Legislature(2017 - 2018)HOUSE FINANCE 519
04/11/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB26 | |
| Amendments | |
| HB115 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 26 | TELECONFERENCED | |
| += | HB 115 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 115
"An Act relating to the permanent fund dividend; relating
to the appropriation of certain amounts of the earnings
reserve account; relating to the taxation of income of
individuals; relating to a payment against the individual
income tax from the permanent fund dividend disbursement;
repealing tax credits applied against the tax on
individuals under the Alaska Net Income Tax Act; and
providing for an effective date."
2:52:52 PM
Co-Chair Seaton MOVED to ADOPT the proposed committee
substitute (CS) for HB 115, Work Draft 30-LS0125\K (Nauman,
4/7/17).
Representative Wilson OBJECTED for the purpose of
discussion.
TANEEKA HANSEN, STAFF, REPRESENTATIVE PAUL SEATON,
explained that the current version contained the amendments
to the income tax section that had been adopted by the
committee. The sections referring to the permanent fund had
been removed. She said that there were three additional
changes; the sort title had been changed to reflect that
the bill was no longer a combined act, from the State
Revenue Restructuring Act to the Education Funding Act. She
directed committee attention to Page 22, line 12, which
directed that the legislature could appropriate the
estimated amount collected for the tax to the Public
Education Fund. She pointed to Page 5, subsection (g),
which was related to an amendment that had been adopted in
committee and was conceptually amended define "disabled
beneficiary" under AS 18.80.300, (a) and (b) only.
2:55:46 PM
Representative Wilson pointed to page 22, line 12. She had
initially thought a new fund was created, but she no longer
believed that was the case. She wondered why the word "may
had been used, and not "shall".
Ms. Hansen replied that a new fund was not being created.
She said that the reason for the use of "may" was due to
the Constitution; there always had to be an appropriation
done by the legislature. She relayed that the Public
Education Fund was distributed without further
appropriation, so the direction could not be that the
revenue "shall" go into a fund where there was no further
appropriation, the legislature had to appropriate the
revenue.
Representative Wilson stated no matter where the funds were
put outside of the General Fund, it was still General Fund
money. She requested further clarity.
Ms. Hansen answered that the bill could have no binding
effect on future legislatures and did not address revenue
beyond what was in the bill.
2:57:57 PM
Representative Wilson felt that it should be clear to the
public that the money could be appropriated for anything
and was not earmarked for education.
Co-Chair Seaton clarified that the Public Education Fund
was where the legislature put money for forward funding of
education; the money flowed from the fund automatically and
funded the formula and pupil transportation. He said that
an appropriation had to be made into the fund for the
deposit, but the funds automatically funded only education.
3:00:25 PM
Vice-Chair Gara preferred the use of the word "shall", but
explained that the word "may" had to be used under the
Constitution.
Representative Pruitt expressed his distaste for short
titles. He plugged the use of iPads in committee to easily
access information for bills that were accompanied by
excessive documents.
Representative Guttenberg remarked that the issue of
electronic and telecommunications was under discussion in
Legislative Council.
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Grenn, Guttenberg, Kawasaki, Ortiz, Pruitt,
Thompson, Foster, Seaton
OPPOSED: Wilson, Tilton
The MOTION PASSED (9/2).
3:03:22 PM
Vice-Chair Gara addressed the two fiscal notes attached to
the bill.
Representative Wilson reiterated her request that the bill
version on the notes be updated to reflect the committee
substitute. She asked about the inter-agency receipts on
FN1, she had understood that the hearings would be done by
the administration and not the court system.
3:06:15 PM
KEN ALPER, DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE,
replied that the interagency receipt meant DOR would pay
the funds to DOA. He said that it had been estimated that
$200,000 to $300,000 of the $1.2 million listed on the
services line of FN2 would be money paid to the Office of
Administrative Hearings (OAH) for the purpose of appeals.
Representative Wilson understood that DOR would be paying
for the administrative hearings from collected taxes.
Mr. Alper replied that DOR would make the payments from its
general fund budget.
Representative Wilson asked whether a person could go to
the courts to appeal the income tax.
Mr. Alper replied that the first step would be the internal
appeals group, then OAH, and then to superior court.
Representative Wilson asked why there was not a fiscal note
for that process.
Mr. Alper responded that he did not know that the process
would require revenue spending. He said that the Department
of Law would support the state's position and the court
system would have costs as well, but forecasting the number
of cases would be difficult. He added that OAH had a metric
for the percentage of tax items that were appealed.
Representative Wilson hoped that the costs would be clearly
laid out.
Co-Chair Foster noted his staff would research the issue.
3:09:45 PM
Representative Pruitt addressed that regulations would have
to be written. He wondered whether DOR would need
additional money to write regulations.
Mr. Alper replied there was a $14 million capital budget
item in the fiscal note that would partially go to drafting
regulation.
Co-Chair Seaton MOVED to REPORT CSHB 115(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes.
Representative Wilson spoke to her OBJECTION.
3:12:11 PM
Representative Thompson said that 80 percent of the wages
paid to residents was in the Railbelt. He stated that a
person working on the North Slope that lived in the
Railbelt was not included in that 80 percent because they
would be considered a North Slope employee and not a
Railbelt resident. He thought that the bill needed further
vetting.
Vice-Chair Gara thought that the only way to tax more
people was to tax those at lower incomes. He was satisfied
that the legislation would not impose taxes at lower
incomes, which he felt would disproportionately hurt rural
and poor areas of the state. He stressed that he did not
want to tax more Alaskans. He noted that no taxes would be
imposed on the first $15,500 of earned income; for each
$1,000 above $15,500, a $25 tax would be imposed. He
expressed discomfort with the idea of taxing people at
lower incomes than $15,500. He lamented that areas in the
budget that could withstand further cuts were limited, and
he expressed concern that liberty and dignity for Alaskan
residents could be cut along with funding.
3:16:44 PM
Representative Pruitt offered a personal anecdote related
to the possible impacts of an income tax. He argued that a
person making $42,000 per year was not privileged, but
rather was a "regular Joe" out working in the world who
would be taxed $692.50 under the legislation.
Vice-Chair Gara clarified that he did not say that everyone
who would pay taxes under the bill came from a place of
privilege.
Representative Pruitt returned to the $692.50 figure. He
referred to seniors on fixed incomes in Alaska. He noted
that the figure would be spread out over the course of 12
months, roughly $58 per month, would be a burden. He spoke
to seniors on fixed incomes of $30,000 per year who would
struggle under the legislation. He offered another anecdote
related to a senior's fixed income budget. He lamented that
property taxes in Anchorage had recently increased. He
worried that an income tax would negatively affect
recruiting people in certain professions to work in the
state. He noted that the Alaska Permanent Fund Corporation
already struggled with hiring people from out-of-state. He
queried that overall effect that an income tax would have
on the state's economy. He expounded on the reasons he
believed that an income tax was a bad idea.
3:24:33 PM
Co-Chair Seaton stated that the hope was to strike a
balance between the bill and the Permanent Fund reduction
bill. He stated the money from the tax would be directed at
education. He was perplexed to hear members stating the
committee had not heard from economists. He stated the
committee had heard from Institute of Social and Economic
Research (ISER) and among other experts. He remarked that
some public testimony had underscored that further cuts
were one of the worst things that could happen to the
economy. He shared that the bill represented one piece of a
four-part fiscal plan. He spoke about services such as road
maintenance, troopers, the university, and others that were
struggling under funding cuts. He reminded members that
individuals earning under $30,000 would be exempt. He noted
that the tax rate would be 2.5 percent, $25 per $1,000 over
$30,000. He stressed that social security for low-income
seniors would be exempt under federal law. He stated that
exempting the permanent fund dividend, and the $4,000
personal exemption, would help lower-income Alaskans. He
responded to the statement that 80 percent of the tax would
come from the Railbelt, but pointed out that 80 percent of
the state's population lived in the Railbelt. He stressed
that the bill was not a geographically discriminatory piece
of legislation. He believed that Alaskans should be willing
to pay for services, such as road maintenance, in order to
protect roads from deterioration. He felt that
the bill represented one component of a plan to solve the
fiscal problem. He stated if only a portion of the deficit
was solved it meant the legislature would be faced with
making further cuts. He spoke to potential impacts around
the state. He stated it came down to what the future of the
state should look like. He believed that the credit
legislation that had passed could not solve the problem on
its own.
3:30:46 PM
Representative Tilton remarked the members had different
philosophies on how the fiscal gap should be handled. She
said that state government could be funded sufficiently
with a $400 million cut. She echoed concern for hoe the tax
could affect seniors on a fixed income. She worried about
how the tax would affect the private sector. She asserted
that she was supportive of funding for education, but that
"an income tax was an income tax, no matter what you call
it."
3:33:27 PM
Representative Guttenberg agreed the situation was
difficult. He shared that even in time of financial
security he worried about not building out sustainable
infrastructure. He lamented that people took joy in the
building and ribbon cutting connected to increased
infrastructure, but that major maintenance of those
structures was less attractive. He thought that a
restructuring of the permanent fund would spread the burden
unfairly across the population. He believed that an income
tax would level out the financial burden to Alaska's
residents. He noted that many on his constituents in rural
Alaska, even during times of financial stability, had not
received the services they had needed. He lamented the
historical inequities in state spending. He stressed the
need for a stable economy. He hoped that industry would
commit to investing in the state. He felt that the most
important issues facing the state were controlling the size
of government and stabilizing the economy. He believed that
the solution to the fiscal crisis was multi-faceted. He
felt that the legislature was running out of time to act on
the issue. He expressed concern that the state was
currently unable to take advantage of economic
opportunities through the University because the
legislature was making deep cuts to their budget.
3:41:26 PM
AT EASE
3:44:45 PM
RECONVENED
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Grenn, Guttenberg, Kawasaki, Foster, Seaton
OPPOSED: Ortiz, Pruitt, Thompson, Tilton, Wilson
The MOTION PASSED (6/5).
There being NO further OBJECTION, CSHB 115(FIN) was
REPORTED out of committee with a "do pass" recommendation
and with one new fiscal impact note from the Department of
Revenue and one new fiscal impact note from the Department
of Administration.
Co-Chair Foster discussed housekeeping. He recessed the
meeting to a call of the chair [Note: the meeting never
reconvened].
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 115 CS WORK DRAFT v K_4.7.2017.pdf |
HFIN 4/11/2017 1:30:00 PM |
HB 115 |
| HB 115_Sectional version K_long form_4.11.2017.pdf |
HFIN 4/11/2017 1:30:00 PM |
HB 115 |
| SB 26 v.U Amendments 1-8.pdf |
HFIN 4/11/2017 1:30:00 PM |
SB 26 |
| SB 26 Fiscal Note PKT v.U.pdf |
HFIN 4/11/2017 1:30:00 PM |
SB 26 |
| HB 115 Fiscal Note PKT. v.K.pdf |
HFIN 4/11/2017 1:30:00 PM |
HB 115 |
| SB26_Oppose_041117.pdf |
HFIN 4/11/2017 1:30:00 PM |
SB 26 |
| SB26_Support_041117.pdf |
HFIN 4/11/2017 1:30:00 PM |
SB 26 |
| HB115_Oppose_041117.pdf |
HFIN 4/11/2017 1:30:00 PM |
HB 115 |
| HB115_Support_041117.pdf |
HFIN 4/11/2017 1:30:00 PM |
HB 115 |
| SB 26 Support Letter.pdf |
HFIN 4/11/2017 1:30:00 PM |
SB 26 |