Legislature(1997 - 1998)
04/22/1997 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
SB 13 - INCREASE TOBACCO TAXES Number 0040 CHAIRMAN BUNDE announced the first item on the agenda, CSSB 13(RLS), "An Act relating to taxes on cigarettes and tobacco products and to the use of the proceeds of those taxes, and increasing by at least 35.5 mills the amount of excise tax levied on each cigarette imported or acquired in the state; and providing for an effective date." He referred to an amendment located in the committee file. Number 0092 SENATOR BERT SHARP, Sponsor of CSSB 13(RLS), stated that the amendment takes out the intent of using the tobacco tax for a dedicated purpose. Number 0186 CHAIRMAN BUNDE said the tobacco tax is separate from the cigarette tax. The cigarette tax existed before statehood and is already a dedicated tax. The tobacco tax refers to a tax on all tobacco, except cigarettes. This tax was instituted after statehood and therefore is not allowed to be a dedicated tax. Number 0226 SENATOR SHARP explained that Section 1 details the legislative intent. The dedicated school fund portion, otherwise known as the cigarette tax, will derive the largest portion of the proposed revenue. The school fund is one of three dedicated funds established prior to statehood and is legitimately constituted as a dedicated fund. This fund only allows for the rehabilitation, construction or repair of state schools or facilities. The other portion of the bill is the Senate version which is to use the tobacco tax, constituting $2.5 million to $3 million according to the Department of Revenue estimates, for anti-tobacco campaigns, enforcement of present tobacco laws and things of that sort. Grants would be given to municipalities to detect, apprehend and prosecute adults who make tobacco products available to children. The intent of these grants would be affected by the proposed Amendment 1. SENATOR SHARP stated that the tax in this bill is increased by 71 cents a pack to make the total tax equal $1. Number 0354 CHAIRMAN BUNDE referred to the chart located in the committee file regarding the existing tax, the tax if this bill passes with the dedication and the final scenario of the bill passing with the dedication found to be unconstitutional. He asked if this indicated the 71 cents or the $1. Number 0389 SENATOR SHARP indicated it was 71 cents, for a total tax of $1. The fiscal note addresses the reduction down to a 71 cent total, with a corresponding reduction in the tobacco product tax. The tobacco tax has the same percentage increase as the cigarette tax. SENATOR SHARP felt CSSB 13(RLS) was a bill addressing health care, education and revenue. Up to 80 percent of the funds could be dedicated to the schools. He said, "The other thing in the bill is a case of a constitutional challenge that would negate the dedication. There's a fail safe retroactive road block to make sure the tax stayed in effect and would not be lost or have to be refunded, that would only be subject to court decision, a negative decision as far as the ability to dedicate the funds to the dedicated account. That depending on who you talk to, there is nothing that prohibits an increased funding on cigarettes to go into that dedicated tax. We didn't want to entice a challenge to avoid the tax, if they should challenge the constitutionality of that. That was the purpose of the last few sections in the retroactive section in the bill. It has nothing to do with retroactive taxes." Number 0592 CHAIRMAN BUNDE said the bill would increase the existing tobacco taxes by 71 cents with those taxes on cigarettes dedicated to the school construction and maintenance fund. Those taxes on other forms of tobacco, if the committee adopts Amendment 1, would go to the general fund and could be appropriated, by the legislature, for the purposes discussed by Senator Sharp. SENATOR SHARP answered that this money could also be used to close the fiscal gap. Number 0607 CHAIRMAN BUNDE mentioned the briefing by Grant Woods, the attorney general from the state of Arizona, who began the lawsuit against Liggett. Some members of the general public feel that raising the fee would not serve as an economic barrier. Grant Woods referred to discussions held with the Chief Executive Officer (CEO) of Phillip Morris, who said that if the cost of cigarettes went up by $1 a pack, nationwide, use would go down by 45 percent. He commented that this information is vastly different from the lobbying effort which claims that raising the tax would not have an impact on use. Number 0660 SENATOR SHARP was a firm believer in the price signal concept. Most business people recognize that there is a definite price signal in regards to any product. Number 0670 CHAIRMAN BUNDE asked him if he had a problem with Amendment 1. Number 0682 SENATOR SHARP answered that he didn't have a problem and he didn't feel the Senate would object, as far as concurrence. The main concern, of the Senate, regarded the dedication. Number 0708 REPRESENTATIVE BRIAN PORTER made a motion to adopt Amendment 1, dated April 22, 1997\T.7. Hearing no objection, Amendment 1 was adopted. Number 0770 GLENN PRAX testified next via teleconference from Fairbanks. He was opposed to HCS CSSB 13(HES) and to the tax on cigarettes. He did not feel the state should assume more responsibility for taking care of citizens. Taking care of a person's health and well being sets a dangerous precedent for the state and is not an appropriate method for influencing public behavior. If the focus could be limited to taxing tobacco and nothing else, then maybe it would be okay. Often government gets some authority to do something and it soon gets out of hand. He cited the income tax and prohibition as examples where government tried to do something good, but it backfired. MR. PRAX did not feel the tax would have the desired effect, to reduce consumption. He indicated that there are studies which indicate both results. Tobacco was a product used to illustrate inelastic demand when he studied economics as it isn't that responsive to the influence of price. Once people get hooked, they will pay whatever the amount needed to get the product. He said some people might stop, but it won't be as significant as some advertise. MR. PRAX felt the tax would lead to smuggling. Kids would become involved in the black market in order to save money to buy cigarettes. He felt a sunset clause should be added to the bill. If the reaction isn't what the proponents of this bill say it is, then it should be repealed. Number 0915 CHAIRMAN BUNDE stated that nothing this legislature does would bind a future legislature. A future legislative body could chose to amend, change or repeal this bill if they felt it was not working. He appreciated the acknowledgement that there were different points of view and different studies, but asked why he felt it wouldn't be an economic deterrent for young people beginning to smoke. He referred to his testimony that once people are addicted, it is harder to change their behavior. He said the legislature hoped the economic deterrent would affect people before they're addicted. CHAIRMAN BUNDE explained that people who are addicted to tobacco products cost the state a considerable sum of money every year in health related expenses. He asked if he had a view on user fees. Number 0968 MR. PRAX advocated getting out of the business of taking care of people who are silly enough to smoke. It is obvious that the health effects of cigarettes are detrimental. People chose to smoke knowing the risks. The government cannot be so paternalistic as to think that society must take care of them when they choose to take foolish risks. He did not think this tax was an appropriate solution to this problem. Number 1011 CHAIRMAN BUNDE agreed, he would rather have people be responsible for themselves. He used the example of people who get into car accidents and are still taken to the hospital. He felt that on a humanitarian level, it would be difficult to change this type of assistance. Number 1022 WALTER GAUTHIER testified next via teleconference from Homer. He opposed any tobacco tax, no matter what shape or form in which it was done. He contended that it is a shell game, that any money dedicated to the Department of Education (DOE) will mean that less money will be included in the DOE budget. This money will be available to continue to fund a whole lot of state employees to push paper from one desk to another. The Republicans were elected to cut the budget. Any kind of tax is a revenue issue. He believed that when you talk about it being a health issue, the smokers costing the state of Alaska a certain amount of money then you have to realize that fat people, people who drink too much coffee, people who eat too many candy bars and get diabetes and people who drink alcohol cost the state a certain amount of money. People who are working for the DOE, the Department of Health and Social Services (DHSS) and non-profit agencies see their budgets shrinking. Those departments and agencies believe that by targeting the evil smokers they can get enough money until a Democratic legislature comes into power. He stated that this is a revenue issue, not a health issue. Number 1121 DIANE BUFFINGTON testified next via teleconference from Kodiak. She stated that HCS CSSB 13(HES) was not a education, health nor a revenue bill. This piece of legislation is a tax bill. This bill purports to dedicate some of the funds to educate children on the hazards of smoking. Over the past five years, the public service announcements have not decreased any type of drug use in our youth. Drug use is up 150 percent for cocaine and marijuana. An education campaign is not going to work. Education needs to begin at the family level. Taxing families is not going to decrease smoking. Fourteen states, in the past two years, have increased their cigarette tax. Most of those states have seen a rise in cigarette usage by teenagers. The state of Washington, who currently has the highest tax on cigarettes, is now attempting to lower their tax. MS. BUFFINGTON referred to enforcement costs. She referred to literature stating that it would cost more for enforcement, that several more employees would need to be added to the budget. She said 70 percent of the DHSS budget is slated for employees. The tax revenue would not filter down to the local municipalities and communities. This bill would violate the constitution. Taxes, according to Mr. Chenoweth, would remain at the same "2.5 which it is currently getting." The state should not enact any laws which would automatically trigger a judicial challenge. The fiscal gap needs to be closed through budget cuts. Number 1282 JOANNE LOVITZ-EDMISTON testified next via teleconference from Anchorage. She said it was an extraordinary abuse of governmental power to propose stealing money from a small group of people via taxation to provide for the education and the anti-smoking sentiments of others. She questioned how the legislature could justify having this small group of smokers pay for the education of other people's children above what is already paid for in property taxes dedicated to education. She did not have any children in the school system. If all people benefited, then all people should fund it. She questioned punishing smokers. She did not think that Alaskans would pay more money to fund increased governmental spending. As a member of Alaskans for Tax Reform she did not approve of increased taxation. MS. LOVITZ-EDMISTON described her upbringing where she learned that it was wrong for a conscience to escape the parameters of personal behavior and conduct. She said that Representatives Bunde and Green have repeatedly expressed that routine smoking and tobacco taxation are a matter of conscious. While she respected their sense of conscious in this matter, she believed that it was her responsibility to state that it is most inappropriate to use one's power to subjugate other free thinking adults who do not share in the same beliefs and values on taxes. Number 1458 CHAIRMAN BUNDE respectfully disagreed with her testimony. He stated that 71 percent of people support this issue according to the Dittman Poll. Number 1508 TESHA SANCHEZ testified next via teleconference from Anchorage. She is in opposition to HCS CSSB 13(HES). She has heard both sides of the tobacco issue. She felt putting a tax on people who smoke because it will stop kids from smoking was wrong. Kids can afford alcohol, drugs, Air Jordan tennis shoes. A dollar a pack won't mean a thing to them. She felt it was her responsibility to teach her children morals at home. Number 1554 BOBBY SCOTT testified next via teleconference from Anchorage. He did not condone the use of tobacco by minors. He stated that it was illegal right now for minors to have tobacco products in their possession. He has heard school principals, coaches and teachers say that they have watched students walk out of school to take a smoke break during school. He asked why these people weren't stopping these students if they were truly concerned. He said when you are a student you will get whatever you need to be popular no matter what it costs. Students don't care about price. It was his job to teach his kids respect, honesty and responsibility. MR. SCOTT works for (Indisc.) Distributing. He feared for the local retailer who would soon be out of business because of these laws. He felt HB 159 should be promoted, rather than the tax bill. The tax bill will not stop the kids, enforcement will. Number 1686 CHAIRMAN BUNDE asked him if he would be willing to pay a cop to watch every kid to ensure that children wouldn't smoke. MR. SCOTT asked if the chair would be willing to pay a cop for every kid to ensure that children didn't use drugs. CHAIRMAN BUNDE answered that he was not willing. MR. SCOTT said he would not be willing to do so either. CHAIRMAN BUNDE then questioned him why he felt enforcement would work. MR. SCOTT referred to a police report located in the committee file. He felt that HCS CSSB 13(HES) would cause people to break into trucks. CHAIRMAN BUNDE asked if young people, under the age of 19, should smoke. MR. SCOTT answered that he did not children should smoke. CHAIRMAN BUNDE commented that the average Alaskan begins smoking at age 14 and becomes addicted at that age. Number 1746 NICHOLAS ZERBINOS testified next via teleconference from Glennallen. He said this tax bill is the silliest thing he has every heard. He talked with legislators who said that they knew this bill was not going to stop kids from smoking, but money can be made on the taxes which can be used for something else. Legislators are not interested in the kids, they are interested in the money. He said the name of the legislators were confidential. He said tax money is not going to stop kids from smoking. Smoking is something that if you take too much of it, it will hurt you. He cited foods on the market that people can't eat including soft drinks, tomatoes and oranges. He suggested taxing these products. Taxes will not help anything, they will only allow the legislature to spend money on things they want. Number 1867 KEN JACOBUS testified next via teleconference from Anchorage. He did not think you needed to increase the tax on tobacco to keep children from smoking. He felt the tobacco companies were going to have to increase their prices because of the settlements from the nationwide lawsuits. He felt it would be possible to test the legislative theory when this occurred. Alaska's lower income group, including many Alaska Natives smoke in disproportionate numbers. He did not think we should force the increased cost of government onto Native Alaskans because they got hooked onto a bad product when they were younger. Number 1932 SUZANNE FISHCHETTI testified next via teleconference from Anchorage. She opposed HCS CSSB 13(HES). "Last Tuesday over 61 percent of the Anchorage voters passed a ballot proposition that required 60 percent majority vote to have a sales tax in Anchorage and I think that's the poll that the legislators should be listening to, not the Dittman Poll." She suggested that the state should try to recover the $100 million in defaulted student loans before they started raising tax revenue. Schools should be able to teach our students about smoking. The Centers for Disease Control have conducted studies, in Illinois, Nebraska and Hawaii where taxes were raised, which showed kids smoking increased. Number 1977 JODI OLMSTEAD testified next via teleconference from Fairbanks. She was opposed to the tobacco tax. She stated that this tax is against Alaskan Natives because a disproportionate high number of them smoke. It has always been illegal for kids to smoke, drink and do drugs. She questioned why the state's permanent fund monies were invested in Phillip Morris. She has talked to many people and has found no one who agrees with this bill. Kids say that the price increase will not change whether or not they smoke. She thought there were other things behind this tax, it did not have anything to do with children. She asked why we are going to have another law which will say that it is still against the law for kids to smoke. She did not feel that money should be invested to save people from themselves. Number 2102 JOHN CYR, President, National Education Association-Alaska (NEA- Alaska), said his organization supports the passage of HCS CSSB 13(HES). The increased cost of tobacco products will serve as a deterrent to use by Alaskan students. He said the age when most kids start to smoke is age 13 and 14 and this is the most price sensitive age. Tobacco use is the leading cause of death in Alaska. One out of five deaths are tobacco related. The United States Centers for Disease Control estimates that 18,000 Alaskans, currently under the age of 18, will die from tobacco related diseases. He said this is absolutely a health bill and something that is long overdue in this state. MR. CYR stated that schools in Alaska have suffered under deferred maintenance for years. There are schools with trash cans collecting the spring runoff. The schools in this state need the money that will be generated from this bill. His organization felt that this bill will be one of the best pieces of legislation that will be passed this year. It will positively affect the lives of children into the foreseeable future and it will make schools better places to be. Number 2202 RUPERT E. ANDREWS, Representative, American Association of Retired Persons (AARP), stated that the state legislative committee of AARP was in favor of any increased taxes on tobacco products. Last fall a survey was done in the membership. Currently there are 40,000 plus AARP members in Alaska, fifty years and older. A sample of 4,000 was chosen for the survey, 2,200 forms were returned. Some of the questions had to do with the tobacco tax. About 79 percent responded that they were in support of a tobacco tax as a health issue. Alaska has an informed electorate that sees this tax as an effective means to discourage children from starting to smoke. He felt this 79 percent fit in well with the Dittman Poll. Number 2268 REPRESENTATIVE JOE GREEN commented that none of the testimony given against the bill cited where that money would go; children and aggressive prosecution of those who sell tobacco products to children. He said this bill prevents children from becoming addicted to tobacco products. TAPE 97-32, SIDE B Number 0000 REPRESENTATIVE PORTER made a motion to move HCS CSSB 13(HES) out of committee. Number 0007 REPRESENTATIVE AL VEZEY objected to the motion. He then withdrew his objection. CHAIRMAN BUNDE stated that hearing no further objection, HCS CSSB 13(HES) was moved out of the House Health, Education and Social Services Standing Committee.
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