Legislature(1997 - 1998)
02/13/1997 03:03 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB - 1 CIGARETTE AND TOBACCO TAX Number 1486 CHAIRMAN BUNDE announced that the next item on the agenda was CSHB 1(HES), "An Act relating to taxes on cigarettes and tobacco products; and providing for an effective date." Number 1489 DAVE PETERS testified next via teleconference from Valdez. He said he was against CSHB 1(STA) as he did not see how raising the taxes on cigarettes was going to keep kids from smoking. He said it would just make them be able to steal cigarettes a little easier. He said maybe if a tax was imposed on alcohol, or a tax to boost the situation where people get fined for selling kids the cigarettes, would work. He said kids will still have the access, they will just steal more from their parents. He said CSHB 1(STA) will hurt him as he is a smoker. Number 1590 CHAIRMAN BUNDE referred to the evidence supporting the increase in tobacco costs with a drop in underage smoking. He also cited the costs to the state because of tobacco related illnesses. MARLENE LEAK testified next via teleconference from Fairbanks. She said state government wants more money and is using pious platitudes that the solution to any problem is more tax money. She went on to say that some health related non-profit organizations have found that being anti-tobacco is a veritable gold mine in contributions and government grants. These organizations, for public relations purposes, need a little moral victory for their cause, without threatening a ban on tobacco, and the tax increase does look good there. MS. LEAK asked the committee to recall that the March of Dimes was almost wiped out when Dr. Salk discovered a vaccine for polio, but with quick thinking a new cause was picked. The cause they chose was birth defects which has a myriad of causes and is unlikely to be cured. She asked if tobacco would be as easy to replace. She said non-profit organizations, profiting from tobacco, can't take that chance. MS. LEAK said about a year ago, a front page article in the Wall Street Journal detailed how a massive increase in tobacco tax in Canada began a giant black market for cigarettes. Later in 1996, Canada lowered the tobacco tax. A federal luxury tax increase was reversed a few years ago due to a loss of ship building jobs when sales of yachts went overseas or to the used yacht market. As the Boston Tea Party showed, the public will not respect a greedy, arrogant government. Even when we get sanctimonious sermons that it is worth the tax to discourage teenagers from smoking. MS. LEAK said if the correlation studies which tell us that tobacco kills several hundred thousand U.S. citizens per year were true, it would be murder for the legislature to leave this substance legal. Assuming that you believe the numbers to be true, the tax would be blood money for the state. She suggested that states, such as Alaska, might be sued by victim's families who might claim that the state knew that tobacco was a killer, but was left legal for short term tax increase gain. She asked if this showed compassion on behalf of the legislators. She asked the legislators to admit that they want more tax money and that they would do and say anything to get it. She said she is against CSHB 1(STA). Number 1745 BETTY ROLLINS testified next via teleconference from Fairbanks. She said she is a non-smoker, but CSHB 1(STA) allows the state to hide behind the bad guy. We have 3,000 contaminated sites in the state of Alaska, and many contaminated sites in the NorthStar Borough. She said there has been no action by the legislature or by any government entity to assist with this problem. MS. ROLLINS said she talked with the Michigan DOR where bootlegging is a very serious problem. She said the state of Michigan raised their tax 200 percent, but only received 28 percent in additional tax revenues from the tobacco tax. She asked Mr. Vesley [Ph] of DHSS if he had any statistics on any of the programs designed to discourage underage smoking, how many children did not smoke because of those programs. She was told that DHSS did not have the ability to go out and find these figures. She was faxed a 2-year- old supposition by DHSS to tell people that a tax increase will stop teen smoking. She said it is the same supposition that is being used today. MS. ROLLINS said she has a letter from the Department of Public Health signed by state troopers and the Michigan Department of Public Health. The letter says that even though they are getting more money in tobacco tax, it will start interfering with the private lives of people. Highly trained officers are following up on tests and making arrests when illegal activity occurs such as when people cross state borders to buy two or three cartons of cigarettes. She said there is a special force to take care of this in Michigan. She asked if we wanted to do this in Alaska. Number 1848 DOUG YATES testified next via teleconference from Fairbanks. He said the tobacco industry is big business, spending billions to advertise their products. He said most of that advertising money is used to convince children that the glamour of using their products outweighs long term health consequences. As a result of the industry's power and their vested interest, tobacco will never be outlawed. Society will never place it in the same arena as marijuana, it is too strongly established as part of this culture's accepted addictions. The only avenue to free thinking men and women who recognize its cost to our people is to employ a level of taxation that begins to address these costs. MR. YATES said he was astounded that there was so much opposition to this measure since Republicans pride themselves on fiscal responsibility. He asked what better way to ease the financial burden of raising a family in Alaska then to reduce the cost of health care. According to reliable estimates, significant money can be saved if we work to eliminate health care costs associated with tobacco addiction. He said the tobacco industry relishes the ideological morass spawned by the issue of taxation. In each state where taxation is an issue, there are guys who stand and point at tax proponents. He urged all legislators to set aside ideological differences and realize that increased taxation will begin to tilt the scales for the long term advantage of the state. Number 1938 SCOTT CALDER testified next via teleconference from Fairbanks. He wanted to reflect on the assertion that is being made that the reason to tax tobacco is to prevent children from smoking, or to deter children from smoking. In connection with his experiences with the state's juvenile authorities, he wanted to tell the committee why this is a false perspective. He said we want to tax tobacco so that we can pay for government. He said the state of Alaska pays specialized foster parents $90 a day and that the foster parent who took care of his son was buying cigarettes for his son. He questioned why the legislature was raising taxes and accruing more funds to pay for services for which there is no oversight or recourse to a parent like himself, who is faced with a specialized foster parent providing cigarettes to his child. He said he did not want any more taxes or any more liabilities to the people in the state of Alaska until those problems are corrected. He suggested that every man, woman and child in the state of Alaska would be better off if they smoked a pack a day than if they had to put up with that type of government. Number 2066 CHAIRMAN BUNDE said there is no indication that any monies raised from this tobacco tax would go to the Division of Family and Youth Services (DFYS). He said CSHB 1(STA) dedicates the money to a school construction fund. His other point was that a vast majority of people in the state of Alaska asked the legislature to address this issue. He referred to a letter by the Federation of Independent Businesses which had 62 percent of their members in favor of supporting this tax. He said this is not some plot from government, it is simply government responding to the requests of their constituents. Number 2097 CAM CARLSON testified next via teleconference from Fairbanks. She said she is a non-smoker, but is adamantly opposed to the tobacco tax. The purpose of taxes is not social, behavior modification or social engineering and added that it is being used as an excuse for increased revenues. She said saying the money will be used for schools is just kind of facetious and added that if we think so little of schools that the only way we can get money for them is to tax and bite, then it is a pretty sad state of affairs. She referred to the previous testimony regarding foster parents letting kids smoke and the problems that need to be corrected in this area. Number 2149 CHAIRMAN BUNDE said if CSHB 1(STA) works and is a barrier, then these children won't begin to smoke and maybe that will solve that problem. He said this is a totally voluntary tax, no one has to pay this tax. They simply don't smoke and they won't pay for the tax. He reminded those people concerned over taxation that smokers cost the state of Alaska nearly $200 million a year. He asked if those people would rather pay an income tax to take care of those expenses or if they think a user fee is more appropriate. TAPE 97-10, SIDE B Number 0000 DON DAPCEVICH, Executive Director, Advisory Board on Alcoholism and Drug Abuse, said the legislative committee spent the major part of this morning meeting telephonically to speak about the tobacco tax. He said they wanted him to convey to the committee that those members from Fort Yukon, Palmer, Fairbanks, Anchorage and Ketchikan have gone into their communities and talked with people and have made up their minds that they want to support this initiative. He said they want to congratulate the committee on bringing it forward. He said the committee hopes the state doesn't collect a dime on these taxes, they would prefer that people not smoke. MR. DAPCEVICH said there is no question that cigarettes are a gateway drug. He said this does not suggest that there is a causal relationship between smoking tobacco and smoking marijuana or using heroin, but it is well established that tobacco is certainly a gateway drug. He said it is also well established that as price goes up, use goes down especially among the most price sensitive group which is youth. He said his committee urged the legislature to pass CSHB 1(STA) with one cautionary note. He said they felt that education efforts, for tobacco and other drugs, should be redoubled in the schools. He said, as price goes up and accessibility goes down, we need to make some measures for smoking cessation programs for youth and adults. He said CSHB 1(STA) will improve the health of people in the state and only requires that users of tobacco pay the tax. Number 0163 REPRESENTATIVE PORTER made a motion to move proposed Amendment 1 to CSHB 1(STA). Number 0182 REPRESENTATIVE VEZEY objected to the motion. Number 0187 CHAIRMAN BUNDE said the purpose of proposed Amendment 1 is to discourage prolonged litigation. He said HB 1, as amended, contains the dedication to the school fund and there is a severability clause in the bill that said if there were litigation that found this dedication to be unconstitutional, then the money would go into the general fund. He said the proposed Amendment 1 is a provision to discourage prolonged litigation which might be filed in hopes of tying this issue up for a number of years before the tax becomes effective. Number 0239 JACK CHENOWETH, Attorney, Legislative Legal Counsel, Legislative Legal and Research Services, Legislative Affairs Agency, clarified that the proposed Amendment 1 was E.2. He said, "E.2 as I understand it is in response to an Assistant Attorney General's concern that because the main bill, the increase in the taxes in the main bill are set to take effect October 1, 1997, that there needs to be a retroactive feature for the provisions in the bill that deal with .090 and .190(a), .090(a) in Section 2 and .190(a) in Section 4 and a means by which the levy, the amount raised by the levy, by the increased levy is directed properly for the cigarettes that are sold after October 1. I think it has to do with the concern that there be some mechanism in place to protect the state, the school fund in the event there is protracted litigation and some means by which the revenue can be accounted for and followed through in the event litigation eventually works out to be contrary to the position that this money go into the, into the school fund." Number 0354 A roll call vote was taken on the proposed Amendment 1. Representatives Bunde, Porter, Brice, Kemplen and Dyson voted yea. Representative Vezey voted nay. Representative Green was absent for the vote. Amendment 1 was adopted to CSHB 1(HES). CHAIRMAN BUNDE called for an at ease at 3:53 p.m. The committee meeting resumed at 3:54 p.m. Number 0415 REPRESENTATIVE PORTER made a motion to move CSHB 1(HES) with individual recommendations and attached fiscal notes. REPRESENTATIVE VEZEY objected to the motion. A roll call vote was taken on CSHB 1(HES). Representatives Bunde, Dyson, Kemplen, Brice, Green and Porter voted yea. Representative Vezey voted nay. CHAIRMAN BUNDE declared that CSHB 1(HES) was moved from the House Health, Education and Social Services Standing Committee with individual recommendations and attached fiscal notes.
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