02/16/2016 06:00 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB133 | |
| SB131 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 131 | TELECONFERENCED | |
| += | SB 133 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
February 16, 2016
6:01 p.m.
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Cathy Giessel, Vice Chair
Senator Kevin Meyer
Senator Gary Stevens
MEMBERS ABSENT
Senator Johnny Ellis
COMMITTEE CALENDAR
SENATE BILL NO. 133
"An Act requiring the electronic submission of a tax return or
report with the Department of Revenue; relating to the taxes on
cigarettes and tobacco products; taxing electronic smoking
devices; and providing for an effective date."
- HEARD & HELD
SENATE BILL NO. 131
"An Act requiring the electronic submission of a tax return or
report with the Department of Revenue; relating to the excise
tax on alcoholic beverages; and providing for an effective
date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 131
SHORT TITLE: ELECTRONIC TAX RETURNS & ALCOHOL TAX
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/19/16 (S) READ THE FIRST TIME - REFERRALS
01/19/16 (S) L&C, FIN
02/16/16 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/16/16 (S) L&C AT 6:00 PM BELTZ 105 (TSBldg)
BILL: SB 133
SHORT TITLE: ELECTRNC TAX RETURNS;TOBACCO & E-CIGS TAX
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/19/16 (S) READ THE FIRST TIME - REFERRALS
01/19/16 (S) L&C, FIN
02/16/16 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/16/16 (S) L&C AT 6:00 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
JACKSON BLACKWELL, high school student representing
American Cancer Society Cancer Action Network (ASC CAN)
POSITION STATEMENT: Testified in support of SB 133.
JOSEPH YOULKOSKI, eighth grade student representing
American Cancer Society Cancer Action Network (ASC CAN)
POSITION STATEMENT: Testified in support of SB 133.
STEVEN MAPES, representing himself
Vape shop owner
Kenai, Alaska
POSITION STATEMENT: Suggested amending SB 133 to remove all
vapor products from the bill.
PATRICIA PATTERSON, representing herself
Lucky Raven Tobacco
Kenai, Alaska
POSITION STATEMENT: Testified in opposition to SB 133.
LARRY HACKENMILLER, representing himself
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to SB 133.
CHARLES RIVERUP, representing himself
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to SB 133.
ANGELA CARROL
Smoke Free Alternative Trade Association
Wasilla, Alaska
POSITION STATEMENT: Requested the committee remove all vapor
products from SB 133.
KAREN PERDUE, representing herself
Fairbanks, Alaska
POSITION STATEMENT: Spoke in support of SB 133 and asked the
committee to make sure that e-cigarettes are taxed.
TERRENCE ROBBINS, representing himself
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of SB 133.
DR. KRISTEN COX, ND, representing herself
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 133.
MARGE STONEKING, Executive Director
American Lung Association in Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 133.
ISAAC HEWELL, owner
Cold Vapes 907
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 133.
JEFF FUHRMAN, representing himself
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 133.
JASON JONES, owner
Legion Vapor
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 133.
TOM LAKOSH, representing himself
Anchorage, Alaska
POSITION STATEMENT: Testified in support of sin taxes and
suggested adding the consumption and production of fossil fuels
to both SB 131 and SB 133.
SHEB GARFIELD, representing himself
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 133.
GREGORY CONLEY
American Vaping Association
Medford, New Jersey
POSITION STATEMENT: Testified in opposition to SB 133.
ALEX MCDONALD
Ice Fog Vapor, Inc.
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to including vapor
products in SB 133.
THOMAS BROWN, representing himself
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 133.
FRED STURMAN, representing himself
Kenai, Alaska
POSITION STATEMENT: Testified that he opposes taxes of any
description until the legislature cuts at least 30 percent from
the budget.
JEFF JESSE, Chief Executive Officer
Alaska Mental Health Trust
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 131.
BANDON HOWARD
Amalga Distillery
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to SB 131.
ROBERT MCCORMICK, Director
Glacier Brew House
Chugiak, Alaska
POSITION STATEMENT: Testified in opposition SB 131.
MARCY LARSON, co-founder
Alaskan Brewing Company
Juneau, Alaska
POSITION STATEMENT: Spoke in opposition to SB 131 due to its
unintended consequences to the entire hospitality industry.
SASSAN MOSSANEN, founding partner
Denali Brewing Company
Talkeetna, Alaska
POSITION STATEMENT: Testified in opposition to SB 131.
GARY SUPERMAN, co-owner
Hunger Hut Bar and Liquor Store
Nikiski, Alaska
POSITION STATEMENT: Testified in opposition to SB 131.
KRISTEN MYLES, Director
Cook Inlet CHARR
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 131.
RICK ARMSTRONG, owner
Baranof Island Brewing Company
and President
Brewers Guild of Alaska
Sitka, Alaska
POSITION STATEMENT: Testified in opposition to SB 131.
BILL BUBBEL
The Pump House Restaurant
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to SB 131.
TIFFANY HALL, Executive Director
Recover Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 131.
MARK STAPLES, President
Midnight Sun Brewing
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 131.
TOM CHARD, Executive Director
Alaska Behavioral Health Association
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 131.
PAM WATTS, Member
Alaska Behavioral Health Association
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 131.
MICHAEL CERVANTES, owner/operator
The Banks Alehouse
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to SB 131.
CARMEN LUNDE, Director
Kodiak CHARR
Kodiak, Alaska
POSITION STATEMENT: Testified in opposition to SB 131.
ROBIN MINARD, Director
Public Affairs
Matsu Health Foundation
Wasilla, Alaska
POSITION STATEMENT: Testified in support of SB 131.
PHILLIP LICHT, Chair-elect
Advisory Board on Alcoholism and Drug Abuse (ABADA)
Palmer, Alaska
POSITION STATEMENT: Testified in support of SB 131 on behalf of
the ABADA Board, the Alaska Mental Health Board, and Thrive
MatSu.
JIM PSENAK
Alpine Inn
Sutton, Alaska
POSITION STATEMENT: Testified in opposition to SB 131.
ACTION NARRATIVE
6:01:11 PM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 6:01 p.m. Present at the call to
order were Senators Giessel, Stevens, and Chair Costello.
SB 133-ELECTRNC TAX RETURNS;TOBACCO & E-CIGS TAX
CHAIR COSTELLO announced the committee would hear public
testimony on SB 133.
6:02:53 PM
JACKSON BLACKWELL, high school student representing the American
Cancer Society Cancer Action Network (ASC CAN), testified in
support of SB 133. He reported that he has been involved in
tobacco prevention for three years and feels it is important to
do everything possible to protect the health of his peers by
keeping electronic cigarettes out of their hands. He related
that when he returned after spending six months serving as a
U.S. page in Washington, D.C., he saw that the use of e-
cigarettes and vapes had skyrocketed. He concluded saying the
tobacco tax would be beneficial because it would make e-
cigarettes more difficult to acquire.
6:03:06 PM
SENATOR MEYER joined the committee.
JOSEPH YOULKOSKI, eighth grade student representing the American
Cancer Society Cancer Action Network (ASC CAN), testified in
support of SB 133. He said the increased tobacco tax would make
it harder for middle school students to get vapor and e-
cigarettes. It will keep the state healthier and generate
revenue.
SENATOR STEVENS asked if anyone uses e-cigarettes to stop an
addiction to combustible cigarettes.
MR. BLACKWELL replied some people use them as a means to quit
smoking, but his perspective is that it creates an addiction to
something else. He pointed out that e-cigarettes are not
regulated so people could still be buying a nicotine product
without knowing it. He reiterated that they shouldn't be readily
available for anyone to use.
6:06:28 PM
SENATOR MEYER asked what the tobacco of choice is in schools now
days.
MR. BLACKWELL replied he primarily sees the use of vapes, e-
cigarettes and chewing tobacco, often by students he would not
expect.
6:07:27 PM
MR. YOULKOSKI said kids have been educated through programs like
DARE that nicotine products are harmful so they've switched to
e-cigarettes and vapes. Those claim to be tobacco and nicotine
free and he wonders what they do contain.
SENATOR MEYER commented on the problem in Anchorage with Spice
and the lack of package labeling. He asked the students if they
agree that that is part of the problem.
MR. BLACKWELL pointed out that some people are using vaping
devices to smoke hash oil and opioids, which presents a whole
new danger.
MR. YOULKOSKI added that his middle school doesn't have many
problems with Spice and he attributes it to good education from
teachers about its dangers.
6:08:43 PM
STEVEN MAPES, representing himself, Kenai, Alaska, asked the
committee to amend SB 133 to remove all vapor products from the
bill. He stated that he is speaking as an ex-smoker, former e-
cigarette user and current vape shop owner. He shared his story
of trying to kick the habit of smoking three packs of cigarettes
per day. The only thing that worked for him was e-cigarettes so
he decided to open a vape shop and help others get off tobacco.
He described the success of his business and the fact that he
has been able to help hundreds of people to stop using tobacco
products. Increasing the tax on tobacco as proposed would put
him out of business and drive the market to the Internet.
6:11:44 PM
At ease
6:12:25 PM
CHAIR COSTELLO reconvened the meeting.
PATRICIA PATTERSON, Lucky Raven Tobacco, Kenai, Alaska,
testified in opposition to SB 133. She said there is no federal
or state law that prohibits an Alaskan from buying pipe tobacco,
cigars or vape products online, and the 75 percent state tax
isn't levied on those sales. That is her competitor. She pointed
out that there are just three humidors left in the state and
increasing the 75 percent tax to 100 percent will get rid of all
three. She opined that the current 75 percent tax has done
nothing but move business to other states. She posited that the
same thing will happen to in-state e-cigarette and vape shops if
those products are included in the tax scheme. The revenue the
state would gain is insignificant compared to the damage it will
do to local economies throughout the state.
6:14:48 PM
LARRY HACKENMILLER, representing himself, Fairbanks, Alaska,
testified in opposition to SB 133. He stated total opposition to
taxing electronic smoking devices, maintaining that they have
nothing to do with cigarettes or tobacco products. He said no
concrete research shows hazards associated with the use of this
device or its benefit as a means to quit smoking tobacco. He
also requested the committee remove the requirement to file tax
forms electronically and instead state it is the preferred
method.
CHARLES RIVERUP, representing himself, Fairbanks, Alaska,
testified in opposition to SB 133. He offered his belief that
vape products are not tobacco and should not be taxed as such.
He and others purchase their vape products locally and the
proposed tax would send this business outside the state. "That
doesn't seem logical to me," he said.
6:18:34 PM
ANGELA CARROL, Smoke Free Alternative Trade Association,
Wasilla, Alaska, requested the committee amend SB 133 to remove
all vapor products from the bill. She referred to reports in the
bill packets from the Mayo Clinic and Public Health England that
discuss how vapor products benefit adults addicted to
cigarettes. She pointed out that the proposed tax on these
products would bring the tax on vapor products from zero to 100
percent overnight, which will be a huge burden to the consumer.
She maintained that the proposed tax will drive consumers back
to combustible cigarettes, deter a current smoker from switching
to a vapor product or drive sales to the Internet. This won't be
good for the economy or selective businesses in Alaska.
6:21:04 PM
KAREN PERDUE, representing herself, Fairbanks, Alaska, said she
is retired and working with the American Cancer Society Alaska
Cancer Action Network, and is speaking in support of SB 133. She
informed the committee that she was involved in the 1997 initial
tobacco tax increase when an amazing bi-partisan effort resulted
in Alaska having the highest tobacco tax in nation. The tax had
a dramatic effect on consumption; in particular, youth
consumption has gone down 70 percent since then. She asked the
committee to make sure that e-cigarettes are taxed to help
ensure that young people do not start using them. She
highlighted that current data shows that far more young people
are using those products than tobacco. Responding to a question,
she confirmed that this information is from the Behavioral Risk
Survey.
She said the track record is great for using the tobacco tax for
public health purposes rather than revenue purposes, and tobacco
advocates would like to see the additional tax focused on
reducing consumption.
MS. PERDUE said the use of e-cigarettes has exploded in the
Fairbanks community and it makes no sense to exclude them from
taxation. They're a medium for delivery of both tobacco and
marijuana and those products already are or will be taxed.
6:24:35 PM
SENATOR STEVENS mentioned a bill he introduced intended to keep
children from buying e-cigarettes. In the process, he learned
that a young person who is addicted to cigarettes can get a
prescription for e-cigarettes to help break the addiction. He
asked if this is a legitimate way to help people stop smoking
and, if so, why charge them more.
MS. PERDUE replied the policy is to tax tobacco and she views e-
cigarettes as a delivery mechanism for tobacco and other
products. She added that it's one thing if someone actually
quits using tobacco altogether but the nicotine levels in e-
cigarettes could be higher than a combustible cigarette because
they aren't currently regulated by the FDA.
6:26:35 PM
TERRENCE ROBBINS, representing himself, Ketchikan, Alaska,
testified in support of SB 133. He cited U.S. surgeon general
findings that every 7 percent increase in the retail price of
cigarettes will result in 7 percent reduction in youth smoking
rates. He also mentioned data from 2015 showing that 27.5
percent of Alaskans age 12-17 have used cigarettes or e-
cigarettes in the last 30 days. He said e-cigarettes are a
nicotine product and increasing their retail price will decrease
use rates among youths.
6:29:42 PM
DR. KRISTEN COX, ND, representing herself, Juneau, Alaska,
testified in support of SB 133. She said in 2014 the State of
Alaska collected $100 million between tobacco taxes and the
Tobacco Master Settlement Agreement. However, the costs
associated with smoking in Alaska totals $600 million. She
pointed out that these costs equate to $20 per pack of
cigarettes which arguably means the state is essentially
subsidizing the tobacco industry. Clearly, increasing the cost
of cigarettes decreases use rates in youths, she said. Even
Phillip Morris recognized this in a 1988 statement.
CHAIR COSTELLO asked Dr. Cox to provide the backup for the $600
million she cited.
DR. COX said the data came from the Department of Health and
Social Services data from the Tobacco Prevention and Control
Program. She offered to leave her copy.
6:32:23 PM
MARGE STONEKING, Executive Director, American Lung Association
in Alaska, Anchorage, Alaska, testified in support of SB 133.
Reading from prepared testimony she stated that tobacco taxes
are a proven method to reduce tobacco use and tobacco related
illnesses. Increasing these taxis also saves government and
businesses millions of dollars in tobacco-related healthcare
costs. She reported that increasing tobacco taxes 10 percent
reduces youth smoking by a minimum of 7 percent, reduces adult
smoking by 4 percent, and reduces pregnant women smoking by 7
percent. A vast majority of people who smoke want to quit and
the increased price is yet another incentive to quit. Thus, the
American Lung Association supports the proposal to increase the
price of cigarettes a minimum of $1 per pack and the equivalent
increase on other tobacco products, including electronic
cigarettes.
MS. STONEKING highlighted that there are seven approved products
for tobacco cessation and e-cigarettes are not one of them. In
fact, the tobacco industry sued the FDA to treat these devices
as a tobacco product, not as a cessation device. She also
suggested that e-cigarette venders should have a tobacco
endorsement so they'll be part of the state's underage
enforcement program.
6:36:12 PM
ISAAC HEWELL, owner, Cold Vapes 907, Anchorage, Alaska,
testified in opposition to SB 133. He listed his family run
business, employees, rent, insurance and ancillary businesses,
all of which would be affected if the bill were to pass and
become law. He described the bill as an unemployment bill for
the vaping industry in Alaska because it will drive sales to the
Internet. He maintained that an estimated 9 million smokers,
including himself, have switched from combustible tobacco
products to vaping. He urged the committee to hold the bill so
the state can continue to profit from his business as it does
now.
6:38:47 PM
JEFF FUHRMAN, representing himself, Anchorage, Alaska, testified
in opposition to SB 133. He shared personal stories about
cigarette smoking and lung cancer and related that he was
initially skeptical about vaping. However, he has not touched a
cigarette since he started to vape 3.5 years ago. He maintained
that the effect of SB 133 will be to close small businesses in
Alaska and drive the consumers to online sales. Furthermore, it
will make it more difficult for people like him to quit smoking.
It's reprehensible that the state is increasing the cost of a
device that is helping people quit and saving lives, he said.
6:42:02 PM
JASON JONES, owner, Legion Vapor, Anchorage, Alaska, testified
in opposition to SB 133. He related that after 17 years and
multiple failed attempts to stop smoking cigarettes, he turned
to vaporizers and was finally successful. That was three years
ago and he's still smoke free. Speaking as a vape shop owner, he
stressed that taxing vaporizer products will not create revenue
for the state because it will drive consumers to purchase
online. The result will be that the 20 locally-owned, family
vape shops in Alaska will be forced to close. An unintended
consequence is that it will remove the first line of defense in
keeping vaporizer products out of the hands of children.
6:43:40 PM
TOM LAKOSH, representing himself, Anchorage, Alaska, testified
in support of sin taxes and suggested adding the consumption and
production of fossil fuels to both SB 131 and SB 133. He also
described the proposed tax on vaping products as "quite a cost
to bear."
6:45:27 PM
SHEB GARFIELD, representing himself, Anchorage, Alaska,
testified in opposition to SB 133. He stated that after smoking
for 20 years, he's been cigarette-free for 3 years, and he owes
that healthy achievement to vaping. He stressed that the 100
percent wholesale tax will start a domino effect that will end
the cottage vaping industry in Alaska. Consumers will be forced
to shop online or go back to smoking. Either circumstance will
cause the 20 mom-and-pop vape shops in Alaska to cut employees
and eventually close. The State of Alaska is shooting itself in
the foot in its decision to tax vaping products when it's a
proven method for helping people to quit smoking, he said.
6:47:40 PM
GREGORY CONLEY, American Vaping Association, Medford, New
Jersey, testified in opposition to SB 133. He related that he is
an ex-smoker and attorney who has been advocating for sound
policies for vapor products for more than 5 years. He discussed
the public health impacts of vapor products and the ongoing
debate within the tobacco control community. He cited a Center
for Disease Control and Prevention (CDC) survey that found that
22 percent of the adults who claimed to have quit smoking in the
past year are using vapor products. Regardless of whether people
approve, this is what is happening, he said.
Turning to the question of vaping use among youth, he pointed to
the short summary issued by Ohio Attorney General, Tom Miller,
and urged a smart review of the numbers. They show that only 2
percent of American youths are using vapor products more than 20
days of the month. Other surveys found that 60-80 percent of
youth that report using vapor products in the last month are
using a non-nicotine product. He suggested the committee keep
the numbers in perspective.
6:50:18 PM
ALEX MCDONALD, Ice Fog Vapor, Inc., Fairbanks, Alaska, testified
in opposition to including vapor products in SB 133. He related
how vapor products helped end his 19-year tobacco addition. He
maintained that the tax proposed on vapor products is different
than on tobacco products because the former are readily
available for purchase on the Internet. It will be impossible
for small family-owned businesses to compete with that market.
Furthermore, online vendors lack the ability to check IDs to
ensure they aren't selling to minors. The vaping industry in
Alaska is in full support of SB 141 relating to the sale of
vapor products to minors, he said.
6:51:57 PM
THOMAS BROWN, representing himself, Anchorage, Alaska, testified
that he opposes SB 133 for a number of reasons. First, vaping is
a healthy alternative to combustible tobacco. This is evidenced
by documents he intends to provide to the committee. Second, as
vaping goes up smoking goes down. This is true for every age
range so the behavior should be promoted. Third, SB 133 will
harm Alaskan businesses and jobs. The tax will cause consumers
to turn to the Internet or the black market. Fourth, the
unintended consequence of increasing sin taxes is that revenue
goes down. This bill will cause more people to smoke, cost
Alaskans jobs, and create a new class of criminals. Nothing
about the bill is desirable, he said.
6:54:14 PM
FRED STURMAN, representing himself, Kenai, Alaska, stated that
he opposes taxes of any description until the legislature cuts
at least 30 percent from the budget. He highlighted that Ruby
Hines sent suggestions for cutting the budget in 14 places and
he's aware of no cuts thus far. He suggested punitive measures
to ensure this is done.
CHAIR COSTELLO, finding no further comments on SB 133, closed
public testimony and held the bill in committee.
6:57:35 PM
At ease
SB 131-ELECTRONIC TAX RETURNS & ALCOHOL TAX
7:00:59 PM
CHAIR COSTELLO reconvened the meeting and announced the
committee would hear public testimony on SB 131.
JEFF JESSE, Chief Executive Officer, Alaska Mental Health Trust,
Juneau, Alaska, testified in support of SB 131. He directed
attention to a spreadsheet from the Division of Behavioral
Health that shows that the state spent over $41 million for
alcohol treatment and prevention. Additionally, other general
fund costs due to alcohol are substantial.
A survey by the McDowell Group found that the 2010 general fund
spending for alcohol-related healthcare costs totaled $170
million; $9.5 million for public assistance; $50.5 million for
traffic accidents; $156.7 million for the criminal justice and
Office of Children's Services systems of care. Together that is
a $387 million cost to the general fund from alcohol. That is
larger than every department and every budget component except
the foundation formula and the Medicaid program. He pointed out
that this cost will be paid through user fees, as contemplated
by SB 131, or it will be passed on to all Alaskans through other
taxes and decreased dividend payments.
To further emphasize the magnitude of the problem, he pointed
out that the loss of productivity due to alcohol is $500 million
per year. He emphasized that the alcohol tax is one of the
fairest ever devised.
7:05:13 PM
BANDON HOWARD, Amalga Distillery, Juneau, Alaska, testified in
opposition to SB 131. He is starting a new distillery in an
industry that is growing quickly. In 2003 there were about 40
licensed producers in the U.S. and now there are close to 600.
He suggested that growth is a better way to generate revenue
than increasing taxes. The industry has both capital and
administrative barriers and the proposed tax will add to those.
If SB 131 were to pass and become law, he will pay about
$8/bottle in state excise tax. He'll pass that on, but it will
make his business less able to compete with producers outside
the state.
7:07:35 PM
ROBERT MCCORMICK, Director, Glacier Brew House, Chugiak, Alaska,
testified in opposition SB 131. He said he appreciates the need
to find new sources of revenue for the state, but he believes
that any tax should be broad based and not come from sources
where Alaskans already pay more than average. Alaska has among
the highest liquor taxes in the nation and doubling them doesn't
make sense. While the tax is levied at the wholesale level, it's
exponential from there with everyone adding their markup. A 3
ounce martini will likely cost the customer $2.25 more, not 45
cents more, he said.
He pointed out that the brewing industry is one of the few
industries in Alaska that is growing and it's grown without
incentives from the state. Doubling the excise tax will only
hurt the industry and drive sales online, he said
7:11:11 PM
MARCY LARSON, co-founder, Alaskan Brewing Company, Juneau,
Alaska, stated that SB 131 has unintended consequences for the
entire hospitality industry, not just the producers. She agreed
with Mr. McCormick that the tax is exponential because it goes
up every step along the way. That includes the city sales tax,
which will be raised five percent. She opined that the extreme
nature of the proposed tax will affect the health of the
hospitality industry and "make it no longer hospitable."
MS. LARSON pointed out that the existing excise tax on alcohol
makes it possible for someone in Oregon to buy Alaskan beer at
the same price as in Alaska. If the tax is doubled, it will be
cheaper to purchase Alaskan beer in Oregon than here where it's
made. She proposed not raising the tax to such extreme levels so
the hospitality industry can stay strong.
7:14:08 PM
SASSAN MOSSANEN, founding partner, Denali Brewing Company,
Talkeetna, Alaska, testified in opposition to SB 131. He shared
the history of the company and its robust growth over the last
seven years. All their available capital is reinvested in
Alaska. With 27 year-round employees they are the largest
employer in Talkeetna and the largest consumer of energy.
He expressed concern that an unintended consequence will be that
people will figure out a way to circumvent the system. He
maintained that to create and maintain mental health, people
need to be engaged in their community. "When you create a
prohibitive state where people hide, it makes it harder to keep
track of who is consuming what." He pointed out that during
Prohibition, people drank more and community costs went up.
MR. MOSSANEN reported that Denali Brewing was approached last
year by the state Division of Economic Development and the U.S.
counterpart to engage in talks about increasing Arctic commerce.
As a result, they collaborated with a brewery in Norway in an
effort to further the economic benefits of alcoholic beverages
produced in Alaska. He encouraged the committee to consider
creating an exemption for wineries and distilleries that small
breweries currently enjoy.
7:18:38 PM
GARY SUPERMAN, co-owner, Hunger Hut Bar and Liquor Store,
Nikiski, Alaska, testified in opposition to SB 131. He shared
the history of his career and described himself as "strictly
blue collar, working class." He lives among folks that get by on
$30,000-$50,000 per year; they build their own homes. His
perspective is that doubling the alcohol taxes is an assault on
the blue color working class in Alaska. He stressed that the
proposed alcohol and tobacco taxes coupled with the permanent
fund proposals will consume a significant portion of the working
class's disposable income. "If you're looking for a new revenue
stream, I suggest that you look elsewhere for the sake of
fairness," he said.
7:23:00 PM
KRISTEN MYLES, Director, Cook Inlet CHARR, Anchorage, Alaska,
testified in opposition to SB 131. She pointed out how this tax
will hurt those who serve alcohol. Speaking hypothetically, she
said if Senator Stevens' martini costs $8.50 he probably gives
the server $10. With the proposed tax the martini will cost
closer to $9.50. While the Senator is aware of the tax situation
and may adjust his spending so the server isn't punished, the
average patron likely won't give a thought to the dollar or so
the server is losing on each drink sale. "Now we're punishing
business owners, responsible consumers and employees," she said.
7:24:47 PM
RICK ARMSTRONG, owner, Baranof Island Brewing Company, and
President, Brewers Guild of Alaska, Sitka, Alaska, testified in
opposition to SB 131. He opined that the industry is already
doing its fair share when it collects over $40 million each year
for the state. The proposed tax places a burden on the only
small industry in Alaska that is growing and punishes
responsible adults who are trying to make an honest living.
Higher prices won't lower consumption, but force consumers to
buy lower priced products elsewhere. He agreed with previous
testimony that the dime a drink argument is inaccurate. If SB
131 passes and becomes law, Alaska will have the highest alcohol
taxes in the nation. "I strive to be number 1, but not in this
instance and I'm quite happy knowing that we're already at
number 2," he said.
7:26:58 PM
BILL BUBBEL, The Pump House Restaurant, Fairbanks, Alaska,
testified in opposition to SB 131. He maintained that even if
oil were to return to $100 per barrel, the tax wouldn't return
to the existing level because taxes never go down. He said the
distributor pays the tax initially and it trickles down to the
end user which ultimately inhibits sales. Municipalities often
compound the problem by following the state policy and raising
local taxes. He asked the committee to consider something more
manageable and perhaps take another look at casino gambling or a
Powerball lottery.
7:28:41 PM
TIFFANY HALL, Executive Director, Recover Alaska, Anchorage,
Alaska, testified in support of SB 131. She stated that
increasing the alcohol tax will generate needed revenue and
support long-standing public health and safety objectives. She
maintained that the increased tax will save money because the
cost of alcohol abuse to Alaskans totaled $1.2 billion in 2010.
She noted she would submit her sources via email. Beyond the
financial benefits, raising the alcohol tax will save lives,
improve the health of babies and reduce underage drinking.
She reported that the increases in the alcohol tax in 1983 and
2002 were followed by 29 percent and 11 percent decreases in the
number of alcohol related deaths in the state. Furthermore,
increased alcohol taxes has been found to reduce binge drinking
during pregnancy, decrease the incidence of fetal alcohol
syndrome, and significantly reduce youth alcohol consumption.
She stressed the importance of this, highlighting that youth
that drink before age 15 are 5 times more likely to abuse
alcohol as adults.
She noted that the U.S. surgeon general and a host of others
recommend increasing the excise tax on alcohol because research
indicates that it is directly related to decreased alcohol-
related deaths, traffic crashes, violent crime, and child abuse.
7:31:51 PM
MARK STAPLES, President, Midnight Sun Brewing, Anchorage,
Alaska, testified in opposition to SB 131. He said his brewery
employs over 50 people and sells product in four states in
addition to Alaska. It's been exciting to be part of this
growing industry, he said, but growth could cease and the
industry could be in peril if this tax goes forward. He
referenced the list of proposed new revenue components and
highlighted that with this legislation the alcohol industry will
be the third highest taxed industry in the state, which seems
unfair.
7:34:21 PM
TOM CHARD, Executive Director, Alaska Behavioral Health
Association, Juneau, Alaska, testified in support of SB 131. He
isn't opposed to responsible consumption, but as Mr. Jessee
pointed out, the tax increase ultimately ends with the consumer
and their relative consumption. His hope is that this will
mitigate the impact on business. He maintained that the tax
increases revenue to help address the budget shortfall,
decreases the costs associated with problem drinking, and raises
much needed revenue for prevention and treatment efforts.
Studies show the link between increased alcohol tax and
decreased consumption, particularly among youth. He cited the
McDowell report that found that the impact of alcohol on the
system totaled $1.2 billion. He noted that last year a group
gathered in Anchorage to talk about drug and alcohol treatment
options. Last night about 400 people gathered to talk about how
the 14 detox beds in Anchorage can serve a population of
300,000.
7:36:56 PM
PAM WATTS, Member, Alaska Behavioral Health Association, Juneau,
Alaska, testified in support of SB 131. Having worked in the
behavioral health field for over 30 years, she can attest to the
damage that alcohol has caused to individuals, families and
communities and the cost to the state. Over time and with flat
funding access to treatment and detox has been reduced.
Treatment costs money but without treatment and resources to
help people become healthy and productive, even more money is
spent on public safety, court costs, prisons, and spiraling
healthcare costs. Alaska has the distinction of being the first
in the nation in alcoholism, alcohol-related deaths, fetal
alcohol spectrum disorder, and alcohol-related domestic
violence, rape and suicide. Changing those numbers takes money
and the increased excise tax on alcohol will help, she said.
7:38:33 PM
MICHAEL CERVANTES, owner/operator, The Banks Alehouse,
Fairbanks, Alaska, testified in opposition to SB 131. He works
with 15 different breweries in Alaska and employs 55 people. The
proposed tax will have a ripple effect. He'll pass the tax along
to the consumers and they will go elsewhere. That may force him
to look for other breweries outside the state with cheaper
products.
7:40:35 PM
CARMEN LUNDE, Director, Kodiak CHARR, Kodiak, Alaska, testified
in opposition to SB 131. She related that when the alcohol
industry was taxed some years ago she didn't believe she'd live
long enough to see another proposed hike. That made Alaska the
highest in the nation for alcohol taxes with a couple of small
exceptions. She said the alcohol tax brings the state $40
million per year and she doesn't believe the state should be
looking at the hospitality industry for more money. The industry
already pays far more than the national average and the proposal
to double the tax is outrageous. She suggested cutting
government spending, revisiting the tax cuts for oil, having a
state lottery, but not touching the permanent fund.
7:43:05 PM
ROBIN MINARD, Director, Public Affairs, Matsu Health Foundation,
Wasilla, Alaska, testified in support of SB 131, pointing to the
many benefits it offers. She highlighted that a substantial body
of evidence demonstrates that an increase in the tax on alcohol
results in reduced alcohol consumption and improvements in
various health outcomes, particularly for youth. She pointed out
that alcohol consumption contributes to the three leading causes
of death for adolescents, and that it is a risk factor for a
host of negative behaviors and experiences. She cited 2009 data
showing that Alaska's youth consumed 17.9 percent of alcohol
sold in the state that year, and noted that the surgeon general
and the Institute of Medicine have specifically advocated for
increases of excise taxes for alcohol as a means to reduce
underage drinking. She also discussed the documented benefit to
adults of increased excise taxes on alcohol.
MS. MINARD summarized that the proposed tax increase will help
keep underage drinking indicators moving in the right direction,
reduce deaths caused by alcohol and save babies, all while
helping reduce costs in corrections, youth justice, and
healthcare.
7:45:10 PM
PHILLIP LICHT, Chair-elect, Advisory Board on Alcoholism and
Drug Abuse (ABADA), Palmer, Alaska, testified in support of SB
131 on behalf of the ABADA Board, the Alaska Mental Health
Board, and Thrive MatSu. He noted that he submitted written
comments. He asked the committee to consider SB 131 as part of a
comprehensive effort to address the budget deficit and not a tax
bill targeting a single industry. "It's really part of a larger
effort to reduce spending, increase revenue, and contain costs
through reform," he said. SB 131 provides revenue that is needed
to maintain access to substance abuse treatment and prevention
efforts along with health and safety services.
7:47:15 PM
JIM PSENAK, Alpine Inn, Sutton, Alaska, testified in opposition
to SB 131. He directed attention to Section 3 of the bill and
questioned the reason that retailers are mentioned because the
tax will be levied before it reaches the retail level. Next, he
asked if the committee understands that he will incur a $40.58
increase on each case of distilled beverage he purchases. He
estimated that the up-front cost of the additional tax will be
$1,000 to $1,200 per week. He questioned how the State of Alaska
can give away between $700 million and $2.4 billion every year
in the permanent fund dividend and then expect private industry
to support the government. He warned that at some point the
federal government will reevaluate what it sends to Alaska.
7:50:20 PM
Finding no further comments, Chair Costello closed public
testimony on SB 131 and held the bill in committee.
7:51:12 PM
There being no further business to come before the committee,
Chair Costello adjourned the Senate Labor and Commerce Standing
Committee meeting at 7:51 p.m.