02/10/1994 01:35 PM Senate L&C

 SENATOR KELLY introduced SB 269 (INCREASE TOBACCO & ALCOHOL TAXES)            
 sponsored by request of the Governor, and invited PAUL DICK from              
 the Department of Revenue to testify.                                         
                                                                               
 Number 065                                                                    
                                                                               
 MR. DICK explained SB 269 would increase the excise tax rates on              
 tobacco products and alcohol such as liquor, wine, and beer.  He              
 said it would increase the taxes by 50% on all but wholesale                  
 tobacco, which is chewing tobacco and snuff.  The taxes on these              
 two items would increase 100%.  He referred to the outline in the             
 fiscal note showing the increases and the revenue impact in each              
 one of the categories.  The total revenue increase, MR. DICK                  
 estimated to be $14.9 million a year as outlined in the fiscal                
 note.  He offered to answer questions.                                        
                                                                               
 SENATOR SHARP asked when the taxes on tobacco and alcohol were last           
 increased and by how much.                                                    
                                                                               
 MR. DICK said cigarettes were increased in 1989, but he wasn't sure           
 of the amount of increase.  The liquor category increased in 1983,            
 and he reviewed the different categories and the amount.                      
                                                                               
 SUZANNE PERRY, representing the Division of Alcoholism and Drug               
 Abuse in DHSS, testified in support of SB 269.  She presented some            
 statistical correlations between consumption and alcohol problems             
 in the State of Alaska, which ranks #4 in the nation with per                 
 capita consumption.  She said the increase in the excise tax, which           
 she dubbed user fees, would have a direct impact, particularly on             
 the youthful drinking in the State, and she used beer as an                   
 example.                                                                      
                                                                               
 Number 099                                                                    
                                                                               
 Next SENATOR KELLY called on RESA JERREL, State Director for the              
 National Federation of Independent Business, who spoke in                     
 opposition to the legislation, and she reviewed the information               
 from the 4,400 members on the subject of taxes from their 1993                
 ballot.  She quoted the membership as voting 92% to not increase              
 taxes until there was a reduction in the operating budget, and she            
 suggested the State privatize operations that could be done by                
 private industry.  She used printing as an example.                           
                                                                               
 MS. JERREL referred to the position paper from the NFIB/Alaska with           
 a list of commercial activities presently operated by State and               
 local agencies.  She thought privatization should be considered as            
 an alternative to bring down the size and cost of State and local             
 government.  She offered to answer questions.                                 
                                                                               
 LENNIE GORSUCH, representing Miller Brewing Company, testified in             
 opposition to what Miller Brewing considers a substantial increase            
 in taxes, an increase which would be felt by countless Alaskans.              
 She quoted figures to show Alaskan taxes on beer is well above                
 average for the Western States and the nation, making Alaska at               
 double the national average.  MS. GORSUCH claimed excise taxes on             
 beer places a disproportionate burden on lower income people, nor             
 does taxation curb alcohol abuse.                                             
                                                                               
 Number 154                                                                    
                                                                               
 MS. GORSUCH explained an alcoholic will buy a drink no matter the             
 price, but increasing taxes will discourage an underage drinker.              
 She said the real solution lies in enforcement of current laws and            
 through education.  She described the involvement by the Miller               
 Brewing Company in numerous programs aimed at safe drinking, but              
 those who do drink are not a safety hazard to themselves or to the            
 public at large.  She concluded it was popular to aim a sin tax in            
 times of cash crunches, but she said the brunt of this tax will be            
 felt by the working men and women of low and middle income.                   
                                                                               
 SENATOR KELLY asked MS. GORSUCH what was happening on the National            
 level in terms of taxes on tobacco and alcohol.  MS. GORSUCH said             
 she didn't have any current information, but offered to do some               
 research.  SENATOR KELLY wanted to know if Congress was expected to           
 pass an increase in either of the two this year, and MS. GORSUCH              
 said there was a substantial tax in 1991 on beer.                             
                                                                               
 Number 196                                                                    
                                                                               
 SENATOR KELLY next called on MIKE FRANKLIN, a long-time local                 
 family practioner, who spoke on behalf of the Alaska Division of              
 the American Cancer Society, and he reviewed a meeting in Anchorage           
 where SB 269 was discussed.  He quoted the American Cancer Society            
 as taking the position in favor of increasing the tax on tobacco              
 products, and he offered proven research to the committee showing             
 tobacco as the young people's entry level drug.  He claimed price             
 does dictate the amount of use, and he referred to a study showing            
 an increase in price of tobacco products, particularly chewing and            
 cigarettes, caused a decrease in the use and the rate at which                
 young people become addicted.  MR. FRANKLIN concluded by urging the           
 committee to consider the SB 269 as a "cancer control" measure.               
                                                                               
 RICK LAUBER, representing the Anheuser Busch Company, endorsed the            
 testimony from MS. GORSUCH, and he responded to the question on               
 Federal taxation, saying a tax in 1991 doubled the alcohol tax.  He           
 took on the charge that an increase in sin taxes on beer would                
 reduce consumption, and he agreed it would decrease consumption,              
 but also the revenue.  He said it would not reduce the consumption            
 by those who are addicted to alcoholic beverages, and beer is not             
 the choice of beverage for those who abuse alcohol.                           
                                                                               
 Number 254                                                                    
                                                                               
 MR. LAUBER claimed the vast number of beer drinkers did not abuse             
 the use of beer, and in fact, there was a health benefit to daily             
 and moderate consumption of small amounts of alcoholic beverages.             
 He claimed a couple of beers a day would increase a person's                  
 lifetime, and he likened it to a daily half hour jog.  He concluded           
 by quoting MS. GORSUCH on the down side of the proposed alcohol               
 tax.                                                                          
                                                                               
 SENATOR KELLY directed MR. FINK to get some comparative figures on            
 other state alcohol and tobacco taxes for comparison.  Next he                
 called on RICK URION, representing the Alaska Wine and Spirits                
 Wholesaler's Association.                                                     
                                                                               
 MR. URION also supported the responses by MS. GORSUCH and opposed             
 Section 3 of SB 269, dealing with alcoholic beverages, but had no             
 opinion on the tobacco tax.  He reviewed the arguments on the                 
 generation of revenue and the decrease in consumption.  He quoted             
 information on the increase in Federal excise taxes, and the loss             
 of revenues.                                                                  
                                                                               
 MR. URION described an attempt by PRESIDENT CLINTON to pay the cost           
 of the National Health Care legislation on items mentioned in this            
 bill, but he said PRESIDENT CLINTON had decided alcohol is not a              
 source of revenue and does not intend to increase taxes on alcohol            
 in the foreseeable future.                                                    
                                                                               
 MR. URION said the industry he represents understands the problems            
 caused by the abuses of alcoholic beverages.  He explained those he           
 represent spent time and money promoting moderation and felt the              
 efforts were paying off.                                                      
                                                                               
 Number 300                                                                    
                                                                               
 MR. URION protested alcohol was not the cause of all the social               
 ills, nor was it responsible for the $200 million in cost said to             
 be in the State budget directly related to alcohol abuse.                     
 Conversely, he suggested, if there was no alcohol, there could be             
 the same sum cut from the budget, which he also didn't believe.               
                                                                               
 MR. URION concluded by maintained the consumption of spirits has              
 declined in Alaska by 21% since 1983, and he said the passage of              
 Section 3 would not result in more revenues.  He urged the bill not           
 pass.                                                                         
                                                                               
 SENATOR LINCOLN protested that alcohol is responsible for over 50%            
 of the people incarcerated in eleven institutions in our State, and           
 of those people confined, 95% are there due to alcohol.  She                  
 claimed there would be a reduction in the over all budget to the              
 State, and she questioned his statistic on the decrease in the                
 consumption of alcohol.                                                       
                                                                               
 MR. URION repeated the consumption of alcohol has decreased 21%               
 since 1983.                                                                   
 SENATOR LINCOLN quoted his testimony on a further reduction in the            
 consumption of alcohol if the bill were passed, and MR. URION said            
 she was correct.  He said there would also be a reduction in                  
 revenues.                                                                     
                                                                               
 SENATOR LINCOLN thought the reduction in consumption through the              
 passage of SB 269 was wonderful.  MR. URION agreed her motivation             
 was fine, but he said the original motivation of the sponsor was to           
 increase revenues, which would not happen.                                    
                                                                               
 There being no further testimony, SENATOR KELLY decided to hold the           
 bill in committee awaiting information on the rates from other                
 states.