Legislature(2023 - 2024)DAVIS 106
03/29/2023 06:00 PM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB110 | |
| HB142 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 142 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| *+ | HB 110 | TELECONFERENCED | |
HB 142-STATE SALES AND USE TAX
7:01:06 PM
VICE CHAIR MCCABE announced that the final order of business
would be HOUSE BILL NO. 142, "An Act relating to a state sales
and use tax; authorizing the Department of Revenue to enter into
the Streamlined Sales and Use Tax Agreement; and providing for
an effective date."
7:01:27 PM
CHAIR CARPENTER, as prime sponsor, read the sponsor statement
for HB 142 [included in the committee packet], which read as
follows [original punctuation provided]:
State leaders should naturally be motivated to grow
Alaska's private economy. The prospect of jobs and
opportunity would allow our children to stay in
Alaska, would attract development that would bring
infrastructure investment, and would make retiring
here comfortable for all employeesnot just those who
had government jobs.
Inertia in the state Capitol, however, keeps the state
legislature focusing on government growth without
corresponding economic growth. We can change that with
a long-term fiscal plan for the state that
incentivizes such growth. The Alaska legislature has
the opportunity this session to pass a package of
bills and resolutions that will:
Take the permanent fund dividend payment out of the
annual budget process and require the PFD to be paid
by the formula in law,
• Place a limit on government spending in a manner
that incentivizes economic growth,
• Reform our state government management and budgeting
practices, and
• Promote economic growth with business tax cuts, make
carbon credits available to Alaska resource
developers, streamline regulations, make obtaining
licenses easier.
As part of a package of bills that includes all these
structural reforms, we can institute a low rate,
broad-based sales tax that will bring a small share of
the ensuing economic activity to government, and
further incentivize legislators to pursue economic
growth.
HB142 imposes a two-cent tax on all sales of goods and
services purchased in Alaska and allows the
legislature to share half of the tax revenue with
certain municipalities that meet certain criteria,
including low property taxes.
According to the Tax Foundation, forty-five states and
the District of Columbia collect statewide sales
taxes. Local sales taxes are collected in 38 states.
In some cases, they can rival or even exceed state
rates. The five states with the highest average
combined state and local sales tax rates are Louisiana
(9.550 percent), Tennessee (9.548 percent), Arkansas
(9.46 percent), Alabama (9.25 percent), and Oklahoma
(8.98 percent). Sales tax rates differ by state, but
sales tax bases also impact how much revenue is
collected from a tax and how the tax affects the
economy.
HB142 is designed after the South Dakota system as the
broadest-based tax in the nation. Broad-based systems
keep rates low, keep compliance simple, and create as
few economic distortions as possible. Except for the
five states that have no sales tax, a two-cent
statewide sales tax would maintain Alaska's ranking as
the lowest state and locally combined sales tax rate
in the nation.
7:04:52 PM
CHAIR CARPENTER, in response to a question from Representative
McKay as to whether the sponsor statement should state "two-
cent," said that a two percent tax would be literally a two-cent
per dollar tax.
7:05:27 PM
KENDRA BROUSSARD, Staff, Representative Ben Carpenter, Alaska
State Legislature, on behalf of Representative Carpenter, prime
sponsor, provided the sectional analysis of HB 142 [included in
the committee packet], which read as follows [original
punctuation provided]:
Section 1
HB 142 amends AS 28.10.021 to add sales and use taxes
for vehicles.
Section 2
HB 142 amends AS 43.05.240 (a) to add sales tax
collectors to those who may file for grievance if
their seller's permit or resale exemption certificate
is revoked.
Section 3
AS 43 is amended by adding a new chapter to institute
a statewide sales tax of two percent of sale or lease
of tangible property or services and a two percent use
tax on tangible personal property. The use tax is
applied to tangible personal property acquired outside
of Alaska as the result of a transaction that would
have been subject to the sales tax if it had occurred
in Alaska. The use tax is also applied to tangible
personal property that has been converted to a use
that is subject to tax. The use tax is additionally
applied to services in Alaska that would be subject to
a sales tax if purchased in this state (remote
purchases).
HB 142 provides exemptions to the sales tax for sales
that are exempt by federal law 26 USC (Internal
Revenue Code): government, tax-exempt corporations,
employee wages, interest on loans and deposits, stock
dividends, financial services fees, insurance
premiums, personal uses of property or between
business partners, the sale, lease, or construction of
real property.
HB 142 provides tax credits for sales or use taxes
paid to another state.
HB 142 requires businesses to acquire a seller's
permit before doing business in Alaska.
HB 142 exempts resales from taxation.
HB 142 allows the department of revenue to suspend or
revoke a seller's permit if the person who holds the
permit fails to comply with the provisions of this
law.
HB 142 requires the department of revenue to enter the
Streamlines Sales and Use Tax Agreement, a multi-state
agreement for processing of cross-state transactions.
HB 142 allows for a municipal share. The legislature
may appropriate half the revenue collected from this
tax to municipalities. A municipality may receive an
appropriation under this section if the municipality
does not collect either:
o Property taxes in excess of ten mills; or
o An oil and gas production tax or gas pipeline
property tax.
Section 4
Contains conforming language.
Section 5
Provides for a transition to allow the department of
revenue to adopt regulations under the Administrative
Procedures Act.
Allows for services contracted before the effective
date of the tax to be exempt from the tax.
Allows for persons to apply for a seller's permit or a
resale permit before the effective date of this act.
Section 6
Provides an immediate effective date for Section 5.
Section 7
Provides an effective date for the remainder of this
act of January 1, 2025.
7:08:53 PM
CHAIR CARPENTER expressed the understanding of the gravity of
putting forward a bill instituting a sales tax. He advised that
in order to move the state forward in the direction of pro
economic growth in the non-oil, private sector economy, the
state would need to start moving in this direction. He said
that, as a compromise, he is presenting HB 142 as an option for
a broad-based revenue source, tying the legislative budget
decisions to economic activity in the state. He argued that
people in the state work in the private sector economy, and this
is critical to why Alaskans want to be in the state. He said a
sales tax, or broad-based tax, which ties the economy to
government spending is important. He stressed that HB 142 is
not the only item being presented, rather, it is one component
of a policy package intended to have a positive economic benefit
to the state.
7:11:33 PM
REPRESENTATIVE GRAY raised the concern of higher costs for
expenses, like groceries, in rural Alaska. He stated that the
average price of milk in Anchorage is $4.20, while it is $8.80
in Bethel; therefore, he deduced that if people in rural Alaska
are paying twice as much for groceries, the tax would be twice
as much. He expressed the understanding that, under the
proposed tax program, those who can least afford the tax would
be the ones paying most of it.
7:12:35 PM
REPRESENTATIVE MCKAY advised Representative Gray that the tax
would have to be based on population. He expressed the
understanding that most people live on the Railbelt, while about
a quarter of the population live in rural areas. Furthermore,
he illustrated an example where 75 percent of the state's
population live in the $4.50 per gallon of milk region while 25
percent live in the $16 per gallon of milk region.
REPRESENTATIVE GRAY, interjected, expressing the belief that it
is unfair for people in Bethel to pay more.
7:13:27 PM
VICE CHAIR MCCABE, referring to the comment that the tax would
not be fair for rural populations, questioned whether the
concern is that the revenue generated would be less.
REPRESENTATIVE GRAY clarified that rural residents would be
paying a disproportionately high amount of tax compared to
Anchorage residents. He asked if there is a way to implement
the program without rural Alaskans paying a disproportionate
amount of the tax.
7:14:14 PM
CHAIR CARPENTER suggested that the legislature investigate ways
to reduce the cost of a gallon of milk in rural Alaska. He
suggested that modernizing transportation in the region would be
a better solution.
REPRESENTATIVE GRAY concurred.
CHAIR CARPENTER said, "If there is a will there's a way." He
suggested that the only way would be to grow the state's
economy, as solutions to big problems do not come without a
growing economy. He advised that a two-cent tax on an $8 gallon
of milk would be 16 cents. He explained that if municipalities
can share in the state revenue, then a portion of the state's
tax would be distributed to these municipalities. He suggested
that this could somewhat alleviate the higher cost of goods.
7:16:13 PM
REPRESENTATIVE GROH inquired about the emphasis on boosting the
economy and pointed out that HB 142 would apply a tax on
commerce. He recounted an article regarding the complexity and
resource-heavy process, and how this would impact small
businesses. He asked if Representative Carpenter shared his
concern that a sales tax would burden Alaska's small businesses.
CHAIR CARPENTER responded that a business collecting sales tax
and passing the tax onto the consumer would not be a business
paying the tax, rather the consumer would be paying it. He
argued that regardless of whether the policy is income tax or
sales tax, the cost would be passed on to the consumer.
REPRESENTATIVE GROH commented about the compliance cost, which
he said is the actual cost of collecting the taxes. He
acknowledged that a few cities in the state collect sales tax,
but his community of Anchorage has never had such a tax. He
asked Chair Carpenter if he would seek a sales tax compliance
exemption for small and local businesses.
CHAIR CARPENTER pointed out that Anchorage is currently
struggling with finances. He said the concept of a sales tax
that works in partnership with small businesses is not
unattainable; it is a cost of doing business. He said he is not
concerned about the business community being able to figure this
out since larger corporations, for example, can figure out
larger and more complex corporate income taxes. He said, if the
state were going down the path to eliminating the permanent fund
dividend as a way to continue funding state services, this would
hurt small businesses more than the compliance cost of a sales
tax.
REPRESENTATIVE GROH suggested that an alternative to a sales tax
would be a high-earner tax. He relayed that, according to the
federal reserve, the median household income is $81,000. He
asked how much an average household is expected to pay annually
in sales taxes.
CHAIR CARPENTER expressed uncertainty and stated he would follow
up to the committee.
REPRESENTATIVE GROH asked if each household would get a sales
tax return showing how much it paid in sales taxes throughout
the year.
CHAIR CARPENTER expressed uncertainty.
7:20:11 PM
REPRESENTATIVE ALLARD commented that, although Anchorage does
not have sales tax, there is a 10-cent per gallon tax on fuel.
7:20:40 PM
VICE CHAIR MCCABE said there are many cities in Alaska that have
a sales tax, including Wasilla. For example, if the city needs
to construct a new library, the city could put a question to the
voters as to whether they approve an increase in sales taxes for
a set period of time. Furthermore, he said Wasilla has zero
debt, explaining that, despite not having outside traffic with
tourists, for example, the sales tax in the city would work
"fabulously." He expressed the understanding from the data
presented from the fiscal policy working group, there are not
enough high earners in Alaska to satisfy the amount of money the
state needs; therefore, as regressive as it may seem, the only
possibility is a broad-based sales tax. He asked if Chair
Carpenter agrees with this statement.
CHAIR CARPENTER answered that he has spent time looking at a
sales tax and does not prefer an income tax. He commented that
states with income taxes, or progressive income taxes, are not
as competitive as states which have sales taxes. He advised
that if the committee is going to make a good decision, it
should have a conversation comparing the two types of taxes.
7:22:46 PM
REPRESENTATIVE GROH referred to a study by the Institute of
Social and Economic Research at the University of Alaska
Anchorage, which showed that more than 70 percent of Alaskans
would do better and pay less under an income tax over a sales
tax. Furthermore, he suggested that if the legislature had
passed an income tax in 2017, $700 million would have been
generated. He questioned whether these factors have been
considered in the decision of a sales tax, which focuses on
nonresidents, versus an income tax, which focuses on high
earners.
CHAIR CARPENTER expressed uncertainty concerning the options.
He said that the only thing before the committee right now is a
sales tax; however, he suggested that it is more likely the
permanent fund dividend will be taxed instead, and this would be
the most regressive tax. He said that, if the options are
either the most regressive tax or a less regressive tax, and he
has political agreement to "pass the lesser of those two evils,"
then he would suggest passing the sales tax.
7:24:50 PM
VICE CHAIR MCCABE announced that HB 142 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0110A.PDF |
HW&M 3/27/2023 6:00:00 PM HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB110-DOR-APFC-03-24-23.pdf |
HW&M 3/29/2023 6:00:00 PM |
|
| HB110-DOR-PFD-03-24-23.pdf |
HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB 110 Sponsor Statement.pdf |
HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB 110 Sectional Analysis.pdf |
HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB0142A.PDF |
HW&M 3/29/2023 6:00:00 PM HW&M 2/26/2024 6:00:00 PM |
HB 142 |
| HB 142 Sponsor Statement.pdf |
HW&M 3/29/2023 6:00:00 PM HW&M 2/26/2024 6:00:00 PM |
HB 142 |
| HB 142 Sectional Analysis.pdf |
HW&M 3/29/2023 6:00:00 PM HW&M 2/26/2024 6:00:00 PM |
HB 142 |
| W&M Foundation for Discussion Power Point 3.29.2023 Slide.pdf |
HW&M 3/29/2023 6:00:00 PM |