Legislature(2023 - 2024)BARNES 124
04/02/2024 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB161 | |
| HB133 | |
| HB220 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 161 | TELECONFERENCED | |
| *+ | HB 220 | TELECONFERENCED | |
| += | HB 133 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 220-ROOM RENT TAX
8:48:09 AM
CHAIR MCCORMICK announced that the final order of business would
be HOUSE BILL NO. 220, "An Act establishing a bed tax; and
providing for an effective date."
8:48:20 AM
REPRESENTATIVE ANDREW GRAY, Alaska State Legislature, prime
sponsor, presented HB 220. He paraphrased the sponsor statement
[included in the committee packet], which read as follows
[original punctuation provided]:
Alaska is the only state in the country that does not
collect some sort of state revenue from tourist
lodging. California and Nevada lack a formal statewide
bed tax but collect state revenue from tourist lodging
via other methods. House Bill 220 seeks to put Alaska
on par with every other state by enacting a 6%
statewide bed tax.
In 2019, the last normal tourism year prior to the
COVID pandemic, we received approximately 2.5 million
tourists none of whom contributed to Alaska through
state sales or bed taxes. HB 220 would capture this
revenue so that the millions of visitors to Alaska can
contribute to the services provided by the state.
Legislative Research estimates that a 6% bed tax could
generate a minimum of $18 million annually for the
state, creating a reliable source of revenue that will
help address Alaska's fiscal woes. A six percent bed
tax is the same as Texas and Florida. It is
significantly lower than Connecticut's, which is 15%,
and Hawaii's, which is over 14%.
HB 220 is a commonsense measure to join the rest of
the country in enacting a statewide bed tax to
generate revenue from our robust tourism industry. To
not do so is leaving money on the table.
REPRESENTATIVE GRAY refuted the argument that a statewide bed
tax would deter tourists from visiting Alaska. He asserted that
most tourists have no idea before or after visiting Alaska that
the state does not have a bed tax. With 49 other states
collecting a similar tax, he shared his belief that Alaska is
making a huge strategic blunder by not implementing one. He
reported that according to the Department of Revenue (DOR), a 6
percent bed tax could generate a minimum of $58 million annually
and serve as a reliable source of revenue that the state sorely
needs. He added that 6 percent would be significantly lower
than the bed tax in many other states.
8:50:47 AM
DAVID SONG, Staff, Representative Andrew Gray, Alaska State
Legislature, on behalf of Representative Gray, prime sponsor of
HB 220, presented the sectional analysis [included in the
committee packet], which read as follows [original punctuation
provided]:
Section 1: Amends AS 43.52 to create a new article 3
relating to the establishment of a statewide bed tax.
This encompasses the following new sections:
Sec. 43.52.300 establishes a statewide bed tax of 6%
for rooms that are being rented for the purpose of
lodging.
Sec. 43.52.310 establishes exemptions for the bed tax.
These include room rentals that exceed 30 days, room
rentals for federal/state officials or employees
traveling on official business, and room rentals for
officials or employees from foreign governments
traveling on official business if the tax is
prohibited by federal law or treaty.
Sec. 43.52.320(a) states that the bed tax is due at
the time the room rent is paid, and that the tax shall
be collected and paid to the department by either the
person who provided the room for rent, or the rental
room rental network company if the room rental was
facilitated through that room rental network company.
Sec. 43.52.320(b) states that a room rental network
company required to collect the bed tax shall register
with the department.
Sec. 43.52.330 states that the statewide bed tax would
be in addition to any municipal bed tax.
Sec. 43.52.350 lists definitions for terms used in AS
43.52.300-350.
Section 2: Establishes an effective date of July 1,
2024.
8:52:38 AM
MR. SONG directed attention to a PowerPoint presentation,
entitled "House Bill 220 Statewide Bed Tax" [hard copy included
in the committee packet]. He began on slide 2, "Background
Information," which read as follows [original punctuation
provided]:
• Alaska is the only state without any form of
statewide bed tax in the country.
• Alaska receives over 2.5 million tourists
annually.
8:53:25 AM
MR. SONG continued to slide 3, which featured a comparison of
bed taxes by state. Six states, including Florida, Illinois,
Maryland, Michigan, Pennsylvania, Texas, and West Virginia had
implemented a 6 percent bed tax.
8:54:14 AM
MR. SONG concluded on slide 4, "What does HB 220 do?" Slide 4
read as follows [original punctuation provided]:
• House Bill 220 enacts a 6% statewide bed tax for
room rentals that are less than 30 days.
• Applies to hotels, motels, short-term rentals,
lodges, etc.
• State bed tax would be in addition to any
municipal bed taxes.
• Would raise approx. $60 million annually for the
state.
CHAIR MCCORMICK sought questions from committee members.
8:55:24 AM
REPRESENATIVE BAKER questioned the math for those Alaskans who
use hotels for in-state travel.
REPRESENTATIVE GRAY said he was open to an amendment that would
establish an exemption for Alaska residents. He explained that
the $60 million includes everyone; however, Alaskans make up a
small percentage of the 2.5 million tourists.
REPRESENATIVE BAKER questioned what percentage [of the 2.5
million tourists] are Alaskans.
REPRESENTATIVE GRAY offered to follow up with the requested
information.
8:57:01 AM
REPRESENTATIVE RUFFRIDGE said he had similar concerns as
Representative Baker. He asked whether the bill sponsor had
considered a seasonal component.
REPRESENTATIVE GRAY reiterated that he was open to an amendment
that would exclude Alaska residents with state identification.
He added that he was less open to a seasonal exemption for fear
of missing out on revenue that could be collected in the winter.
CHAIR MCCORMICK opened invited testimony.
8:59:12 AM
KEVIN BERRY, PhD, Associate Professor of Economics, Department
of Economics, University of Alaska Anchorage, presented a
PowerPoint, entitled "HB 220 An Act establishing a bed tax; and
providing for an effective date" [hard copy included in the
committee packet]. He began on slide 2, "Summary of Bill,"
which read as follows [original punctuation provided]:
• 6% tax on the amount of room rented for lodging
• Excludes rentals over 30 days
• Excludes government employees
• Excludes foreign officials
• Collected by the person or firm renting the room to
a guest
• In addition to municipal bed taxes
8:59:58 AM
DR. BERRY proceeded to slide 3, "Context," which read as follows
[original punctuation provided]:
• Alaska had 2.4 million visitors in 2019
• 1.33 million cruise passengers
• 1 million air passengers
• 99,000 highway/ferry passengers
• Spending of $2.79 billion in 2019
• Tourists do bring revenue to the State of
Alaska
• AK Railroad revenues
• Fish and Game licenses/tags
• Commercial Passenger Vessel Tax
• AK Marine Highways System revenues
• Lodging is only part of the price of a trip
to Alaska
9:03:09 AM
MR. BERRY advanced to slide 4, "Who would bear the burden of the
tax?" Slide 4 read as follows [original punctuation provided]:
• Even if companies collect the tax, they may pass the
burden on to customers through higher
prices
• Their ability to do this depends upon how
responsive demand is to changes in price
• Bibler, Teltser and Tremblay (2021 RESTAT
https://doi.org/10.1162/rest_a_00910)
• Use data on Airbnb listings and examine a
change in tax enforcement
• Find demand for short term rentals (Airbnb's)
is not responsive to changes in price
• Tax burden disproportionately falls on
consumers (tourists)
• There is little change in the amount of
Airbnb activity
• Are Airbnb's special?
• Small existing literature for other forms of
tourism with mixed results
• For locations with close substitutes
demand is more responsive
9:05:57 AM
MR. BERRY continued to slide 5, "Other Comments," which read as
follows [original punctuation provided]:
• Fiscal note assumes no significant impact on the
demand for room rentals
• It is estimated to raise between $18 million
and $52 million
• Revenue is smaller if demand is more responsive
• Some communities already have significant bed taxes
that they use for revenue
• Highest rate: Anchorage, Bethel, Kaktovik,
Nuiqsut
• Highest revenue (over $1 million): Anchorage,
Denali Borough, Fairbanks, Fairbanks (borough),
Juneau, Mat-Su Borough
• Issues with capping combined state and municipal
room taxes
9:07:06 AM
MR. BERRY concluded on slide 6, "Comments on the bill," which
read as follows [original punctuation provided]:
• The combined tax would be higher in municipalities
with existing taxes
• Caps on the combined tax would either
• Reduce local revenue (if state paid first)
• Reduce state revenue (if municipality paid
first)
• Municipalities would have incentive to tax
to the cap
9:09:40 AM
REPRESENTATIVE GRAY said his intention is for cruise ship
passengers to pay the bed tax if they spend a night off ship on
an excursion, for example. This means that any all-inclusive
packages would need to be increased to account for the 6 percent
bed tax.
9:10:41 AM
REPRESENTATIVE MCCABE asked how the number of days spent in
Alaska is measured, specifically for cruise ship passengers.
MR. BERRY explained that that data weighed heavily on three
different reports from the McKinley Research group.
s
REPRESENTATIVE MCCABE referenced slide 4 and asked how the bill
would affect a borough that only funds its government through
bed taxes from one or two hotels.
MR. BERRY shared his understanding that if there were a total
cap, the state's payment would take priority. Representative
McCabe's concern could be ameliorated by giving thought to the
order in which local or state governments are paid, as well as
the total level of the cap, he said.
9:14:21 AM
REPRESENTATIVE GRAY stated his belief that the appropriate
[total] cap would be 15 percent. He reported that the Denali
borough would be well below that at 13.5 percent.
REPRESENTATIVE HIMSCHOOT asked who would create the cap.
MR. BERRY clarified that he was discussing a hypothetical cap.
He explained that if the intention is to avoid a high bed tax by
imposing a total cap, the existing local revenue would need to
be considered.
9:17:00 AM
REPRESENTATIVE HIMSCHOOT asked why cruise ships with overnights
in open waters would be excluded from the bed tax.
MR. BERRY pointed out that most cruise ships are not docked at
port overnight. He said it's a valid point worth considering
and that he was unsure how to answer the question at this time.
REPRESENTATIVE HIMSCHOOT asked how a bed tax would be calculated
for all-inclusive packages.
REPRESENTATIVE GRAY explained that the pre-arranged price would
need to include the 6 percent bed tax. He pointed out that
other states do this already, and shared his belief that Alaska
could figure it out too.
9:19:21 AM
REPRESENTATIVE HIMSCHOOT sought to clarify whether
Representative Gray had stated that the entire package would be
taxed at 6 percent.
REPRESENTATIVE GRAY clarified that the price of the bed would be
taxed at 6 percent and that amount would be included in the
total package price.
MR. SONG reiterated that the 6 percent would only apply to the
"room rent" cost, not the entire package.
REPRESENTATIVE HIMSCHOOT asked who sets the value of that part
of the package.
REPRESENTATIVE GRAY said cruise ships often negotiate the
package price with the owner of the lodge who decides how much
they need to be paid per night per person.
9:21:42 AM
REPRESENTATIVE MCCABE suggested that the lodge owner could comp
the bed tax to compete with other lodges.
REPRESENTATIVE GRAY stated that if lodges are offering free
lodging to tourists, they need to be offering free lodging to
Alaskans.
9:23:13 AM
REPRESENTATIVE HIMSCHOOT asked whether a portion of the [bed
tax] revenue could be distributed back to its source.
REPRESENTTIVE GRAY said he would be open to that amendment.
CHAIR MCCORMICK invited Mr. Berry to contribute to the
discussion.
9:24:10 AM
MR. BERRY suggested that if lodges were using creative pricing
to avoid imposing the bed tax, a fair market value per bed could
be used to calculated a minimum tax amount.
CHAIR MCCORMICK referred to slide 3 and asked why the bed tax
was so high in Connecticut at 15 percent.
CHAIR MCCORMICK shared his understanding that Connecticut had
imposed a 15 percent statewide bed tax instead of local
municipal bed taxes. He reported that last year, Anchorage
collected $43 million from its 12 percent bed tax.
CHAIR MCCORMICK said it would be illuminating to know how
recently the states with high bed taxes were implemented.
9:26:41 AM
REPRESENTATIVE HIMSCHOOT pointed out that local sales tax was
not included in the calculation of bed tax. For example, Sitka
has a bed tax of 6 percent and a sales tax of 6 percent, putting
the city at 12 percent tax to the visitor. Another 6 percent in
statewide bed tax would put Sitka at 18 percent. She was unsure
at what point the taxes would "price people out." She expressed
concern that without including sales tax, the burden on
communities is not being accurately reflected.
REPRESENTATIVE GRAY opined that bed tax is not a driving factor
in where people choose to travel.
9:28:58 AM
REPRESENATIVE BAKER expressed concern about the burden on
consumers, whether they are Alaskan or otherwise.
REPRESENTATIVE GRAY reiterated his belief that a resident
exemption from the statewide bed tax would be a good amendment.
He acknowledged that it would be interesting to see how the high
bed tax of 22.7 percent in Columbus, Georgia has affected its
tourism industry.
MR. BERRY referenced a study by Andrew Bibler, Keither Teltser,
and Mark Tremblay, [titled Inferring Tax Compliance from Pass-
through: Evidence from Airbnb Tax Enforcement Agreements],
related to consumers' response to a rise in prices, which
suggests that tourists are not responsive to that kind of price
increase.
9:31:04 AM
REPRESENTATIVE MCCABE assumed that in a community like Nuiqsut,
all of the bed tax comes from oil workers. He asked how
Alaskans would be exempt from the bed tax without harming a city
like Nuiqsut.
REPRESENTATIVE GRAY reiterated that Alaskans with a state ID
would be exempt. He encouraged another amendment that would
change [the exemption for room rentals] from 30 days to 90 days.
MR. SONG noted that the bill would not remove the ability for
municipalities to create a local bed tax. He added that if
there was an amendment to create an exemption, it would not
affect the revenues that Nuiqsut is receiving.
9:32:59 AM
REPRESENTATIVE GRAY, in closing, expressed his hope that the
conversation could continue, because some form of statewide bed
tax would be extraordinarily beneficial to the state.
[HB 220 was held over.]