Legislature(1993 - 1994)

02/18/1993 01:00 PM House CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  HB 52:  RELATING TO TAX ON ALCOHOLIC BEVERAGES                               
  HB 53:  INCREASING TAX ON ALCOHOLIC BEVERAGES                                
                                                                               
  Number 030                                                                   
                                                                               
  REPRESENTATIVE KAY BROWN, PRIME SPONSOR of HB 52 and HB 53,                  
  testified saying, "HB 52 would allow municipalities to enact                 
  a sales tax on alcohol at any rate whether or not they had                   
  sales taxes on other commodities.  The need for this bill                    
  comes primarily from an Alaska Supreme Court interpretation                  
  of our existing law in 1991 where they found that the                        
  community of Sitka did not have the authority to impose an                   
  alcohol sales tax that was four percent above their tax on                   
  other commodities.  As the law is currently interpreted,                     
  municipalities are prohibited from enacting an alcohol sales                 
  tax in excess of or different than an existing commodity                     
  sales tax or having only a sales tax on alcohol."                            
                                                                               
  REPRESENTATIVE BROWN continued, saying, "The restrictions on                 
  local alcohol sales tax were put into the statute in 1985                    
  and at that time there were three municipalities that had                    
  additional sales tax on alcohol and those were grandfathered                 
  in.  They are Juneau, Craig and Kotzebue.  And their's can                   
  continue but this ruling applies that they wouldn't be able                  
  to increase them or change them.  With respect to others,                    
  Anchorage as you might have been reading in the press, is                    
  now considering a tax and the tax they're considering is at                  
  the same rate as their other tax which is the bed tax at                     
  eight percent."                                                              
                                                                               
  (Representative Bill Williams joined the committee at 1:05                   
  p.m.)                                                                        
                                                                               
  Regarding HB 53, REPRESENTATIVE BROWN said, "What that bill                  
  would do is address the state's tax on alcohol and it would                  
  slightly more than double our state excise tax on alcoholic                  
  beverages which has not been changed or increased since                      
  1983.  The proposed increase would equal about ten cents per                 
  drink on beer, wine and spirits and at the current rate of                   
  consumption would raise roughly 19 million additional                        
  dollars into our general fund.  That would bring our total                   
  collection from our alcohol tax to about 30 million which is                 
  roughly ten percent of the overall costs to the state of                     
  dealing with alcohol abuse."                                                 
                                                                               
  Number 140                                                                   
                                                                               
  REPRESENTATIVE BROWN continued, "One reason I think it's                     
  appropriate that we consider an increase in the alcohol tax                  
  is that users of this substance would be paying a little bit                 
  more toward the overall cost to society that alcohol is                      
  causing us and that the costs people would be paying would                   
  be in direct proportion to what they are consuming.                          
  Research shows that an increase in the alcohol tax would                     
  have a significant and long-term effect on the alcohol                       
  consumption particularly of young people."                                   
                                                                               
  (Representative John Davies joined the committee at 1:12                     
  p.m.)                                                                        
                                                                               
  REPRESENTATIVE BROWN added, "Polls show that of all                          
  potential taxes of any type or description, this is the one                  
  that has the most popular support, the most public support.                  
  Nationally, about two thirds of those surveyed indicated                     
  that they support additional taxes on alcoholic beverages...                 
  We have a significant alcohol problem in our state, I                        
  understand that Alaska ranks fourth in the nation in per                     
  capita consumption."                                                         
                                                                               
  Number 253                                                                   
                                                                               
  REPRESENTATIVE CYNTHIA TOOHEY asked, "Are you saying that                    
  the people within the municipality will have the right to                    
  vote on whether to increase the tax in HB 52?"                               
                                                                               
  REPRESENTATIVE BROWN said, "Anchorage, whether or not we                     
  pass HB 52, if the Anchorage Assembly chose to put this                      
  issue on the ballot they could only do it at the same rate                   
  as we already have an existing sales tax on other                            
  communities.  If we had HB 52, the Anchorage municipality                    
  would not be limited to considering it at that rate, they                    
  could consider it at some other rate without regard to any                   
  other taxes."                                                                
                                                                               
  Number 291                                                                   
                                                                               
  REPRESENTATIVE CON BUNDE pointed out he did not feel that a                  
  price increase would discourage use and gave an example of                   
  expensive cocaine abuse.  He also asked if HB 52 would                       
  require municipalities to dedicate funds toward alcohol-                     
  related problems specifically, or into a general fund.                       
                                                                               
  REPRESENTATIVE BROWN said municipalities had a choice of                     
  placing those funds in either a dedicated fund or the                        
  general fund.                                                                
                                                                               
  REPRESENTATIVES BUNDE and BROWN discussed the principles of                  
  taxes being produced at a municipal level by HB 52 and state                 
  revenues increasing through HB 53.                                           
                                                                               
  Number 380                                                                   
                                                                               
  REPRESENTATIVE JOHN DAVIES asked if there was any other                      
  commodity limited by state statute in the same way that                      
  alcohol was limited "relative to sales tax" and gave an                      
  example of fuel taxes which were not limited.                                
                                                                               
  REPRESENTATIVE BROWN did not believe any other commodity was                 
  limited by state statute in the same way as alcohol.                         
                                                                               
  Number 400                                                                   
                                                                               
  REPRESENTATIVE DAVIES indicated his experience at the                        
  municipal level brought him to the conclusion that this was                  
  an exclusive situation.  He said, "If it is true, then I                     
  would say that what we're really doing here is we're                         
  removing what I would consider to be an unnecessary                          
  limitation on municipalities to decide how and when and if                   
  and under what terms they want to impose taxes."                             
                                                                               
  REPRESENTATIVE ED WILLIS asked if Anchorage, being a first-                  
  class city, currently had the right to tax alcohol.                          
                                                                               
  REPRESENTATIVE BROWN replied in the negative and referred to                 
  the statute as it currently reads.                                           
                                                                               
  Number 427                                                                   
                                                                               
  REPRESENTATIVE BUNDE asked what communities throughout the                   
  state thought about HB 52.                                                   
                                                                               
  REPRESENTATIVE BROWN said, "I know, as you do, all the local                 
  governments are tight and looking for ways to raise money to                 
  support local services."                                                     
                                                                               
  REPRESENTATIVE DAVIES concurred that the municipality of                     
  Fairbanks had discussed what HB 52 would do and realized                     
  this was currently a limitation.                                             
                                                                               
  Number 458                                                                   
                                                                               
  REPRESENTATIVE TOOHEY asked if Representative Brown had                      
  alcohol revenue figures for the state.                                       
                                                                               
  REPRESENTATIVE BROWN referred to the Department of Revenue                   
  fiscal note provided with HB 52.                                             
                                                                               
  Number 491                                                                   
                                                                               
  KENT SWISHER, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL LEAGUE,                   
  testified saying, "This is an additional revenue opportunity                 
  for local governments and we certainly need those.  It's                     
  also one that very probably is well geared towards a                         
  specific problem that will be pretty large on the local                      
  government horizon and we would certainly welcome the                        
  opportunity to levy these taxes, independently or in a way                   
  that is not coupled to the rate of other taxes within the                    
  jurisdiction."                                                               
                                                                               
  REPRESENTATIVE BUNDE doubted municipalities would be able to                 
  raise taxes "on booze" through the various assemblies or a                   
  "vote of the general public" and pointed out that HB 52 "may                 
  be an exercise in futility."                                                 
                                                                               
  Number 505                                                                   
                                                                               
  MR. SWISHER said, "If a jurisdiction is locked to another                    
  sales tax rate, that may have the effect of taking the                       
  option of the sales tax on alcohol at that specific rate off                 
  the table for consideration.  If a jurisdiction had the                      
  option of setting the tax on alcohol at some other rate, it                  
  might leave that question on the table and, therefore, lead                  
  to a selection of that tax as an option.  The flexibility                    
  enhances the viability of the option."                                       
                                                                               
  Number 530                                                                   
                                                                               
  CHAIRMAN OLBERG verified that Mr. Swisher was limiting his                   
  testimony to HB 52.                                                          
                                                                               
  MR. SWISHER concurred.                                                       
                                                                               
  Number 540                                                                   
                                                                               
  RICK URION representing the ALASKA WINE AND SPIRITS                          
  WHOLESALERS ASSOCIATION, testified against HB 52 and HB 53                   
  saying, "Only alcohol was picked out as an item to increase,                 
  so if a local government picked fish or automobiles or                       
  wheaties to tax at a higher rate you would see those                         
  interest groups here to convince the legislature to limit                    
  those items. So it is an issue of equity... that was singled                 
  out so we oppose that bill (HB 52)."                                         
                                                                               
  MR. URION continued, "On HB 53, the people I represent are                   
  the people who pay this tax to the state.  We pay it on a                    
  monthly basis, we remit money to the state based on our                      
  inventory depletions...   We understand the problems                         
  associated with abusing alcoholic beverages and as an                        
  industry we spend a lot of time and effort and money to                      
  preach moderation.  I think we're being successful.  Most                    
  people who drink are not abusers as you've heard the sponsor                 
  say... We do not think that alcohol is the cause of all our                  
  social ills as some would have you believe.  Most reports                    
  that you read that associate purported costs to society to                   
  alcohol are subjective at best.  Including the ones that are                 
  in your packet."                                                             
                                                                               
  Number 580                                                                   
                                                                               
  MR. URION concluded, "Cost only affects those people who                     
  treat alcohol responsibly and the passage of this bill will                  
  not bring about the purported results and we urge you not to                 
  pass it."                                                                    
                                                                               
  Number 590                                                                   
                                                                               
  REPRESENTATIVE BUNDE asked what portion of the cost of                       
  alcohol was presently taxed.                                                 
                                                                               
  MR. URION indicated approximately 29 percent of a 750 ml.                    
  bottle was taxed, of which 18 percent was federal, and 11                    
  percent state and local.  He disputed Rep. Brown statistics                  
  through example.                                                             
                                                                               
  REPRESENTATIVE BILL WILLIAMS questioned whether the alcohol                  
  industry really preached moderation through advertisements.                  
  He asked if the revenues from HB 53 could be dedicated to                    
  education or something similar instead of going into the                     
  general fund.                                                                
                                                                               
  REPRESENTATIVE BROWN indicated dedication of revenues would                  
  probably take a constitutional amendment.                                    
                                                                               
  Number 650                                                                   
                                                                               
  REPRESENTATIVE DAVIES addressed Representative William's                     
  concern and said, "Whenever there's a strong legislative                     
  intent and the funds are shown as program receipts going                     
  into a particular program there's a fair amount of momentum,                 
  budgetary momentum, behind using those funds in that way."                   
                                                                               
  REPRESENTATIVE DAVIES added, with regard to Mr. Urion's                      
  comments, "I certainly agree with you about the statistics.                  
  A lot of kinds of statistics are kept in very inappropriate                  
  ways ... however, having conceded that, I will not concede                   
  that alcohol is not the most significant social problem in                   
  this state and I would challenge you to develop appropriate                  
  statistics that would demonstrate anything other than that."                 
                                                                               
  MR. URION declined to respond.                                               
                                                                               
  Number 686                                                                   
                                                                               
  REPRESENTATIVE TOOHEY asked how much money was set aside by                  
  the Alaska Wine and Wholesalers Association to help young                    
  people of Alaska.                                                            
                                                                               
  MR. URION said his client only contributed to a national                     
  group.                                                                       
                                                                               
  TAPE 93-6, SIDE B                                                            
  Number 022                                                                   
                                                                               
  RICK LAUBER, representing ANHEUSER BUSCH, CO., INC.,                         
  testified against both HB 52 and HB 53 saying, "Referring to                 
  advertising...the alcohol consumption in general, and beer                   
  consumption in particular, has gone down.  Fortunately for                   
  Anheuser Busch, their share of the market has gone up and                    
  that's probably due to the fact that they do better                          
  advertising and take customers away from their competitors."                 
  He cited the historical increases of taxes on alcohol.                       
                                                                               
  MR. LAUBER continued, "The thing that often is ignored by                    
  people who want to raise the taxes on liquor, and people in                  
  so-called health related fields, is that there's a growing                   
  body of literature and work that's being done that has found                 
  that moderate use of alcohol has health benefits.  If you                    
  increase the price, for any reason, you will reduce the                      
  consumption but there are many studies quite frankly that                    
  show you do not reduce the abuse...You're reducing the                       
  consumption of alcohol by the moderate users of alcohol, not                 
  the abusers of alcohol.  And if you factor in the health                     
  benefits, you're then saying, the person terminates the                      
  moderate use of alcohol that is beneficial because they                      
  can't afford it."                                                            
                                                                               
  Number 157                                                                   
                                                                               
  REPRESENTATIVE TOOHEY identified herself as a nurse, a                       
  mother, and a child of an alcoholic.  She said, "Warn                        
  children if they have alcoholic parents, which is very                       
  normal up here in Alaska, that these children too have a                     
  predisposition and they must be careful of this.  They must                  
  watch this.  I mean there are all kinds of things we can                     
  do."  She added, "The increase in that little bit of tax                     
  wouldn't stop anybody..."                                                    
                                                                               
  REPRESENTATIVE WILLIAMS asked what Mr. Lauber would suggest                  
  to the legislature to "take care" of alcoholism and the                      
  associated problems.                                                         
                                                                               
  MR. LAUBER revealed his experience with alcohol abusers and                  
  gave a synopsis of the more positive trends relating to                      
  alcohol consumption.                                                         
                                                                               
  Number 251                                                                   
                                                                               
  REPRESENTATIVE BROWN asked Mr. Lauber to reveal the studies                  
  he referenced in his testimony because she had studies which                 
  came to the opposite conclusion.                                             
                                                                               
  MR. LAUBER gave the author and title of one study.                           
                                                                               
  REPRESENTATIVE BROWN asked to see that study since an                        
  author's name was also found within her data.                                
                                                                               
  MR. LAUBER said he would retrieve the study for her.                         
                                                                               
  Number 290                                                                   
                                                                               
  REPRESENTATIVE BUNDE said, "The advertising I still see                      
  especially relating to sports, sends the wrong kinds of                      
  messages.  It doesn't send responsible drinking messages and                 
  encourages, I think, the kind of legislation we're looking                   
  at today...   It undermines what you say in 'when to say                     
  when'."                                                                      
                                                                               
  Number 314                                                                   
                                                                               
  LENNIE GORSUCH representing MILLER BREWING COMPANY,                          
  testified against HB 52 and HB 53 saying, "With respect to                   
  HB 52, Miller Brewing Company does oppose that legislation.                  
  As well we believe it's not good public policy to isolate                    
  one industry or one commodity for differential tax                           
  treatment.  With respect to HB 53, I can speak only to the                   
  sections dealing with beer because we don't handle the other                 
  alcoholic beverages.  ....Already Alaska's tax rate per                      
  gallon is above the national average where it stands today                   
  and with this increase it would be by far the highest in the                 
  nation and that is for state tax."                                           
                                                                               
  MS. GORSUCH also said, "Beer excise taxes, we believe, are                   
  highly regressive in that they place a disproportionate                      
  burden on the lower income individuals, particularly with                    
  respect to beer drinkers, they traditionally fall into the                   
  middle and low income status bracket.  This only means that                  
  more of their disposable income would go to pay the taxes to                 
  take care of those problems that you've identified here.                     
  Taxation does not solve alcohol abuse...  Raising the price                  
  of alcohol only forces alcoholics to spend more of their                     
  money on the alcohol that they're going to buy no matter                     
  what, and decreases the amount of money that they're going                   
  to have to spend on food and shelter."                                       
                                                                               
  Number 377                                                                   
                                                                               
  REPRESENTATIVE DAVIES said, "I fail to see the equity                        
  argument associated with HB 52.  It seems to me it's in fact                 
  the other way around, the legislation that was passed a few                  
  years ago...made a protected class out of that commodity                     
  relative to all other commodities."                                          
                                                                               
  MS. GORSUCH said, "To undo it at this particular time would                  
  be to focus it back on the one industry..."                                  
                                                                               
  Number 400                                                                   
                                                                               
  REPRESENTATIVE DAVIES asked Ms. Gorsuch to share the dollar                  
  amounts that go into educational programs versus                             
  advertising.                                                                 
                                                                               
  MS. GORSUCH said she could provide that information for the                  
  chair later.                                                                 
                                                                               
  REPRESENTATIVE BROWN pointed out the bar chart provided by                   
  Ms. Gorsuch did not provide the rates of higher tax states                   
  for comparison.  (A copy of this chart may be found in the                   
  House Community and Regional Affairs Committee Room, Capitol                 
  Room 110, and after the adjournment of the second session of                 
  the 18th Alaska State Legislature, in the Legislative                        
  Reference Library.)                                                          
                                                                               
  MS. GORSUCH said the chart came from the west coast                          
  headquarters and reflected the taxes of western states only.                 
                                                                               
  CHAIRMAN OLBERG asked for further testimony or discussion.                   
                                                                               
  Number 433                                                                   
                                                                               
  REPRESENTATIVE DAVIES MOVED that HB 52 be passed out of                      
  committee with individual recommendations.                                   
                                                                               
  REPRESENTATIVE JERRY SANDERS OBJECTED.                                       
                                                                               
  CHAIRMAN OLBERG called an at ease at 2:12 p.m.                               
                                                                               
  Number 435                                                                   
                                                                               
  CHAIRMAN OLBERG reconvened the meeting at 2:17 p.m. with all                 
  members present.                                                             
                                                                               
  REPRESENTATIVE BUNDE said, "What we're really saying is,                     
  "Drink yourself to death because the city needs the money,"                  
  and "I would feel a lot more comfortable with [HB] 52 if the                 
  monies gained from it went directly dedicated to alcohol                     
  abuse."                                                                      
                                                                               
  REPRESENTATIVE DAVIES spoke at length saying, in part,                       
  "Those issues are interesting and should be debated but it's                 
  not at this point, I believe.  The point of [HB] 52 is to                    
  allow a municipality the local option to decide."  He                        
  reiterated his concern about alcohol receiving special                       
  protection under the law.                                                    
                                                                               
  Number 511                                                                   
                                                                               
  REPRESENTATIVE TOOHEY concurred that HB 52 offered only a                    
  local option of alcohol taxation and said she could not                      
  support HB 53.                                                               
                                                                               
  REPRESENTATIVE WILLIAMS supported HB 52 and HB 53.  "I think                 
  [HB] 53 is an area where we can generate some money back                     
  into the general fund," he said.                                             
                                                                               
  REPRESENTATIVE WILLIS expressed a concern that the                           
  legislature was not devising a state fiscal plan.  He said                   
  he might introduce legislation to form a commission to                       
  address a long-term fiscal plan for Alaska.  "We're                          
  piecemealing," he added.                                                     
                                                                               
  REPRESENTATIVE DAVIES reminded the committee of the motion                   
  before them.                                                                 
                                                                               
  REPRESENTATIVE SANDERS rendered some personal experience                     
  with alcohol.  He said, "I don't know what the answer is but                 
  I don't know that tacking monies on to it is going to help                   
  with the alcohol problem.  If it's to raise money, I think                   
  we have too much taxes, I think we have too much government                  
  and I'm not for taxes in any way, shape or form.  ...I'm not                 
  inclined to go along with this for those reasons, I'm not                    
  sure which it's trying to address and I don't think it                       
  addresses either one of them adequately."                                    
                                                                               
  Number 591                                                                   
                                                                               
  CHAIRMAN OLBERG called for a roll call vote on the motion to                 
  move HB 52 out of committee with individual recommendations,                 
  which resulted in the following:                                             
                                                                               
       Representatives Toohey, Willis, Williams, Bunde and                     
       Davies voted to move HB 52 out of committee with                        
       individual recommendations; and, Representative Sanders                 
       and Olberg voted against the motion.                                    
                                                                               
  THE MOTION CARRIED.                                                          
                                                                               
  REPRESENTATIVE BUNDE MOVED that HB 53 be moved out of                        
  committee with individual recommendations.                                   
                                                                               
  REPRESENTATIVE SANDERS OBJECTED.                                             
                                                                               
  REPRESENTATIVE BROWN testified again, "I view it as a                        
  socially responsible way to raise needed revenue.  The                       
  amount raised by this bill would not even cover the                          
  incremental increases in one public safety agency, the                       
  Department of Corrections, that we have right now before us                  
  in their increase that's requested for the coming fiscal                     
  year.  A prior commissioner testified at a meeting I was at                  
  that 85 percent of the prisoners in Alaska's prison system                   
  today are there because of involvement with alcohol in their                 
  crime."                                                                      
                                                                               
  Number 693                                                                   
                                                                               
  REPRESENTATIVE DAVIES reminded the committee that he                         
  cosponsored HB 53, and reiterated his support for the bill.                  
                                                                               
  TAPE 93-7, SIDE A                                                            
  Number 000                                                                   
                                                                               
  REPRESENTATIVE BUNDE said, "This is raising state taxes:                     
  That was not my goal when I came to the legislature."                        
                                                                               
  A roll call was taken on the motion that HB 53 be moved out                  
  of committee with individual recommendations, which resulted                 
  in the following:                                                            
                                                                               
       Representatives Sanders, Bunde, Olberg and Toohey voted                 
       against the motion; and Representatives Willis, Davies                  
       and Williams voted for the  motion.                                     
                                                                               
  THE MOTION FAILED.                                                           
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  Number 055                                                                   
                                                                               
  CHAIRMAN OLBERG adjourned the meeting at 2:40 p.m.                           

Document Name Date/Time Subjects