SJR 7-CONST. AM: STATE TAX; VOTER APPROVAL  2:42:18 PM CHAIR HOLLAND reconvened the meeting and announced the consideration of SENATE JOINT RESOLUTION NO. 7, Proposing amendments to the Constitution of the State of Alaska relating to prohibiting the establishment of a state tax without the approval of the voters of the state; and relating to the initiative process. [This was the first hearing on SJR 7.] 2:42:41 PM MIKE BARNHILL, Deputy Commissioner, Department of Revenue, Juneau, Alaska, began a PowerPoint on SJR 7 by paraphrasing slide 2: • SJR 7 amends article 9, section 1 of the Alaska Constitution: • Requires voter approval for any new tax enacted by the legislature • Article 9, section 1(b) • A form of direct democracy • Functionally, authorizes an automatic referendum on new taxes • Requires legislative approval for any new tax enacted by initiative • Article 9, section 1(c) • Amends the people's constitutional initiative power • Functionally, a form of checks and balances MR. BARNHILL characterized section 1 (b) as a prepackaged referendum. Whenever the legislature enacts a new state tax, voters will have an opportunity to reject it under this amendment to the constitution. If Alaskans enacted a tax through the initiative process, section 1 (c) would require legislative approval. In this sense, SJR 5 would amend the people's constitutional initiative power to add legislative approval, thus providing a form of checks and balances. He characterized this as essentially coupling direct democracy with representative democracy by requiring both to enact any new state tax. 2:45:07 PM SENATOR SHOWER asked if the people have ever taxed themselves in this manner. MR. BARNHILL answered no; then clarified that the marijuana tax was done by initiative. 2:45:27 PM SENATOR MYERS concurred. 2:45:53 PM SENATOR KIEHL asked what was wrong that needs fixing in the current referendum language. MR. BARNHILL said, "Nothing is broken." SJR 7 acknowledges that the state likely cannot rely on oil taxes, so the state will need to rely on taxes to pay for government services. The policy concept in SJR 7 is to provide the people with a more powerful voice and legislative consideration whenever enacting a new state tax. SENATOR KIEHL pointed out that the state has previously had statewide taxes in place, including those enacted by initiatives and others that were legislatively enacted, which were later repealed. He maintained that he did not understand the need for SJR 7. MR. BARNHILL restated that the intent of SJR 7 is to give the people a stronger voice. 2:47:37 PM SENATOR HUGHES said SJR 7 relates to any new taxes. She described a scenario in which the state enacted a 2 percent sales tax. She asked if the legislature subsequently raises the tax rate to 10 percent whether it would be considered a new tax under SJR 7. MR. BARNHILL responded that the hypothetical scenario she described would not go before the voters. In the last legislative session, he recalled a resolution before the legislature that proposed amending Alaska's Constitution by requiring any new taxes or increases to taxes would require voter approval. However, the language requiring voter approval for any increases to taxes was removed by SJR 7. 2:48:25 PM SENATOR SHOWER stated that the legislature has been discussing tax issues for years. He offered his view that SJR 7 relates to a broad-based tax rather than the marijuana tax, which is more of a user fee. He said that the state will need to enact an income tax, sales tax, or other tax to pay for government services. 2:49:27 PM MR. BARNHILL reviewed voter approval in other states on slide 3: • Other States That Require Voter Approval of New or Increased Taxes: • Colorado (1992) • "Taxpayer Bill of Rights" (TABOR) • Requires voter approval of new taxes and increases to existing taxes at state and local level • Colorado voters approved marijuana tax in 2013 • Missouri (1996) • Requires voter approval of tax increases of $50mm (adj. for inflation) • 2018 Proposition D, $400mm increase to gasoline tax, defeated at polls • Washington (2001) • Requires voter approval of certain increases to real and personal property tax ("levy lid lifts) • In recent years, 75% of levy lid lifts have been approved by voter MR. BARNHILL directed attention to a spreadsheet in member's packets that listed taxes considered in Colorado, Missouri, and Washington. He reported that 5 of 15 tax proposals put before the voters in Colorado were approved and 3 of 11 measures Missouri put before the voters were approved. 2:51:25 PM MR. BARNHILL reviewed considerations on slide 4: • Considerations: • Voter consent to new taxes may increase tax compliance • Hug & Sporri, "Referendums, Trust and Tax Evasion," European J. of Pol. Econ. (Mar. 2011) • Requirement of voter consent can delay implementation and collection of new revenues • National Council of State Legislatures has considered generally the pros and cons of "tax and expenditure limitations" 2:52:06 PM MR. BARNHILL referred to the Hug & Sporri study listed on the slide. This study showed tax compliance actually increased in those countries in which the voters were asked to consent to a new tax. 2:52:28 PM MR. BARNHILL stated that delays in enacting new taxes requiring voter approval could be disruptive to governments during revenue shortfalls. MR. BARNHILL pointed to the pros and cons of "Tax and Expenditure Limitations" shown on slides 5 and 6. He stated that this information is posted on NCSL's website, which members can review. 2:53:17 PM SENATOR HUGHES asked if any studies found that voter participation increases when tax proposals are on the ballot. MR. BARNHILL answered that he was unsure of any studies, but it makes sense that more voters would come to the polls. 2:53:44 PM CHAIR HOLLAND opened public testimony on SJR 7. 2:54:08 PM MIKE COONS, President, Association of Mature American Citizens (AMAC), Mat-Su Chapter, Palmer, Alaska, read into the record a letter by Bob Carlson, President, AMAC Action to Senator Hughes [Original punctuation provided]: We are pleased to support SJR 7, proposing an amendment to the Constitution of the State of Alaska to prohibit the establishment of state tax without the approval of the voters of the state. Specifically, this amendment provides the citizens of Alaska the right to reject, by popular vote, a new tax. And if they approve it, the amendment provides for a check by the legislature before such a tax could take effect. This is an excellent approach to preventing runaway taxation and it serves well to protect Alaskans, and specifically seniors on fixed and modest income. I am pleased to offer our organization's full support for SJR 7. Bob Carlson, President AMAC Action MR. COONS said AMAC's Mat-Su Chapter membership fully supports SJR 7. He offered his belief that the people run government by telling government what to do. SJR 7 provides the means for the voters to make the final decisions on any new taxes in Alaska. 2:56:55 PM CHAIR HOLLAND stated that those wishing to provide written testimony could submit them to senate.judiciary@akleg.gov. 2:57:07 PM BERT HOUGHTALING, representing self, Big Lake, Alaska, stated that he supports voter approval of any new taxes or any old taxes since taxes affect Alaskans. For example, the House Ways and Means Committee is currently discussing statutory changes to implement taxes. Alaskans will not vote on it if the legislature passes a tax bill. SJR 7 will ensure that legislators will not make decisions on new taxes without first obtaining approval from Alaskans. 2:59:05 PM CHAIR HOLLAND closed public testimony on SJR 7. 2:59:14 PM SENATOR KIEHL said he still has questions about what constitutes a new tax and how SJR 7 will affect local taxes. [SJR 7 was held in committee.]