Legislature(2003 - 2004)
03/18/2004 01:44 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 236
An Act imposing a tax on employment; and providing for
an effective date.
REPRESENTATIVE MIKE HAWKER commented that the legislation
would impose an education tax on wages and net earnings from
self-employment in Alaska. HB 236 provides that the tax
collected would be separately accounted for and may be
appropriated for education. The tax imposed may not exceed
$100 per calendar year.
· Section 1: Provides a short title: Alaska Education
Tax Act.
· Section 2: Adds the education tax to the list of
taxes that are prior, paramount and superior to all
other leans upon the real and personal property of
the person liable for the tax.
TAPE HFC 04 - 61, Side B
Representative Hawker continued:
· Section 3:
· 43.45.011: Imposes a tax, not to exceed a combined
total of $100 a calendar year on wages and net
earnings from self-employment in excess of $600.
The tax is imposed at a rate of 0% on the first $600
of earnings, 10% on the next $1,000 of earnings and
0% on all other earnings. Section 3 also provides
that the tax is imposed only in calendar years
th
following a June 30 fiscal year end when the cash
balance in the Constitutional Budget Reserve Fund
(CBR) is less than $1.0 billion dollars. The tax
would be suspended in a subsequent calendar year
th
following a June 30 fiscal year end when the cash
balance in the CBR was greater than $2.5 billion
dollars.
· 43.45.021: Provides that the education tax is to be
collected from wages by employers in accordance with
regulations adopted by the Department of Revenue.
· 43.45.026: Provides that the Department may require
security deposits from employers who have been
delinquent in remitting the education tax.
· 43.45.031: Provides that self-employed individuals
remit their education tax in accordance with
regulations adopted by the Department of Revenue.
· 43.45.041: Provides for refunds of overpayment of
the education tax.
· 43.45.051: Requires that a person required to
report a payment to a self-employed individual to
the federal government, report the same information
to the Department of Revenue.
· 43.45.061: Provides that the tax collected be
accounted for separately and may be used for
education.
· 43.45.099: Defines critical terms by reference to
the Internal Revenue Code (26 U.S.C.)
Representative Hawker highlighted the sectional analysis:
· Section 4: Allows the Department of Revenue to
develop regulations to implement the Act before the
effective date of the Act.
· Section 5: Allows Section 4 of the Act to take
effect immediately.
· Section 6: Allows the other sections of the Act to
st
take effect January 1, 2005, although the education
tax would not actually be imposed until the CBR
trigger point was reached.
REPRESENTATIVE PEGGY WILSON commented that Alaska has many
resources and that the most precious resource is our
children. A head tax for education is important.
In response to Co-Chair Williams, Representative Wilson
thought that the caller option would be a good idea, as it
would allow the people of the State to keep the Legislature
in a position of reporting what is spent in regard to what
is paid. It provides the necessary "pressure" for when
times are economically difficult statewide.
Co-Chair Williams inquired how the Ways and Means Committee
had determined the statewide testimony issues regarding
revenue taxes.
Representative Wilson replied that the Ways and Means
Committee, which helped in making the determination for the
education tax calculation, had heard a lot of statewide
testimony. Representative Hawker added that the idea of a
school tax was voiced throughout the State during the summer
hand he was impressed that the school tax had been
consistently supported. He added that many Alaskan
residents are hesitant to support the Percent of Market
Value plan without initiating taxes first.
Co-Chair Williams questioned how much would be generated
from receipt of the tax. Representative Wilson anticipated
approximately $43 million dollars collected and the cost to
administer the tax will be about $1.4 million dollars.
Vice Chair Meyer addressed the fiscal note, pointing out
that the initial capital cost would be about $683 thousand
dollars and that the Department would need to hire about 10
people to administer the program. He commented that was a
"lot of expense" to administer this program. Vice Chair
Meyer suggested that an income tax "could get to the same
place and generate the same amount". Representative Wilson
acknowledged that she would be willing to "switch". Vice
Chair Meyer reiterated concerns with the high administrative
costs for the program.
Vice Chair Meyer asked about a "double tax" for those that
live outside of Alaska who come to work in State.
Representative Hawker pointed out that the initial fiscal
note had been overviewed on with the Department of Revenue.
When the bill is in place, it will cost the State
approximately $1 million dollars a year to administer and
collect almost $46 million dollars a year. It is not
intended to be a complete income tax but rather a small
component to deal with the fiscal concern. He argued that a
$1 million dollar cost to administer a program that would
generate $46 million dollars would be a fair exchange. He
added that placing a surcharge on the out-of-state workers
remains an issue.
Vice Chair Meyer commented the idea would be more "sellable"
if out-of-state workers could be taxed more. He asked about
the $685 thousand dollar fiscal note.
Vice Chair Meyer asked how the legislation would deal with
the person working for multiple employers. Representative
Hawker responded that the provisions in the bill address
that first and if the person overpays during the course of a
year, the State would refund that at the end of the year.
There is a provision that an employer "shall" withhold money
from an employee, unless the employee can provide written
documentation that they had previously paid the tax. If
there were sequential employers throughout the year, it
would be easy to take their pay stubs in and show that the
amount had been paid. The responsibility rests on the
employee.
Representative Croft asked where the language was located
that indicates the tax will go to education. Representative
Hawker replied it is on Page 5, Line 18, the disposition of
tax proceeds.
Representative Croft responded that it shall be deposited
into the general fund and that the Legislature "may"
appropriate for education. He questioned if the amount
could be appropriated for anything else. Representative
Hawker advised that the State constitution prohibits the
absolute dedication of funds. It is a "best interest
determination" that the money be set-aside for specific
purposes. It becomes a statement of legislative intent that
the funds are designated for that purpose, by creating
separate accounting of those funds.
Representative Stoltze inquired if Representative Wilson
favored the trigger mechanism. Representative Wilson said
she did. Representative Stoltze noted his concern with
"triggers", commenting that the money should go directly to
the education cause.
Co-Chair Williams advised that amendments to the bill would
be taken at the next meeting.
Vice Chair Meyer voiced appreciation to the sponsors for
bringing the education concept forward.
HB 236 was HELD in Committee for further consideration.
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