Legislature(2003 - 2004)
05/07/2003 09:00 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.