Legislature(2003 - 2004)

05/07/2003 09:00 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                                     
     ·         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                                                                    
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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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