03/15/2016 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB111 | |
| Economic Impacts of Alaska Fiscal Options - Draft Conclusions | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| += | SB 111 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
March 15, 2016
1:31 p.m.
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Cathy Giessel, Vice Chair
Senator Kevin Meyer
Senator Gary Stevens
MEMBERS ABSENT
Senator Johnny Ellis
OTHER LEGISLATORS PRESENT
Representative Dan Ortiz
COMMITTEE CALENDAR
SENATE BILL NO. 111
"An Act relating to flame retardants and to the manufacture,
distribution, and sale of products containing flame retardants;
and providing for an effective date."
- MOVED CSSB 111(L&C) OUT OF COMMITTEE
ECONOMIC IMPACTS OF ALASKA FISCAL OPTIONS - DRAFT CONCLUSIONS
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 111
SHORT TITLE: LIMIT FLAME RETARDANT ITEMS/FURNITURE
SPONSOR(s): SENATOR(s) WIELECHOWSKI
04/16/15 (S) READ THE FIRST TIME - REFERRALS
04/16/15 (S) L&C, JUD
01/28/16 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
01/28/16 (S) Heard & Held
01/28/16 (S) MINUTE (L&C)
03/15/16 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
NANCY BALE, Member
Alaska School Nurses Association
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 111.
WESTON EILER, Staff
Senate Labor and Commerce Committee and
Senator Mia Costello
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Described the changes in the proposed CS for
SB 111.
SENATOR BILL WIELECHOWSKI
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 111.
GUNNAR KNAPP, Director
Institute of Social and Economic Research (ISER)
University of Alaska - Anchorage
Anchorage, Alaska
POSITION STATEMENT: Summarized the conclusions of ISER's draft
report "Economic Impacts of Alaska Fiscal Options."
ACTION NARRATIVE
1:31:18 PM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 1:31 p.m. Present at the call to
order were Senators Giessel, Meyer, and Chair Costello.
SB 111-LIMIT FLAME RETARDANT ITEMS/FURNITURE
1:31:40 PM
CHAIR COSTELLO announced the consideration of SB 111. This is
the second hearing and there is a committee substitute (CS).
1:32:33 PM
NANCY BALE, Member, Alaska School Nurses Association, testified
in support of SB 111. She maintained that Alaska's joining other
states that have passed legislation pertaining to flame
retardants will protect young children and their families from
harmful chemicals. She encouraged the committee to pass SB 111.
1:33:49 PM
CHAIR COSTELLO closed public testimony.
1:34:02 PM
SENATOR GIESSEL moved to adopt the CS for SB 111, labeled 29-
LS0518\P, as the working document.
CHAIR COSTELLO objected for discussion purposes.
1:34:27 PM
WESTON EILER, Staff, Senator Mia Costello, Senate Labor and
Commerce Committee, Alaska State Legislature, described the
changes in the proposed new CS. The first change is on page 2
where a new subsection is added on lines 23 - 26 that deals with
an exemption for motorized vehicles designed to be used by kids.
The second change is to the violation section on page 3, lines 2
- 4. Fines in the original version of the bill were to be
enforced by the Department of Labor and Workforce Development,
but now will be enforced by the Department of Law.
CHAIR COSTELLO removed her objection and finding no further
objection, version P was before the committee.
1:36:15 PM
SENATOR MEYER asked for an example of an off-road motorized
vehicle used by kids, included in subsection (b).
MR. EILER said the industry brought this forward. It refers to
dirt bikes and small off-road vehicles.
SENATOR GIESSEL moved to report the CS for SB 111, labeled 29-
LS0518\P, from committee with individual recommendations and
attached zero fiscal note.
1:37:06 PM
CHAIR COSTELLO announced that without objection, CSSB 111 (L&C)
is reported from the Senate Labor and Commerce Standing
Committee.
SENATOR BILL WIELECHOWSKI, Alaska State Legislature, sponsor of
SB 111, thanked the committee for hearing and passing the bill.
1:37:34 PM
At ease
^Economic Impacts of Alaska Fiscal Options - Draft Conclusions
Economic Impacts of Alaska Fiscal Options - Draft Conclusions
1:39:12 PM
CHAIR COSTELLO reconvened the meeting and announced the next
order of business would be a presentation by Gunnar Knapp with
the Institute of Social and Economic Research, University of
Alaska, Anchorage. He will present his analysis of the tax
proposals before the legislature.
1:39:37 PM
SENATOR STEVENS joined the committee.
1:40:39 PM
GUNNAR KNAPP, Director, Institute of Social and Economic
Research (ISER), University of Alaska - Anchorage (UAA),
summarized the conclusions of ISER's draft report "Economic
Impacts of Alaska Fiscal Options." He noted the report is on
their website and ISER is inviting comments. There are small
changes to this addition but not substantively. He reviewed the
presentation outline starting with the study background, revenue
impacts of taxes and dividend cuts, short-run economic impacts
of fiscal options, regional differences in impacts of fiscal
options, total economic impacts of reducing the deficit, and
other economic impacts of fiscal options.
1:42:48 PM
DR. KNAPP reviewed the selected fiscal options they studied:
•Revenue impacts of taxes and dividend cuts
-What share would non-residents pay?
-What share would be offset by lower federal taxes?
-What would be the relative impacts on different income
groups?
•Short run economic impacts of spending cuts, taxes and dividend
cuts. Per hundred million of deficit reduction:
-What would be the impacts on Alaskans' incomes?
-What would be the impacts on Alaska jobs?
•Regional economic impacts
-How would the impacts of different options vary between
regions?
•Total economic impacts of reducing the deficit
-What would the total short-run impacts on income and jobs
of reducing the deficit by different amounts?
He presented slide 7 with a table of the fiscal options they
studied:
Spending cut: workers - Spending cut achieved entirely by
reducing state workforce
Spending cut: broad-based - Spending cut achieved by broad range
of cuts to state spending
Spending cut: capital - Spending cut achieved by cutting the
capital budget
Spending cut: pay - Spending cut achieved entirely by reducing
pay of state workers
Income tax: progressive - Constant percentage of federal income
tax liability
Income tax: flat rate - Constant percent of federal taxable
income
Sales tax: more exclusions - Sales tax excluding food at home,
shelter, health care and education
Sales tax: fewer exclusions - Sales tax excluding only health
care and education
Property tax: - Statewide tax on real and personal property with
exclusions for property taxes paid to local governments
Dividend cut: - Reducing dividends and using PF earnings that
would have gone to dividends for general fund spending
Saving less: - Reducing savings of PF earnings that currently
are saved in the PF principal (inflation proofing) or added to
the PF earnings reserves, and using the money for general fund
spending
Excise tax: motor fuels - Increase in state motor fuels tax
Excise tax: alcohol - Increase in state alcoholic beverages tax
Excise tax: tobacco* - Increase in state tobacco tax
1:46:11 PM
He noted they studied only some of Alaska's potential fiscal
options.
•We studied:
-Options that are part of the broad political discussion
-Options we had time, funding and expertise to analyze
•We didn't study
-Complex options requiring detailed industry-specific
expertise
•Changes to oil credits or oil taxes
•Changes to other resource industry taxes
-Changes to how the state delivers services
•K12 education, University of Alaska, Medicaid, etc.
-"Re-plumbing" of state finances (SB114, SB128, etc.)
1:47:19 PM
SENATOR GIESSEL asked who funded the study.
DR. KNAPP replied the total funding was $60,000; $30,000 came
from the Department of Revenue and $30,000 from the Office of
Management and Budget.
SENATOR GIESSEL asked if the administration requested the study.
DR. KNAPP answered yes.
SENATOR GIESSEL asked if the administration provided ISER with
what to include in the study.
DR. KNAPP said no; the authors designed the study and topic
areas entirely.
He emphasized that they studied only some of the potential
economic impacts of the fiscal option:
We studied:
-Revenue impacts
-Short-run economic impacts
-Total short-run economic impacts on Alaska economy
We didn't study:
-Long-run & indirect impacts
What we could study was limited by:
-Data
-Complexity
-Funding & time
He noted the impacts they didn't study are important. This study
is only a start at understanding potential economic impacts of
fiscal options.
CHAIR COSTELLO asked if there is a plan to study the long-term
impacts.
DR. KNAPP reported that the end of the study contains a list of
relevant areas for future study.
1:50:34 PM
DR. KNAPP emphasized that they are not advocating for or against
any fiscal options or choices. The only purpose is to help
inform the fiscal discussion. Their analysis is relevant to
their fiscal choices and is far from sufficient as a sole basis
for arguing for or against any fiscal options.
1:51:30 PM
DR. KNAPP reiterated that they prepared this study
independently:
•The Department or Revenue and Office of Management and
Budget funded this study
•They had no influence over the study design, analysis or
conclusions
•The findings are only what is reported in their report and
presentations - They are not necessarily what other people
say they are
1:52:06 PM
DR. KNAPP turned to the revenue impacts of taxes and dividend
cuts. He displayed a chart showing that non-residents would pay
about 9-11 percent of sales taxes and about 7 percent of income
taxes. He described the logic behind that analysis.
CHAIR COSTELLO noted that 82.9 percent and 83.9 percent of
income tax would be paid by Alaskans. The committee learned that
not all Alaskans would pay income tax.
DR. KNAPP said he would address that later in the presentation.
1:54:26 PM
SENATOR STEVENS asked how a Seattle-based fisherman's income tax
would be calculated in Alaska.
DR. KNAPP said he would need to learn the details of the
situation and the tax would be difficult to determine.
CHAIR COSTELLO asked what the assumptions were in this study.
DR. KNAPP said they are in Appendix A of the report. More data
could be added to the final report if there is a need to do so.
1:56:10 PM
He displayed a chart showing that the impacts of state taxes and
dividend cuts on Alaskans' incomes would be partially offset by
reductions in their federal taxes. Higher-income households that
pay higher tax rates would benefit most. The chart shows
estimates of these offsets.
He noted that the higher the income, the more pronounced the
impact.
SENATOR MEYER asked if sales tax is deductible on the federal
form.
DR. KNAPP said yes and added there is discussion in Matt
Berman's report about who would deduct sales tax.
He noted the difference between the dividend cut and the income
taxes and sales taxes for non-residents versus residents, is
that some of the sales and income taxes are paid for by non-
residents. The dividend cut has a higher economic impact when
not offset by non-residents.
2:00:31 PM
DR. KNAPP showed slide 15, which illustrates the estimated
effects of taxes and dividend cuts for 10 groups of Alaska
households, grouped by their per-capita cash income in 2013,
from the lowest 10 percent to the highest 10 percent.
Slide 16 shows the three lowest-income groups had average
household incomes of less than $45,000. The highest-income group
had an average household income of more than $200,000. He said
this relative range of income distribution is more than any
other state. He noted 21 percent is earned by the highest income
group and is equivalent to the rest of the groups.
2:03:26 PM
He discussed on slide 18 how options affect different groups:
income reduction per person - the average per capita disposable
income reduction per $100 million in deficit reduction.
He used various lines on a graph to make his points: the brown
line shows that the dividend cut takes more from low income. The
red line shows that the income tax is the most progressive and
collects nothing from the lowest income group. The sales and
property taxes have an intermediate effect.
SENATOR GIESSEL noted that the committee was told that estimates
show that 43 percent would pay no income tax. She asked if that
was taken into account on this chart.
DR. KNAPP said Dr. Berman's estimates show some income tax
kicking in at the lower level. Dr. Knapp did not know how to
reconcile Senator Giessel's statement and noted, if it were
true, you would expect the red line to remain at zero. He said
he would need to see the source of that information.
SENATOR GIESSEL said the statement came from DOR.
DR. KNAPP said he'd look into it, but his impression is that DOR
said ISER's analysis was more complex than theirs. He said for
the final report he would check to see if there is a discrepancy
and what would explain it. Clearly, most of the burden of income
tax would be borne by high income people.
SENATOR MEYER thought DOR said anyone under $50,000 would pay no
income tax. He agreed with Dr. Knapp's theory.
DR. KNAPP said he'd be surprised to learn that anyone earning
less than $50,000 would not pay any income tax.
2:09:37 PM
DR. KNAPP turned to slide 20 that shows how options affect
different groups: percentage income reduction per person, as
opposed to dollars in the previous slide. He noted this is cash
income and some lower income households use cash equivalents
CHAIR COSTELLO asked how the study calculated children's
dividends.
DR. KNAPP said they were included in household income. His
colleague looked at detailed data on the different taxes
different people pay. He used that to estimate the marginal tax
that would be paid by each group. It's a complex calculation,
but intuitively reasonable.
2:12:31 PM
Slide 21 shows how the combination of options would have
intermediate effects on households of different income levels.
Slide 22 is the same graph in percentage terms. The combinations
of options would have intermediate effects on households of
different income levels.
2:14:03 PM
DR. KNAPP turned to the saving less option:
Saving less (and using the money to fund government) would have
no short-run economic impacts on the Alaska economy.
•Options for saving less include:
-Reducing inflation-proofing transfers to PF principal
-Adding less to the PF earnings reserve
•Saving less would not:
-take any money out of the economy
-have any short-run impacts on jobs or income
•But it would reduce:
-our future investment earnings
-how much savings we leave for future Alaskans
DR. KNAPP explained that the graph on slide 25 illustrates that
from 2010 to 2015, Alaska saved an average of $1.4 billion
annually of Permanent Fund realized earnings. He distinguished
between the concept of sustainably saving less and unsustainable
saving; use of current earnings, as opposed to drawing down the
CBR.
In contrast, spending cuts, taxes, and dividend cuts would have
significant short-run economic impacts. They would all take
significant amounts of money out of the economy, but they would
do so in different ways, with different impacts on different
Alaskans and different relative impacts on public and private
employment.
CHAIR COSTELLO pointed out she was told that states that
implement an income tax see lower job growth.
DR. KNAPP said that is an example of a longer term potential
economic impact of an option that they didn't study. He
suggested it would be useful for someone to research it. He
noted that 35 states have income taxes and not all of their
economies are having issues.
SENATOR MEYER asked if the study considers the efficiency of
collecting the revenue.
DR. KNAPP said no; his general understanding is it is cheapest
to have a state income tax formula that is based on the federal
income tax, and that a sales tax is more expensive to collect.
The study is focused on the money coming out of the economy
2:20:01 PM
SENATOR MEYER said he mentioned it because DOR estimated it
would take an additional 50 employees to collect an income tax.
He assumed if the PFD was reduced there would be no need to add
more state employees.
DR. KNAPP said that is a relevant consideration.
2:20:38 PM
He said slide 27 shows how ISER compared relative impacts of
spending cuts, taxes, and dividend cuts. They used a standard
"economic impact analysis" using the IMPLAN model. They began
with the question, "How does spending change?" They standardized
it with impacts per $100 million of deficit reduction. They
paired both low and high impact estimates based on different
assumptions about how changes in income affect spending and
multiplier impacts. They also paired low and high assumptions
estimated from different data sources. The earlier presentations
presented high impact estimates. Low impact estimates are
slightly smaller, but have the same relative impacts.
CHAIR COSTELLO asked if they considered the relative size of
families in different areas of the state.
DR. KNAPP reiterated that family size is built into the
calculation. He also reiterated that different cuts have
different impacts. The report gives examples of the potential
range of impacts.
DR. KNAPP explained slide 28, the economic impacts of spending
cuts depending on what is cut.
Cuts affect:
•Direct impacts on workers' incomes and jobs for both
government workers and contractor workers
•Impacts on contractor sales and spending
•Impacts of reductions in state services
-Instructure development and maintenance
-Resource management (fish catches, mine permitting)
-Transportation (Marine Highway service, road plowing,
etc.)
-Quality of social services (schools, health care,
parks, etc.)
He concluded that you can't generalize about economic impacts of
spending cuts. Estimates illustrate a range of potential
impacts.
2:26:55 PM
He discussed the input-output modeling methodology for
estimating short-run economic impacts of fiscal options, on
slide 29, such as spending cuts, dividend cuts, and taxes. There
are both direct income impacts and job impacts, as well as off-
shoot impacts from those impacts, such as spending.
2:28:46 PM
He showed the calculation of direct impacts on income on slide
30. He assumed a short-run economic impact per $100 million of
deficit reduction. He listed spending cut options and impacts of
direct earned income in millions, direct other income in
millions, and why the direct income impact is less than $100
million.
CHAIR COSTELLO asked about the capital spending cut option,
which is less than any other option. She asked about the
construction industry.
DR. KNAPP said in cutting the capital budget by $100 million, a
lot of construction jobs will be lost, but not as much as if
workers alone were cut.
CHAIR COSTELLO said this illustrates how complex the calculation
is because the operating budget is where state workers would be
paid.
DR. KNAPP pointed out that a dramatic drop in capital spending
affects the money coming into the state economy and that will be
seen in coming years.
2:33:25 PM
DR. KNAPP turned to the topic of calculating economic impacts on
slide 31: multiplier income impacts, with short-run economic
impacts per $100 million of deficit reduction. He noted pay cuts
have a smaller multiplier impact than dividend cuts because more
of pay goes to federal taxes and savings.
2:34:52 PM
He continued with calculating economic impacts on slide 32: job
impacts, short-run economic impacts per $100 million of deficit
reduction. Job impacts are biggest for cutting government
workers because they include direct losses of government jobs.
Taxes and dividend cuts have only multiplier impacts on jobs.
He showed the short-run economic impacts under a high scenario
on slide 33 and a summary of fiscal options and estimated
impacts per $100 million of deficit reduction on slide 34.
2:39:13 PM
The graph on slide 35 shows estimated job impacts per $100
million of deficit reduction (FTE jobs) and income impacts on
slide 36. He emphasized that all the numbers are big and affect
the economy. The differences aren't that great unless a large
share is going outside to buy supplies for construction.
2:40:37 PM
The economic impacts of reducing the deficit will depend on what
combination of options are used - slide 37. Slide 38 is a table
from the report giving examples of ranges of estimated economic
impacts per $100 million of deficit reduction resulting from
selected potential combinations of fiscal options. It makes the
point that the impacts will be different based on the
combination of those that are chosen.
2:42:43 PM
CHAIR COSTELLO asked what the 25 percent represents.
MR KNAPP provided a hypothetical example that combines four
approaches to raising $100 million, and 25 percent would be one-
fourth each, or the average of each option. It illustrates
examples of potential combinations.
2:43:57 PM
DR. KNAPP turned to regional differences in economic impacts of
fiscal options. He showed that income distribution varies for
different regions of Alaska. His chart highlighted the share of
total 2013 federal income tax exemptions by adjusted gross
income group and Alaska census areas - slide 40.
2:45:50 PM
He showed the share of state government jobs in wage and salary
earnings in different regions - slide 41. Regional economic
impacts of state spending cuts would depend on how important
state government jobs and income are in the regional economy.
Some regions are much more dependent than others.
Slide 42 shows the relative importance of local government jobs
in the economy. Regional economic impacts of cuts to revenue
sharing, K-12 education, and other ways that state spending
helps fund local government would depend on how important local
government jobs are in the regional economy. Some regions are
much more dependent than others.
2:47:31 PM
DR. KNAPP turned to the total economic impacts of reducing the
deficits. Slide 44 shows the estimated income and job impacts of
reducing the deficit by different amounts using different
options. This gives a sense of what the effect on jobs and
income there would be at any particular level.
Slide 45 shows how big Alaska's economy is. It lists selected
estimates of Alaska income and employment in 2014. The source is
the Bureau of Economic Analysis.
Slide 46 shows the estimated percentage income impacts of
reducing the deficit by different amounts using different
options. Slide 47 shows how jobs are impacted. He emphasized
that he isn't saying any of the numbers is the right estimate.
The purpose of the table is to facilitate a comparison of fiscal
options.
2:52:07 PM
DR. KNAPP raised the question of how much is needed to reduce
the deficit. He said they didn't study that important question.
He noted the answer depends in part on what you assume about
future oil revenues and how much Alaska is willing to draw down
its savings.
2:53:43 PM
He highlighted Alaska Department of Revenue projections for
general fund unrestricted revenues. He noted that this year
general fund spending is $5.2 billion. He showed projections of
forecasts for various years at various oil prices. At $30/barrel
there would be a $4 billion deficit.
2:54:39 PM
He stated that Alaska can't sustain general fund spending over
time that is more than its unrestricted general fund revenues.
This year (FY16) spending is $5.2 billion for government. Over
the next 10 years, the general fund revenues from current
sources will probably be about $1.5 - $2.5 billion. It will be
necessary to reduce the difference between general fund spending
and general fund revenues by between $2.7 and $3.7 billion. How
much and how fast the reductions need to be depends on future
revenues and the willingness to draw down savings.
2:56:07 PM
He continued to say the state has lost billions of dollars of
oil revenues - slide 51. There will be significant economic
impacts of adjusting to lower oil revenues.
•Impacts of spending cuts we've already made:
-Impacts of capital budget cuts on construction industry
-Delayed because capital projects take several years
-Actual capital spending will decline as money from past
large capital budgets runs out
•Impacts of future adjustments we will have to make
-Spending cuts
-Taxes
-Dividend cuts
2:57:16 PM
CHAIR COSTELLO noted that Representative Ortiz joined the
committee some time ago.
DR. KNAPP addressed how fast the state needs to reduce the
deficit - slides 52 and 53. He highlighted that closing the
deficit in this year could have a significant impact on an
already weakened economy. On the other hand, not making
significant progress would also have significant impact on the
economy, such as having increased business and household
uncertainty about the future. It could affect future investment
and downgrade the state's credit rating.
He opined there will be a smoother transition if there is a plan
toward a sustainable path and building confidence in the state's
future - slide 54. If the state substantially reduces the
deficit this year and clearly demonstrates to Alaskans,
businesses, and investors that it can, and will, finish closing
the deficit there will be a smoother transition. The plan must
build confidence in Alaska's fiscal future.
2:59:46 PM
DR. KNAPP noted many other potential economic impacts of fiscal
options - slide 56. Their studies are only a start in
understanding potential economic impacts. He addressed potential
economic impacts of spending cuts listed on slide 57:
•Impacts of reductions in state services?
•Impacts on economic development and future revenues?
•Impacts on future state costs and spending?
•Impacts of cost shifting to local governments and service
users?
•Impacts on federal matching funding?
•Impacts on public employee work force?
3:00:39 PM
He listed on slide 58 other potential economic impacts of taxes:
•Some level of taxes is a "necessary evil," but:
-What level is necessary?
-What kinds are "least evil?"
•Shifting of purchases to non-Alaska retailers?
•Reduced incentives to invest in Alaska?
•Reduced competitiveness of Alaska resource industries?
•Higher labor costs?
•Administration and enforcement costs?
•Public "skin in the game" and more attention to state
spending?
•Fixing the "Alaska disconnect" so that growth pays for
itself?
He concluded that not all impacts are bad. They may bring more
attention to state spending and may fix the "Alaska disconnect"
so that growth pays for itself.
DR. KNAPP listed other potential economic impacts of dividend
cuts on slide 59:
•Ability of lower-income Alaskans to live in high-cost
rural areas?
•Ability of Alaskans to accumulate wealth for "big-ticket"
investments such as homes and college
•Impacts on Alaska wage rates?
•Impacts on how many and what kind of people move to or
from Alaska?
•Impacts on extent to which Alaskans feel they have a stake
in the Permanent Fund and are committed to growing and
protecting it?
He suggested thinking about the long-term impacts of these
potential changes.
DR. KNAPP summarized that Alaska's fiscal choices will
significantly affect Alaska's future economy and society. He
urged thinking not only about short-term economic impacts, but
also about longer-term economic and social impacts.
3:02:27 PM
SENATOR MEYER said he didn't see any analysis of tobacco,
alcohol, or motor fuel taxes.
DR. KNAPP said his colleague looked at those and considered how
regressive they would be. The data shows that higher income
Alaskans pay more for alcohol, whereas tobacco taxes take more
money from low income people. There is similar income data for
motor fuel taxes.
SENATOR MEYER said DOR admitted that Alaska already has the
highest alcohol tax in the nation and he opined that doubling it
will affect small businesses. He asked if that data is in the
analysis.
DR. KNAPP said that is a relevant point and the comparative tax
burden question really matters.
SENATOR MEYER asked about slide 35. He questioned whether the
job impacts consisting of a spending cut in pay and a sales tax
with exclusions would have the least impact.
DR. KNAPP said yes. He added that it is related to income
distribution. He provided an example of a cut in pay for
government workers having less impact due to higher-than-average
wages and their tendency to save more.
SENATOR MEYER suggested that a sales tax protects those with
lower incomes.
DR. KNAPP said that is probably related to the amount paid by
non-residents.
3:06:58 PM
SENATOR GIESSEL said she is struggling with her take away and
the utility of the study. The last slide in particular is what
has been known for several years. She asked what her concrete
takeaway should be.
DR. KNAPP responded that "all these things would affect the
economy." He stressed that income distribution effects are
definitely relevant regarding cuts and taxes, and decisions
about that ought to reflect consideration of this factor.
He stated that it took writing this report to realize what is in
the last slide. There is a lot more that is relevant than
previously thought. These results don't tell you the right thing
to do, so reasonable people will come to different conclusions.
3:11:44 PM
SENATOR GIESSEL commented that Dr. Knapp has described the
difficulty of the work he has done and she appreciates that for
the public's information. She concluded that it will take
patience, discipline, and vision to get to the right answer.
SENATOR STEVENS said a strong takeaway is having "skin in the
game." He said perhaps we're in the fix we're in because people
have not had to pay in the past.
DR. KNAPP agreed it is a reasonable hypothesis. He cited local
spending decisions regarding capital projects in Anchorage and
opined that there hasn't been that level of scrutiny at the
state level.
CHAIR COSTELLO thanked Dr. Knapp.
3:15:16 PM
There being no further business to come before the committee,
Chair Costello adjourned the Senate Labor and Commerce Standing
Committee meeting at 3:15 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| CS SB 111 Ver. P.pdf |
SL&C 3/15/2016 1:30:00 PM |
SB 111 |
| SB 111 - Sponsor Answers to Questions.pdf |
SL&C 3/15/2016 1:30:00 PM |
SB 111 |
| 2016.02.23 - SB 111- Opposition Follow-up ACC.pdf |
SL&C 3/15/2016 1:30:00 PM |
SB 111 |
| 2016.03.14 - ISER - Economic Impacts of Alaska Fiscal Options-Draft Report.pdf |
SL&C 3/15/2016 1:30:00 PM |
ISER Alaska Fiscal Options Draft Report |
| 2016.03.15 - Sen. L&C - ISER Economic Impacts of Alaska Fiscal Options.pdf |
SL&C 3/15/2016 1:30:00 PM |