05/01/2021 11:30 AM House WAYS & MEANS

              HB 189-EMPLOYMENT TAX FOR EDUCATION                                                                           
                                                                                                                                
12:54:03 PM                                                                                                                   
                                                                                                                                
CHAIR SPOHNHOLZ announced  that the only order  of business would                                                               
be HOUSE BILL  NO. 189, "An Act imposing an  education tax on net                                                               
earnings  from   self-employment  and  wages;  relating   to  the                                                               
administration  and   enforcement  of  the  education   tax;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
12:54:18 PM                                                                                                                   
                                                                                                                                
ROSE  FOLEY, Staff,  Representative Ivy  Spohnholz, Alaska  State                                                               
Legislature, on  behalf of  the House  Special Committee  on Ways                                                               
and Means,  briefly introduced  HB 189.   She explained  that the                                                               
proposed legislation would establish an  education tax.  The bill                                                               
seeks to raise  a small portion of the overall  funding needed to                                                               
meet the constitutional  obligation.  She stated  that Section 7,                                                               
Article 1, of the Alaska  Constitution requires the establishment                                                               
and maintenance  of a  system of  public schools.   HB  189 would                                                               
help fulfill  that.  She  noted that Alaska  had some form  of an                                                               
education tax from  1919 to 1980; therefore, the  proposal is not                                                               
a  new idea.    The bill  is estimated  to  raise $65-66  million                                                               
annually once fully implemented  with approximately 20 percent of                                                               
the tax base  attributed to nonresident workers.   She added that                                                               
the measure  contains an element  of progressivity in  the income                                                               
brackets that would determine the tax due.                                                                                      
                                                                                                                                
12:55:31 PM                                                                                                                   
                                                                                                                                
MS. FOLEY  briefly summarized  the sectional  analysis of  HB 189                                                               
[included in  the committee packet],  which read in  its entirety                                                               
as follows [original punctuation provided]:                                                                                     
                                                                                                                                
     Section  1 adds  a new  chapter  to AS  43 creating  an                                                                    
     Education Tax.                                                                                                             
                                                                                                                                
     Sec. 43.45.011 authorizes the  Department of Revenue to                                                                    
     collect an  education tax on wages  and self-employment                                                                    
     earnings from  a source  in Alaska.  The amount  of tax                                                                    
     due is based on  an individual's income and established                                                                    
     in statute.                                                                                                                
                                                                                                                                
     Sec. 43.45.021  directs employers to  withhold one-half                                                                    
     of the  estimated tax  due from  each of  an employee's                                                                    
     first two payrolls of the  year and to maintain records                                                                    
     of  the  withholdings.  The  employer  is  required  to                                                                    
     withhold the tax from the  employee unless the employee                                                                    
     can prove  they have already  paid the tax due  for the                                                                    
     calendar year.                                                                                                             
                                                                                                                                
     Sec.   43.45.031   stipulates  that   a   self-employed                                                                    
     individual  will  remit  the   tax  required  under  AS                                                                    
     43.45.011.                                                                                                                 
                                                                                                                                
     Sec. 43.45.041  provides a mechanism for  a taxpayer to                                                                    
     request a refund if an overpayment is made.                                                                                
                                                                                                                                
     Sec.  43.45.051  requires a  person  to  report to  the                                                                    
     Department  of Revenue  any payments  made  to a  self-                                                                    
     employed  individual if  reporting of  that payment  is                                                                    
     required by the Internal Revenue Service.                                                                                  
                                                                                                                                
     Sec. 43.45.061  directs proceeds  from this tax  to the                                                                    
     public education fund within the general fund.                                                                             
                                                                                                                                
     Sec. 43.45.099  provides definitions  for key  terms in                                                                    
     this chapter.                                                                                                              
                                                                                                                                
     Section 2 is uncodified  law allowing the Department of                                                                    
     Revenue to adopt regulations to implement this act.                                                                        
                                                                                                                                
     Section  3 provides  an  immediate  effective date  for                                                                    
     Section 2, the adoption of regulations.                                                                                    
                                                                                                                                
     Section  4 provides  an effective  date  of January  1,                                                                    
     2022 for the Education Tax.                                                                                                
                                                                                                                                
12:56:57 PM                                                                                                                   
                                                                                                                                
CHAIR SPOHNHOLZ announced that HB 189 was held over.