle is a criminal. He said that is awful. He asked if
those persons would be subject to an "enforcement net."
MR. PORTER said there are many statutes on the books that people
violate every day and that law enforcement looks at the more
egregious elements. He compared it to child support enforcement
where the worst-case violations are pursued because there is
limited number of personnel in enforcement.
Number 0045
CHAIR HAWKER offered a personal observation about the interest
of small businesses being protected from predatory pricing from
out-of-state vendors by adding strict sidebars.
REPRESENTATIVE ROKEBERG said that this bill would put Alaskans
in violation of the law. He asked, "Where do we draw the line?"
TAPE 04-18, SIDE A
MR. PORTER replied that no one is in violation of the law by
bringing cigarettes into the state; they are in violation of the
law by avoiding paying the tax.
REPRESENTATIVE ROKEBERG asked if that individual needs to pay
tax on cigarettes bought in Washington.
MR. PORTER replied yes.
REPRESENTATIVE WILSON replied, "The law's the law. If you break
the law, you pay the penalty."
REPRESENTATIVE ROKEBERG suggested not enacting bad laws with
unintended consequences.
Number 0125
REPRESENTATIVE OGG pointed out that there already is a
forfeiture law in place in Alaska where the cigarettes are
confiscated. He said, in the new bill, other forfeiture
provisions for vehicles, boats, and bank accounts have been
added, with due process. In Washington, as a result of the tax,
there were increased seizures and penalties, $650,000 from a
penalty of $10 per pack, or $250, [upon seizure of cigarettes].
For the year 1999, there were four purchaser enforcement
operations conducted and the agents issued 17 criminal citations
seizing 100 cartons and six packs of cigarettes. He stated a
concern that the forfeiture provision is aimed at addicted
smokers.
REPRESENTATIVE WILSON replied that perhaps the amount should be
changed, but that people who are going to break this law know
exactly what the limit is.
MR. PORTER clarified again that the addicted person does not
come under the forfeiture statute unless he or she engages in
the resale of cigarettes.
Number 0435
REPRESENTATIVE SAMUELS agreed. "You're after the guy who is
going to get a van load of cigarettes at a reservation, drive
them to Alaska, fly them to a village, and make a whole boatload
of money on them." He opined that such a person's vehicle
should be confiscated, and that is the point [of the forfeiture
statute].
REPRESENTATIVE GRUENBERG voiced new concerns. He suggested
making Amendment 3.
REPRESENTATIVE OGG replied that public testimony is being taken
and the amendment part of the meeting is yet to come.
REPRESENTATIVE GRUENBERG referred to Section 13, on page 4, line
24, and said it looks like the bill adds a provision to the
forfeiture section, but that is not the case. All that the
section does is move an existing section of law, AS 43.50.620,
which currently has the exact same language, and changes the
numbering to subsection (b) of the preceding Section 610.
Section 620 becomes the new law with a change of the numbering.
He asked Mr. Barnhill if that is correct.
MR. BARNHILL replied yes.
REPRESENTATIVE GRUENBERG continued to say, even if the
forfeiture provisions were taken out of this bill, the language
would remain in current law. He asked the committee to look at
page 7, line 12-20, where it shows what happens if someone is
convicted of misconduct involving unstamped cigarettes in the
first or second degree, which is cigarette smuggling, in
addition to other penalties for conviction. He said that right
now first degree is a Class C felony, second degree is a Class A
misdemeanor, and the only difference is the amount. He asked
Mr. Barnhill if that is correct.
MR. BARNHILL replied, "Under or over 1000 cigarettes."
REPRESENTATIVE GRUENBERG said even if a person is convicted of a
misdemeanor, their aircraft, vessel, or vehicle are subject to
forfeiture. He opined it is a very large penalty for a very
small infraction. Looking at lines 17-20 he said vehicles or
vessels must be forfeited in cases that have nothing to do with
smuggling cigarettes. For example, if there is a prior felony
conviction or probation, the vehicle is forfeited, he said. He
asked why those provisions were included in the bill.
MR. BARNHILL replied that the provisions were put in at the
recommendations of the criminal division of DOL. He explained
that the person would have to be convicted of felony tax
evasion. "These are bad guys and I would just echo
Representative Samuels comments earlier - we need to have
effective enforcement tools in order to interdict cigarette
smuggling and deter crime," he said. He said [DOL] believes it
is appropriate to have [that provision in the bill]. It is
subject to the constitutional right to protect innocent owners,
and to subsection (j) for a vehicle or a vessel in a village, he
added.
Number 1108
REPRESENTATIVE GRUENBERG asked if it were true that a village
situation would be subject to forfeiture because of a past
felony conviction. He asked Mr. Barnhill if he believes it is
fair to seize a vehicle or vessel for smuggling a small amount
of cigarettes when there is a prior felony conviction at any
time.
MR. BARNHILL said he would accept Representative Gruenberg's
correction, and he thinks it is an appropriate enforcement tool
because tough enforcement provisions are needed in order to
deter crime.
REPRESENTATIVE GRUENBERG said that the bill does not go to House
Judiciary Standing Committee and there may be constitutional
problems. He asked if the forfeiture provision "increases
stress on the bill."
MR. BARNHILL replied that in 1981 the Alaska Supreme Court took
up and validated the issue of the constitutionality of
forfeiture provisions. He opined that there is "no question
that this provision is constitutional." The question of
fairness is a policy issue for the legislature, he added, but
the administration's perspective is that in order to adequately
enforce the cigarette stamp tax and bootlegging laws there needs
to be adequate tools.
Number 1342
REPRESENTATIVE WILSON said it is important to realize that when
other states increased cigarette tax, some people took advantage
of the situation in order to make money. She opined that
[felons] are more inclined to commit this sort of crime, and the
bill must have "teeth in it" in order to prevent this kind of
activity. It will keep everyone on his or her toes because the
law is not being changed, bootlegging is illegal now, and just
the tax is being raised, she opined. She said it is worth it
because lives will be saved.
MR. BARNHILL read the conclusion of the World Bank Study called
"How big is the worldwide cigarette-smuggling problem?" The
study hoped to answer the question about how much of an obstacle
smuggling is to higher cigarette taxes, he related. After
analyzing all the data, the report concluded:
Countries need not make a choice between higher
cigarette tax revenues and lower cigarette
consumption. Higher tax rates can achieve both
objectives. Cigarette tax revenues can be enhanced
still further by effective methods to reduce
corruption that will result in diminished cigarette
smuggling and increased tax collections. Lastly,
cooperative multilateral efforts to increase cigarette
tax rates on a regional basis are likely to be an
effective way to combat smuggling.
MR. BARNHILL submitted the previous data as an example of the
notion that increasing taxes deters the incidence of smoking,
and he said that with effective enforcement tools smuggling can
be combated.
CHAIR HAWKER requested that Mr. Barnhill provide the study for
distribution to committee members.
MR. PORTER remarked about the importance of the fact that the
legislature itself chooses the level of enforcement under any
piece of legislation. He said that the Public Safety fiscal
note contains "a couple hundred thousand dollars" for
enforcement. If more cases were to be pursued, a substantial
amount would have to be added to the fiscal note, he added.
Number 1740
CHAIR HAWKER moved to adopt Amendment 1, labeled 23-GH2116\A.1,
Kurtz, 3/23/04, which read:
Page 1, following line 5:
Insert a new bill sections to read:
"* Section 1. AS 43.50.030(a) is amended to read:
(a) For each license issued to a manufacturer,
and for each renewal, the fee is $50 [$5].
* Sec. 2. AS 43.50.030(c) is amended to read:
(c) For each license issued to a vending machine
operator, and for each renewal, the fee is $50 [$25]."
Page 1, line 6:
Delete "Section 1"
Insert "Sec. 3"
Renumber the following bill sections accordingly.
Number 1820
REPRESENTATIVE ROKEBERG objected for discussion purposes.
CHAIR HAWKER explained that the amendment addresses the
disparity between licensing fees in different categories of
commercial tobacco dealers. The bill raised one category from
$25 to $50 and left manufacturers at $5 and vending operators at
$25. This amendment makes the commercial tobacco activities in
Alaska subject to a consistent $50-a-year annual license, which
is consistent with OTP sellers, he said.
REPRESENTATIVE GRUENBERG noted that currently under the bill,
subsection (d) is increased. He asked if under proposed
Amendment 1, subsections (b) and (c) are increased and (d) is
already increased.
CHAIR HAWKER said that is correct. He noted that there is a
fifth category, the buyer category - a personal use consumption
license - which is left at $25.
REPRESENTATIVE GRUENBERG stated his support of Amendment 1.
REPRESENTATIVE ROKEBERG asked for a definition of
"manufacturer."
Number 2045
REPRESENTATIVE GRUENBERG said the definition is in AS 43.50.170,
[paragraph] (6), "manufacturer means a person who makes,
fashions, or produces cigarettes for sale to distributors or
other persons."
REPRESENTATIVE ROKEBERG wondered if it includes large companies
or just local manufacturers. He said he is looking for the
rationale behind the $5 [tax for manufacturers], but would not
oppose the amendment.
REPRESENTATIVE GRUENBERG replied that it does not seem to
exclude the big companies.
CHAIR HAWKER said that there are no commercial manufacturers in
the state and his intent is to make it consistent across the
board. He asked Representative Rokeberg if he has removed his
objection.
REPRESENTATIVE ROKEBERG removed his objection to Amendment 1.
REPRESENTATIVE GRUENBERG also removed his objection.
CHAIR HAWKER asked if there was any further objection to the
motion to adopt Amendment 1. Hearing none, it was so ordered.
Number 2222
CHAIR HAWKER moved to adopt Amendment 2, labeled 23-GH2116\A.2,
Kurtz, 3/23/04, which read:
Page 8, line 23, following "report":
Insert "not later than the last day of the month
in which this Act takes effect"
Page 8, line 25:
Delete "no later than 30 days after the effective
date of this Act."
Insert "in six sequential monthly installments. The
first installment shall be paid not later than the
last day of the month in which this Act takes effect."
REPRESENTATIVE WILSON objected for discussion purposes.
CHAIR HAWKER explained that proposed Amendment 2 addresses the
concern about the floor tax concept raised by Mr. Elerding and
wholesale businesses. The bill, as currently drafted would
impose a floor tax immediately and in its entirety. [Amendment
2] allows the tax to be assessed immediately, but payable in six
sequential monthly installments.
REPRESENTATIVE WILSON asked for clarification about how the tax
would work if there is an overlapping of inventory.
CHAIR HAWKER replied that the tax would be on the inventory on
hand on the date that the tax changes. [The business] can pay
that assessment over six months and all new purchases would be
subject to the tax from that point forward, he explained.
Number 2354
REPRESENTATIVE SAMUELS asked if Chair Hawker had checked with
distributors to see if six months is a good rotation time.
CHAIR HAWKER said he is not sure rotation time enters into it.
Mr. Elerding indicated he believes six months is an appropriate
period of time [to make the payments]. He asked Mr. Elerding to
speak to the matter.
MR. ELERDING replied that six months is a big improvement over
having to pay the whole tax immediately. He said he is
concerned that he would have had an excess amount of inventory
on hand the day before the legislation passes to accommodate
consumer demand, but then the day after, due to the higher
price, it would have been difficult to sell the remaining
amount. The six-month time period helps solve this problem, he
said.
REPRESENTATIVE WILSON asked if this amendment prevents
businesses from stockpiling cigarettes before the tax is levied
and then charging a higher price for cigarettes on which they've
paid no tax.
CHAIR HAWKER said that is correct.
REPRESENTATIVE WILSON removed her objection to the motion to
adopt Amendment 2.
CHAIR HAWKER asked whether there was any further objection to
Amendment 2. There being no objection, it was so ordered.
Number 2743
REPRESENTATIVE OGG moved to adopt Amendment 3, which read
[original punctuation provided]:
Page 4, line 24 through
Page 8, line 9:
Delete
Renumber the following bill sections accordingly.
CHAIR HAWKER objected for discussion purposes.
REPRESENTATIVE OGG explained that Amendment 3 keeps the status
quo, whereas [HB 538] adds a new forfeiture section. The
amendment would delete Sections 13 and 14 from the bill.
REPRESENTATIVE GRUENBERG stated his support for Amendment 3
because he has concerns about lines 12-20 on page 7, which state
there may be additional penalties for persons convicted of
previous felonies. Though he said he is in favor of the bill,
he stated that he will request a referral to House Judiciary
Standing Committee if the amendment fails. He opined that the
issue of forfeiture should be a separate bill and that there may
be constitutional problems with it. He received an opinion by
DOL that a "Quill amendment" similar to the one Senator Ben
Stevens put into the sales tax bill would put stress on the
bill; however, he said he believes it would put very little
stress on the bill and he plans to offer one like it.
Number 3109
REPRESENTATIVE SAMUELS, in response to the forfeiture
discussion, opined that smuggling and its penalties are linked
to the bill and should not be separate legislation. He referred
to page 5, line 1, and said he has no problem with eliminating
the words "barter, or exchange", and he said he agrees with
Representative Gruenberg that page 7, subsection (i), on prior
felonies and forfeiture may be too severe and he suggested
adding a sidebar such as "within the last 10 years for a crime
against a person". He disagreed with taking away the entire
tool because it would hamper law enforcement, and he referred
back to his example of a person who is smuggling cigarettes for
a living. He stated his opposition to [Amendment 3], which
would delete the entire section.
Number 3226
REPRESENTATIVE WILSON related her opposition to [Amendment 3]
because she said she couldn't imagine anyone being upset if a
criminal who is on parole has to forfeit a vehicle or vessel.
REPRESENTATIVE ROKEBERG stated that while Representative Ogg has
a good point, he agrees with Representative Samuel's position
that there has to be some enforcement, but as the bill is
written, it goes too far.
REPRESENTATIVE OGG said that the existing statutes seem to be
working and he is attempting to make it simple. He voiced a
concern about the bill as whole being a revenue device, which
may encourage prohibition because of addictions. He opined that
[HB 538] goes a step too far and that the current provision,
which provides for forfeiture of tobacco products themselves is
enough.
CHAIR HAWKER related that his only disagreement with
Representative Ogg is whether or not this provision will make
criminals out of people who are addicted to tobacco products.
He said he agrees with Representative Samuels when he said that
this does not penalize the addict who may seek his or her
product from an illicit source; this provision pursues the
illicit source.
REPRESENTATIVE WILSON said she hears what Representative Ogg is
saying, but her conclusions are different than his. Raising the
sales tax by a $1 may encourage illegal activity, however, the
very fact that there are high consequences serves as a
deterrent.
Number 3713
REPRESENTATIVE ROKEBERG responded that he agrees with Chair
Hawker's interpretation of the bill that the provision would be
a force against [illegal] commercial activity, but he suggested
that the testimony from DOL stated the contrary. The poor
enforcement of the "five-pack rule" shows that there is a
problem with too much discretion on the part of DOL. He said it
brought out "the remote but illegal opportunity for mischief to
be done here to individuals." He opined that is Representative
Ogg's point and it concerns him.
Number 3807
REPRESENTATIVE SAMUELS replied that the five-pack rule is the
law of the land and would not be changing in this bill, and he
agrees that it may need to be addressed, but the forfeitures, if
the bartering and exchanging are eliminated, apply to people who
are selling cigarettes. He said if [Amendment 1] fails he will
offer an amendment to address Representative Gruenberg's
concerns, which would fix the problem but leave the tool in
place for the smuggler.
CHAIR HAWKER endorsed Representative Samuels' approach should
the amendment fail. He said the bill will be held to address
this issue as well as the bonding considerations previously
discussed today.
REPRESENTATIVE GRUENBERG said he thought the bill was going to
be passed out today.
CHAIR HAWKER said it will not be moved out today.
REPRESENTATIVE GRUENBERG requested that the criminal division
testify at the next meeting and said he would not offer the
Quill amendment today.
CHAIR HAWKER asked if there was any further debate on Amendment
3.
REPRESENTATIVE GRUENBERG asked if there could be an adjournment
before having to finish dealing with the current amendment and
take it up again at the next meeting.
CHAIR HAWKER asked Representative Ogg if he is willing to
withdraw Amendment 3.
Number 4150
REPRESENTATIVE OGG withdrew Amendment 3.
REPRESENTATIVE ROKEBERG explained several conceptual amendments
he will reserve for the next meeting. One concerns getting rid
of the "two times bonding requirement" and going to a singular
requirement, and the other is to get the methodologies into
regulation to allow the different types of securities for
bonding.
CHAIR HAWKER explained that the "double-up" bonding is from the
time selling is commenced to the time payment is remitted and it
is actually a two-month window. He concurred with
Representative Rokeberg's observations.
REPRESENTATIVE ROKEBERG said Mr. Elerding's testimony is correct
in terms of insurance history, availability of the bonding, and
high costs being a problem.
CHAIR HAWKER said he would be receptive to demonstrated
financial responsibility being placed in statute. He said it is
a discussion he would like to continue.
Number 4426
REPRESENTATIVE GRUENBERG pointed out that the statute referred
to earlier by Ms. Bales is under "alcohol" and the language
state that the department, in its discretion, may issue permits
in place of bonds to certain people. He suggested using that as
a model for this bill.
REPRESENTATIVE ROKEBERG said he will be offering an amendment to
repeal the five-pack provision and one about "incidental
possession resulting from interstate travel for personal
consumption only of like three cartons or 30 packs of cigarettes
shall not be subject to the forfeiture or other penalties." He
said there needs to be a policy statement by the legislature not
to make criminals out of innocent citizens. He related that he
plans to offer an amendment that reserves all taxation for
tobacco products to the State of Alaska, except for a broad
sales tax on the part of municipalities. Those communities that
have existing tax would be grandfathered in. He noted that one
of the problems of the "sin tax syndrome" is that there could be
multi-layers of taxation.
TAPE 04-18, SIDE B
Number 4640
REPRESENTATIVE ROKEBERG opined that currently there is a "flat
line" with increasing taxes mostly at the municipal level and
there is not any major decrease in consumption. He stated that
it is a concern of his that the more tax is raised the fewer
people smoke, as the pool gets smaller. He requested more
discussion about the level of tax saying that the $1 is an
arbitrary amount.
Number 4424
CHAIR HAWKER observed that there has been extensive testimony on
the elasticity of the market, and the inhibiting value of the
tax. He offered to arrange for the presentation material to be
made available to Representative Rokeberg.
REPRESENTATIVE ROKEBERG stated his skepticism of the data
because he opined it has not been in place long enough.
REPRESENTATIVE GRUENBERG remarked to Mr. Barnhill that he does
want to pursue the "Quill issue" for the purpose of asserting
the sovereignty of the state.
[HB 538 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
9:34 a.m.
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