Legislature(2003 - 2004)
05/07/2003 09:00 AM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HOUSE BILL NO. 271
An Act levying and providing for the collection and
administration of an excise tax on passenger vehicle
rentals; and providing for an effective date.
Co-Chair Harris MOVED to ADOPT work draft #23-23-LS0936\X,
Kurtz, 5/6/03, as the version of the legislation before the
Committee. Representative Croft OBJECTED in order to hear
the difference between the two versions.
CHRIS KNAUSS, STAFF, REPRESENTATIVE PETE KOTT, explained
that the Department of Revenue had requested changes from
the Ways and Means Committee version to the House Finance
Committee version of the bill.
LARRY PERSILY, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
classified the changes as mostly technical:
· The original draft of the bill referred to
rentals made in the State. The words "made
out" were removed.
· The Department wanted to make it clear that
the tax must be stated separately on the
rental invoice for the consumers and for the
business.
· Any rental of a motor vehicle by a State,
municipal for federal employee for official
business would be exempt from the tax.
· The Finance version clearly spells out that
the tax should not be charged on top of other
taxes.
Mr. Persily noted that the substance of the bill remains the
same and would place a 10% tax on passenger vehicles and
pick-up trucks and a 3% tax on recreational vehicles. The
st
bill would take effect on July 1, 2003. The fiscal note
estimates that in FY04, approximately $4 million dollars
would be generated and in the following fiscal years,
approximately $6 million dollars generated revenue.
Representative Croft WITHDREW his OBJECTION. There being NO
further OBJECTION, the work draft was adopted.
Representative Croft MOVED to ADOPT Amendment #1, #23-
LS0936\U.1, Kurtz, 4/25/01. (Copy on File).
Co-Chair Williams OBJECTED.
Representative Croft explained that essentially the
amendment would not place the State tax "on top" of local
taxes already in place. Adding the proposed tax to already
high taxes makes it prohibitive. Mr. Knauss pointed out
that action would cut the State's projected revenue from 50%
to 75% since the largest use is in Anchorage and they
already have an 8% tax. Co-Chair Williams agreed with the
sponsor that the amendment would not work well.
Co-Chair Harris asked if the intent of the amendment was not
to penalize local communities that already impose the rental
car tax and instead allow them to keep their current fees.
Representative Croft agreed that was the intent.
Discussion followed between Representative Croft and Co-
Chair Harris regarding the maximum that a community
currently can keep. Representative Croft informed members
that there would be a 10% original car tax across the State
that might be shared differently between municipalities
depending upon their tax rates. Co-Chair Harris commented
that under the premise of Amendment #1, it would be to the
advantage of a community to place a 10% local community tax,
keeping it for themselves. Representative Croft agreed.
Co-Chair Harris pointed out that the bill indicates a 10%
rental car tax on every rental car in the State.
Co-Chair Harris asked if there was a "drop dead" date for
imposing the tax. Representative Croft responded that the
State already shares revenue with the municipal governments.
He stressed that an 18% tax is excessive. Co-Chair Williams
disagreed.
Vice-Chair Meyer voiced his opposition to Amendment #1. He
pointed out that under the amendment, only 2% would be
collected from the Anchorage area noting that nearly 60% of
the rental cars come from that area. Without the Anchorage
revenue, the bill would not generate much assistance for the
State general fund. He pointed out that there are ways in
which local people can avoid paying the airport fees by
renting their cars in town or anywhere away from the
airport.
Representative Stoltze acknowledged that he understood the
intent of the amendment, however, that he would oppose it.
Representative Hawker stated that in other states throughout
the nation, he was accustomed to paying a 25% to 30% tax on
car rentals and maintained that the legislation would bring
Alaska in line with the average national levels. He
stressed that this would be a tax on business corporate
users. "Less is not more" when attempting to balance the
overall budget. He stated that he would oppose Amendment
#1.
Co-Chair Harris clarified that the bill does not allow
charges to State employees. Mr. Persily advised that the
House Finance version exempts State, municipal and federal
employees when on official business.
Representative Croft referenced the charts provided by the
Department of Revenue. He noted that it combines the State
and local taxes with the rental car rates. Without the
amendment in place, Alaska would be ranked #5 for the
highest paying state in the Nation. Right now,
incorporating the tax would raise the tax to a 29% tax fee
at the Anchorage Airport. He noted that at present time,
there is no sales tax but eventually that would also be
added to the tax base.
A roll call vote was taken on the motion to adopt Amendment
#1.
IN FAVOR: Moses, Croft
OPPOSED: Meyer, Stoltze, Whitaker, Chenault, Foster,
Hawker, Harris, Williams
Representative Joule was not present for the vote.
The MOTION FAILED (2-8).
Representative Croft MOVED to ADOPT Amendment #2, #23-
LS0936\U.2, Kurtz, 4/25/03.
Co-Chair Williams OBJECTED.
Representative Croft explained that part of the
justification for the bill was that it is needed for tourism
marketing funding. Amendment #2 stipulates that if the
appropriate level of $10 million dollars has not been met
then the tax could be collected, otherwise it could not be.
Mr. Knauss referenced Page 2, Lines 22-26, noting that the
sponsor's intent was to establish an account in the general
fund for tourism and marketing, but not a dedicated account.
Representative Hawker discussed his concerns regarding
designating funds. He noted that there would be an
arbitrary $10 million dollar general fund money
appropriated. The purpose of the bill results from concerns
regarding Alaska's fiscal issues. To place a provision in
the bill which makes it automatically a net loss to the
general fund "does not fly" with the intent. He stated that
he opposed the amendment.
A roll call vote was taken on the motion.
IN FAVOR: Croft
OPPOSED: Meyer, Moses, Stoltze, Whitaker, Foster,
Hawker, Williams, Harris
Representative Joule was not present for the vote.
The MOTION FAILED (1-9).
Co-Chair Harris MOVED to report CS HB 271 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 271 (FIN) was reported out of Committee with a "do
pass" recommendation and with a new fiscal note by the
Department of Revenue.
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