Legislature(1995 - 1996)
01/24/1995 08:05 AM House STA
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HSTA - 01/24/95
Number 104
HJR 3 - VOTER APPROVAL OF NEW TAXES
CHAIR JAMES went to the next bill on the agenda, which was HJR 3,
and called REPRESENTATIVE TERRY MARTIN who is sponsoring the bill
to the table to make his presentation.
REPRESENTATIVE TERRY MARTIN, SPONSOR OF HJR 3, gave a history of
taxation in the U.S. and stated the importance of allowing voters
to decide on taxation. His sponsor summary for HRJ 3 is as
follows, for the record:
Proposing an amendment to the Alaska Constitution to require
the approval by the state's voters for the imposition of state
income tax, state ad valorem tax on real property, or state
retail sales taxation.
"HJR 3 is intended to prevent exorbitant and disproportionate
taxes from harming Alaskan residents. Taxation, whether
income, property, or retail merchandise is not the answer to
increasing state revenues.
Need for Legislation
"The State of Alaska currently ranks first in state tax
revenue per $100 of personal income, and ranks third for local
tax revenue per $100 of personal income. Although oil and gas
taxes contribute to a large portion of the state tax ranking,
the local burden clearly depicts the high level of taxes
Alaskans suffer. States such as Florida and Nevada prohibit
their legislature from enacting a personal income tax, while
the Colorado Legislature passed a 1992 law requiring voter
approval for any permanent tax increase. Five states have
constitutional mandates preventing specific taxes, while 10
states require a `super majority' of their legislature to pass
various taxes.
"These advances in the elimination of unwarranted taxation are
indicative of the national trend. In Alaska, voters are
extremely apprehensive about new and elevated taxes. The
general viewpoint has been to work in conjunction with the
legislature, rather than to grant them full autonomy over
taxation. HJR 3 would transfer the final authority of
statewide taxation from the legislature to the citizenry."
Number 195
CHAIR JAMES reported for the record that Representative Ivan Ivan
returned shortly after Representative Martin began speaking. She
then asked if there were any questions.
REPRESENTATIVE GREEN testified in support of the bill. He said he
supported the bill strongly from a fiscally conservative point of
view. His concern is about how the action of the various bodies
delegate their responsibility as taxing authorities. The
legislature is the one empowered to do taxing and they, in turn,
give this back to the people. He asked how this works in other
states, if there have been problems, and if the people have
empowered or instigated a tax again through popular vote.
REPRESENTATIVE MARTIN explained that other states have reinstated
a tax through popular vote. Legislators are elected as their
representatives, but it is a sharing of responsibilities that is
happening now. We need to go back to the people for certain
things, and give the people a voice to change the constitution or
to speak to the legislators through the petition process. People
are becoming concerned, nationwide as well as citywide and
statewide, that the government has too much money. We have to put
restraints on it and listen to the people.
REPRESENTATIVE GREEN asked if people in other states that have
enacted legislation like this, where the state requires public
approval of taxes, have increased taxes or imposed a tax by popular
vote.
REPRESENTATIVE MARTIN referred to the tax revolt under the Jarvis
Amendment in California, which had been very effective in
controlling California's wild spending. There were other taxes
accepted in San Diego when people decided to tax themselves for
more education. The state of Colorado recently followed the
revolution of the Jarvis Act in California and put heavy
restrictions on their state legislators on the capping of tax.
People will vote to reinstate taxes when it becomes necessary.
REPRESENTATIVE GREEN said his concern is that we in Alaska will
have to impose a tax at some future time, once spending is brought
under control. He wondered if we move this legislation, if the
people would vote to reinstate a tax.
Number 308
REPRESENTATIVE ROBINSON had two concerns. From what she has seen
is that in Alaska it has been just the opposite. We not only have
imposed an income tax, we have also come back and repealed an
income tax. It was an act of the legislature. Historically, the
legislature has acted responsibly regarding this issue, which is
our constitutional duty, so she asked why Representative Martin
perceived a problem and why he thought we need to move on this one.
Her second question was about another fear she has. The fear is
being caught in a crisis and just being on hold about whether the
public would agree that we were in a crisis and would vote to tax
themselves. For example, if oil dropped to $8 a barrel, it would
be the legislature's responsibility to keep the state functioning
and to keep a responsible budget while just hoping for voters'
approval and they would tax themselves.
REPRESENTATIVE MARTIN commented that fear is the driving force of
the legislature, one way or the other. Legislators fear the public
voice every two years when running for election. If it came to a
revenue crisis he felt there were other options available to the
legislature before taxing. Taxing may take a year or two years to
get started; by then, government is stopped. He said, "Do we have
guts enough to cap the dividends for one year or two years?" If we
capped it this year at $1,000 per person, you would have $227
million for the 1996 budget available to you. Representative
Martin felt that, when we talk about fear, we need to ask in what
way are we fearful of the public. To make his point, he said,
"Will they cut my head off because I capped the dividends or would
they cut my head off because I allowed them to vote on taxes?"
Number 371
REPRESENTATIVE PORTER said that his concern is timing. One of the
major chores of this legislature is to attempt to set up a long-
range fiscal plan, which will require a vote of the public because
of the Constitutional Budget Reserve issue and the spending
limitation, and to try to get something for a five-year period
rather than something changeable every two years. He wondered if
that process would be somewhat frustrated if this and that process
were going on simultaneously.
REPRESENTATIVE MARTIN said that when talking about a five-year plan
this could be part of it. We could have it on the ballot for the
next election to show the people are willing to talk about taxing.
If asked about tax for education, they may pass it with ease. If
the legislature taxes the people on income tax without giving them
a voice they rebel, but give them a voice and they will cooperate.
Part of the plan for future funding is to allow the voice of the
people to be heard.
Number 415
REPRESENTATIVE PORTER said he would be more comfortable if there
were limitations put on interest groups being able to lobby one way
or another on the public. It often comes down as money for
advertising, in that kind of situation, not with the real will of
the people.
Number 419
REPRESENTATIVE IVAN presented a question to Representative Martin
about his bill where it compares Alaska to other states in the
Lower 48. It states that Alaska ranks first in state revenue for
$100 for personal income and third for local tax revenue.
Representative Ivan asked how much of these figures are paid by oil
companies and other resource users, and how much is paid by
individuals for local or state taxes. When looking at the
situation as it is today, and trying to see our future, and what we
have to deal with in order to come up with a fiscal plan, these are
facts that he felt he needed to know to go with Representative
Martin in this process.
REPRESENTATIVE MARTIN said it is good to find out what is happening
in other states of democracy and republican form of government. He
explained that is why the National Council of State Legislators
(NCSL) was able to give them this important information. The
information shows that on the state level we are number one, and on
the local level we are number one. On the state level everyone is
equal: $12.80 per $100 tax that someone is paying for us now,
mostly the oil companies. That is between 80 percent and 85
percent. It is down now to about 80 percent because of productions
decrease and so on. When we come to property tax, the overall is
$6 per $100 that the average Alaskan pays; but it varies from
community to community, for some have a sales tax but low property
tax. Some have high property tax and no sales tax. Other
communities like the North Slope Borough from Valdez and Fairbanks
that can have a high mill rate on the pipeline, which takes the
money directly out of state revenues and gives it to local
government that other areas don't have the access to, but that
property tax decreased to what might be a local property tax. The
average is $6.00 by the national foundation: It is strictly an
average. If people were asked to pay a tax because of a decrease
in oil production, a new 3 percent or 4 percent of this total cost
of government, he thinks the people will pay the tax if they know
it is going for a specific purpose.
REPRESENTATIVE ROBINSON asked Representative Martin if this bill
passes the House and Senate, if another bill would have to be
passed to say it must go to the vote of the people with a plan.
REPRESENTATIVE MARTIN said yes, this could be part of the future
plan. Once the people have been given the right to have a voice in
the future financing of the state, then we can go to them with our
total package for the next five or ten years.
REPRESENTATIVE ROBINSON reaffirmed that there would have to be
another bill passed by the legislature before we could pursue any
taxation. She also pointed out that there is no fiscal note, and
this bill would clearly need a fiscal note.
REPRESENTATIVE MARTIN said the Administration is having difficulty
catching up with everything, and asked if he could introduce
through the committee to accept a typical $2,200 fiscal note for
any ballot question. It wouldn't be any more than that.
Number 506
CHAIR JAMES asserted that it would be a two-part process. This
bill is a request for a constitutional amendment. For this bill
to pass it needs to pass with a two-thirds (2/3) vote in both
houses. Then it would go to the public for them to vote as to
whether or not they wanted to have this authority to decide on
these issues. That is the first issue, and that is the issue
before this committee. This does not have anything to do with
whether or not we want to tax. Pending the decision by the people
on this bill that would be what we would do when we want to impose
a tax. CHAIR JAMES agreed with Representative Porter that the
Senate, the House and the Governor, support the formation of a
long-range planning commission to establish goals for a five year
period, and that is going to take a constitutional amendment. It
is very specific in the constitution that you cannot commit another
legislature, and legislatures only last two years. This committee
or this legislature cannot put anything into any specific form,
which says they must do something. If the public tells us this is
what they want us to do, and the five-year plan should be put out
for the vote of the people, then it would behoove the legislature
to do it whether or not they are compelled by the constitution to
do it. They would be responding to the people's needs. Further,
CHAIR JAMES said she trusts the people too, and it is never a
mistake to ask the people what to do. It is difficult to have the
thumb on the pulse of the people without asking them specifically
to vote for a specific issue. She said, if they are wrong, or they
as legislators do not think they understand something, it behooves
them to make the public understand. It is important that everyone
is on the same plane.
REPRESENTATIVE ROBINSON asked if they could still go to the people
and ask their opinion, as an advisory vote, without this bill.
REPRESENTATIVE JAMES explained that whenever they go to the people
for a vote when it is not a constitutional mandate, what they are
asking is an advisory vote. They can go forward and do what the
people said or not. It is just an advisory vote.
REPRESENTATIVE MARTIN said the experience with the advisory vote is
that the legislators do not listen to the people. It is a gimmick
in the history of this state to kill an issue. The legislature
does not follow through on the advice of the people.
CHAIR JAMES commented on the language of the bill. Her concern was
that it is brief. Even though constitutional amendments are
intended to be brief, they are not intended to put law in the
constitution, but rather philosophy. Yet for establishing a state
tax on personal income, the question is very basic; there is not
anything said in this bill that would indicate that we would need
to ask about any gross increases in that tax. If the people voted
on it, and it becomes part of our constitution that says if we want
to establish a state tax on personal income, we must first ask the
people. So if we ask the people, then if the legislature puts a 1
percent tax on our income and they say yes, then the following year
decide to increase it, this amendment does not preclude the
legislature from raising taxes. She wondered if the bill is
sufficient to do what they intend it to do.
REPRESENTATIVE MARTIN hopes it is. The intent is that any
increases in personal taxes would go to the people for a vote. If
we put on a 2 percent sales tax for the state, and say it would
bring in $200 million, then if two years down the line the
legislature decided it needs another $100 million for something,
then the people would have the chance to vote on that increase.
This is personal taxes. We don't interfere with business taxes,
commercial taxes, oil taxes or severances.
CHAIR JAMES brought up the legislature's ability to authorize
agencies to put on fees. This legislation is turning the decision
on whether or not to have income tax over to the people and taking
it out of our courts. She asked Representative Martin to comment
on that.
REPRESENTATIVE MARTIN commented that we should stay out of that,
because the people would show very clearly that they might not want
to pay more fees.
CHAIR JAMES said we as a legislature, an authorizing body,
authorize fees and now we have no control over what happens to the
fees. The language of this bill does not preclude the legislature
from raising the taxes.
REPRESENTATIVE MARTIN said we do have the right to control fees in
this state, in all agencies, whether it be for motor vehicle plates
or for all kinds of services. The legislature, on behalf of the
citizens, has that control.
REPRESENTATIVE PORTER said that, for the record, the wording:
"prohibiting any imposition of state income tax, ad valorem
taxation on real property, or retail sales tax without approval of
the voters." He wanted to make clear that we are not by-passing
this, by prohibiting boroughs or municipalities.
Number 621
REPRESENTATIVE MARTIN said that is a whole other issue. This is
strictly to the state.
Number 638
JACK CHENOWETH, LEGISLATIVE LEGAL SERVICES, testified that the
changes in the rate after the tax is in place is not clear. If you
want the voters to be able to say yes or no to a change of rate in
any of these taxes, this has to be in the bill. It should be
stated, and increases and decreases must be stated also, or the
courts will get on it.
REPRESENTATIVE MARTIN said because he feels the people should have
that right he would go by his suggestion.
Number 670
CHAIR JAMES asked if anyone wished to make any amendments. She was
not comfortable moving the bill without the changes to make it
clearer. Constitutional amendments must be clear enough to
understand. She did not feel comfortable moving it out of
committee in this condition.
REPRESENTATIVE MARTIN agreed to do a committee substitute.
CHAIR JAMES said the committee will carry it over until February 2,
1995.
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