Legislature(1997 - 1998)
02/13/1997 03:03 PM House HES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HB - 1 CIGARETTE AND TOBACCO TAX
Number 1486
CHAIRMAN BUNDE announced that the next item on the agenda was CSHB
1(HES), "An Act relating to taxes on cigarettes and tobacco
products; and providing for an effective date."
Number 1489
DAVE PETERS testified next via teleconference from Valdez. He said
he was against CSHB 1(STA) as he did not see how raising the taxes
on cigarettes was going to keep kids from smoking. He said it
would just make them be able to steal cigarettes a little easier.
He said maybe if a tax was imposed on alcohol, or a tax to boost
the situation where people get fined for selling kids the
cigarettes, would work. He said kids will still have the access,
they will just steal more from their parents. He said CSHB 1(STA)
will hurt him as he is a smoker.
Number 1590
CHAIRMAN BUNDE referred to the evidence supporting the increase in
tobacco costs with a drop in underage smoking. He also cited the
costs to the state because of tobacco related illnesses.
MARLENE LEAK testified next via teleconference from Fairbanks. She
said state government wants more money and is using pious
platitudes that the solution to any problem is more tax money. She
went on to say that some health related non-profit organizations
have found that being anti-tobacco is a veritable gold mine in
contributions and government grants. These organizations, for
public relations purposes, need a little moral victory for their
cause, without threatening a ban on tobacco, and the tax increase
does look good there.
MS. LEAK asked the committee to recall that the March of Dimes was
almost wiped out when Dr. Salk discovered a vaccine for polio, but
with quick thinking a new cause was picked. The cause they chose
was birth defects which has a myriad of causes and is unlikely to
be cured. She asked if tobacco would be as easy to replace. She
said non-profit organizations, profiting from tobacco, can't take
that chance.
MS. LEAK said about a year ago, a front page article in the Wall
Street Journal detailed how a massive increase in tobacco tax in
Canada began a giant black market for cigarettes. Later in 1996,
Canada lowered the tobacco tax. A federal luxury tax increase was
reversed a few years ago due to a loss of ship building jobs when
sales of yachts went overseas or to the used yacht market. As the
Boston Tea Party showed, the public will not respect a greedy,
arrogant government. Even when we get sanctimonious sermons that
it is worth the tax to discourage teenagers from smoking.
MS. LEAK said if the correlation studies which tell us that tobacco
kills several hundred thousand U.S. citizens per year were true, it
would be murder for the legislature to leave this substance legal.
Assuming that you believe the numbers to be true, the tax would be
blood money for the state. She suggested that states, such as
Alaska, might be sued by victim's families who might claim that the
state knew that tobacco was a killer, but was left legal for short
term tax increase gain. She asked if this showed compassion on
behalf of the legislators. She asked the legislators to admit that
they want more tax money and that they would do and say anything to
get it. She said she is against CSHB 1(STA).
Number 1745
BETTY ROLLINS testified next via teleconference from Fairbanks.
She said she is a non-smoker, but CSHB 1(STA) allows the state to
hide behind the bad guy. We have 3,000 contaminated sites in the
state of Alaska, and many contaminated sites in the NorthStar
Borough. She said there has been no action by the legislature or
by any government entity to assist with this problem.
MS. ROLLINS said she talked with the Michigan DOR where bootlegging
is a very serious problem. She said the state of Michigan raised
their tax 200 percent, but only received 28 percent in additional
tax revenues from the tobacco tax. She asked Mr. Vesley [Ph] of
DHSS if he had any statistics on any of the programs designed to
discourage underage smoking, how many children did not smoke
because of those programs. She was told that DHSS did not have the
ability to go out and find these figures. She was faxed a 2-year-
old supposition by DHSS to tell people that a tax increase will
stop teen smoking. She said it is the same supposition that is
being used today.
MS. ROLLINS said she has a letter from the Department of Public
Health signed by state troopers and the Michigan Department of
Public Health. The letter says that even though they are getting
more money in tobacco tax, it will start interfering with the
private lives of people. Highly trained officers are following up
on tests and making arrests when illegal activity occurs such as
when people cross state borders to buy two or three cartons of
cigarettes. She said there is a special force to take care of this
in Michigan. She asked if we wanted to do this in Alaska.
Number 1848
DOUG YATES testified next via teleconference from Fairbanks. He
said the tobacco industry is big business, spending billions to
advertise their products. He said most of that advertising money
is used to convince children that the glamour of using their
products outweighs long term health consequences. As a result of
the industry's power and their vested interest, tobacco will never
be outlawed. Society will never place it in the same arena as
marijuana, it is too strongly established as part of this culture's
accepted addictions. The only avenue to free thinking men and
women who recognize its cost to our people is to employ a level of
taxation that begins to address these costs.
MR. YATES said he was astounded that there was so much opposition
to this measure since Republicans pride themselves on fiscal
responsibility. He asked what better way to ease the financial
burden of raising a family in Alaska then to reduce the cost of
health care. According to reliable estimates, significant money
can be saved if we work to eliminate health care costs associated
with tobacco addiction. He said the tobacco industry relishes the
ideological morass spawned by the issue of taxation. In each state
where taxation is an issue, there are guys who stand and point at
tax proponents. He urged all legislators to set aside ideological
differences and realize that increased taxation will begin to tilt
the scales for the long term advantage of the state.
Number 1938
SCOTT CALDER testified next via teleconference from Fairbanks. He
wanted to reflect on the assertion that is being made that the
reason to tax tobacco is to prevent children from smoking, or to
deter children from smoking. In connection with his experiences
with the state's juvenile authorities, he wanted to tell the
committee why this is a false perspective. He said we want to tax
tobacco so that we can pay for government. He said the state of
Alaska pays specialized foster parents $90 a day and that the
foster parent who took care of his son was buying cigarettes for
his son. He questioned why the legislature was raising taxes and
accruing more funds to pay for services for which there is no
oversight or recourse to a parent like himself, who is faced with
a specialized foster parent providing cigarettes to his child. He
said he did not want any more taxes or any more liabilities to the
people in the state of Alaska until those problems are corrected.
He suggested that every man, woman and child in the state of Alaska
would be better off if they smoked a pack a day than if they had to
put up with that type of government.
Number 2066
CHAIRMAN BUNDE said there is no indication that any monies raised
from this tobacco tax would go to the Division of Family and Youth
Services (DFYS). He said CSHB 1(STA) dedicates the money to a
school construction fund. His other point was that a vast majority
of people in the state of Alaska asked the legislature to address
this issue. He referred to a letter by the Federation of
Independent Businesses which had 62 percent of their members in
favor of supporting this tax. He said this is not some plot from
government, it is simply government responding to the requests of
their constituents.
Number 2097
CAM CARLSON testified next via teleconference from Fairbanks. She
said she is a non-smoker, but is adamantly opposed to the tobacco
tax. The purpose of taxes is not social, behavior modification or
social engineering and added that it is being used as an excuse for
increased revenues. She said saying the money will be used for
schools is just kind of facetious and added that if we think so
little of schools that the only way we can get money for them is to
tax and bite, then it is a pretty sad state of affairs. She
referred to the previous testimony regarding foster parents letting
kids smoke and the problems that need to be corrected in this area.
Number 2149
CHAIRMAN BUNDE said if CSHB 1(STA) works and is a barrier, then
these children won't begin to smoke and maybe that will solve that
problem. He said this is a totally voluntary tax, no one has to
pay this tax. They simply don't smoke and they won't pay for the
tax. He reminded those people concerned over taxation that smokers
cost the state of Alaska nearly $200 million a year. He asked if
those people would rather pay an income tax to take care of those
expenses or if they think a user fee is more appropriate.
TAPE 97-10, SIDE B
Number 0000
DON DAPCEVICH, Executive Director, Advisory Board on Alcoholism and
Drug Abuse, said the legislative committee spent the major part of
this morning meeting telephonically to speak about the tobacco tax.
He said they wanted him to convey to the committee that those
members from Fort Yukon, Palmer, Fairbanks, Anchorage and Ketchikan
have gone into their communities and talked with people and have
made up their minds that they want to support this initiative. He
said they want to congratulate the committee on bringing it
forward. He said the committee hopes the state doesn't collect a
dime on these taxes, they would prefer that people not smoke.
MR. DAPCEVICH said there is no question that cigarettes are a
gateway drug. He said this does not suggest that there is a causal
relationship between smoking tobacco and smoking marijuana or using
heroin, but it is well established that tobacco is certainly a
gateway drug. He said it is also well established that as price
goes up, use goes down especially among the most price sensitive
group which is youth. He said his committee urged the legislature
to pass CSHB 1(STA) with one cautionary note. He said they felt
that education efforts, for tobacco and other drugs, should be
redoubled in the schools. He said, as price goes up and
accessibility goes down, we need to make some measures for smoking
cessation programs for youth and adults. He said CSHB 1(STA) will
improve the health of people in the state and only requires that
users of tobacco pay the tax.
Number 0163
REPRESENTATIVE PORTER made a motion to move proposed Amendment 1 to
CSHB 1(STA).
Number 0182
REPRESENTATIVE VEZEY objected to the motion.
Number 0187
CHAIRMAN BUNDE said the purpose of proposed Amendment 1 is to
discourage prolonged litigation. He said HB 1, as amended,
contains the dedication to the school fund and there is a
severability clause in the bill that said if there were litigation
that found this dedication to be unconstitutional, then the money
would go into the general fund. He said the proposed Amendment 1
is a provision to discourage prolonged litigation which might be
filed in hopes of tying this issue up for a number of years before
the tax becomes effective.
Number 0239
JACK CHENOWETH, Attorney, Legislative Legal Counsel, Legislative
Legal and Research Services, Legislative Affairs Agency, clarified
that the proposed Amendment 1 was E.2. He said, "E.2 as I
understand it is in response to an Assistant Attorney General's
concern that because the main bill, the increase in the taxes in
the main bill are set to take effect October 1, 1997, that there
needs to be a retroactive feature for the provisions in the bill
that deal with .090 and .190(a), .090(a) in Section 2 and .190(a)
in Section 4 and a means by which the levy, the amount raised by
the levy, by the increased levy is directed properly for the
cigarettes that are sold after October 1. I think it has to do
with the concern that there be some mechanism in place to protect
the state, the school fund in the event there is protracted
litigation and some means by which the revenue can be accounted for
and followed through in the event litigation eventually works out
to be contrary to the position that this money go into the, into
the school fund."
Number 0354
A roll call vote was taken on the proposed Amendment 1.
Representatives Bunde, Porter, Brice, Kemplen and Dyson voted yea.
Representative Vezey voted nay. Representative Green was absent
for the vote. Amendment 1 was adopted to CSHB 1(HES).
CHAIRMAN BUNDE called for an at ease at 3:53 p.m. The committee
meeting resumed at 3:54 p.m.
Number 0415
REPRESENTATIVE PORTER made a motion to move CSHB 1(HES) with
individual recommendations and attached fiscal notes.
REPRESENTATIVE VEZEY objected to the motion.
A roll call vote was taken on CSHB 1(HES). Representatives Bunde,
Dyson, Kemplen, Brice, Green and Porter voted yea. Representative
Vezey voted nay. CHAIRMAN BUNDE declared that CSHB 1(HES) was
moved from the House Health, Education and Social Services Standing
Committee with individual recommendations and attached fiscal
notes.
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