02/04/1997 08:00 AM House STA

 HB 1 - CIGARETTE AND TOBACCO TAX                                             
 HB 52 - INCREASE TOBACCO TAXES                                               
                                                                               
 Number 1790                                                                   
                                                                               
 The next order of business to come before the House State Affairs             
 Standing Committee was HB 1, "An Act relating to taxes on                     
 cigarettes and tobacco products; and providing for an effective               
 date." And, HB 52, "An Act relating to taxes on cigarettes and                
 tobacco products; and providing for an effective date."                       
                                                                               
 CHAIR JAMES announced she would open the committee meeting to the             
 invited testifiers only.                                                      
                                                                               
 Number 1805                                                                   
                                                                               
 TIM SCHRAGE was the first person to testify via teleconference in             
 Anchorage.  He stated he was against the tobacco tax.  He was a               
 retail owner of a couple of liquor stores in Anchorage and the                
 Matanuska Valley.  The current state tax was $2.90 per carton, the            
 current federal tax was $2.93 per carton, and the current                     
 municipality of Anchorage tax was $2.72 per carton.  Therefore, a             
 total of 50 percent of the wholesale price was pure tax.  In                  
 addition, the retailer paid for a license to sell tobacco from the            
 federal government, the state government and the municipal                    
 government.  The bill was asking the smoker to pay a higher price.            
 He asked, "Aren't they already doing that?"  Furthermore, a smoker            
 could not smoke in public buildings and on public transportation.             
 A smoker also paid a higher insurance rate.  He asked, "Where do              
 these taxes go that they're paying?"  He believed they were going             
 to the general fund, and he wondered if the public was getting                
 their money back.  Mr. Schrage stated before an additional tax was            
 added, the state should look at other ways to spend the money from            
 the existing taxes.  Furthermore, the heath organizations in                  
 support of the tax had 33 years, since the first report from the              
 surgeon general that indicated smoking was a habit, to educate                
 them.  If the state was truly interested in stopping the children             
 from smoking, then it should enforce the laws already in place and            
 close the loopholes.  Since it was illegal to sell cigarettes to              
 minors he wondered where they were getting them.  He stated they              
 were probably getting them from stealing, their parents, friends,             
 and illegal retailers.  He reiterated, "Let's close the loophole,             
 let's not tax more."                                                          
                                                                               
 Number 1962                                                                   
                                                                               
 BOBBY SCOTT was the next person to testify via teleconference in              
 Anchorage.  He did not promote or condone the use of tobacco                  
 products by the youth.  He wondered why kids were using tobacco if            
 it was illegal now.  The kids today had the same attitude that the            
 adults did when they were in school, therefore, the price did not             
 matter.  The tobacco tax would put an unfortunate amount of                   
 pressure on the less fortunate kids encouraging them to obtain                
 cigarettes in order to fit in with the other kids.  But, it was his           
 responsibility to teach honesty, responsibility and respect to his            
 kids.  He explained he worked for a small retailer and he feared              
 that the small retailers would be put out of business before long             
 and send the economy on a downward spiral.  There were other                  
 powerful ideas that had been discussed in Juneau and he would like            
 to see them continued with the proper communication to reach the              
 goal of deterring teens from smoking.  The tax would not reach that           
 goal.  It would accomplish diversity, havoc and ultimately                    
 destruction.  He thanked the committee for letting him testify.               
                                                                               
 Number 2095                                                                   
                                                                               
 BRIAN LICK was the next person to testify via teleconference in               
 Anchorage.  He was a non-smoker, and he worked in the retail                  
 industry.  A retailer he spoke to recently cited he was missing               
 $20,000 in cigarette products.  A reasonable amount of that was               
 contributed to theft.  He believed the tobacco tax would increase             
 the amount of theft.  In Canada the price of cigarettes went up to            
 $50 per carton and bootlegging and smuggling became a real issue.             
 The retailers would have to absorb $20,000 to $25,000 per year to             
 protect their investments.  This was not a threat, it was just a              
 realistic perspective, he declared.  The retailers would pass that            
 cost on in a gallon of milk, for example, causing all Alaskans to             
 pay and not just the smokers.  Furthermore, he stated that the                
 permanent fund dividend program invested in stock of the Phillip              
 Morris Company.  He felt that was a double standard.                          
                                                                               
 Number 2201                                                                   
                                                                               
 CHAIR JAMES explained that the Phillip Morris Company was a family            
 of trading companies.  It sold more than tobacco products.                    
                                                                               
 Number 2218                                                                   
                                                                               
 RICHARD CROSS was the next person to testify via teleconference in            
 Glennallen.  He was against the cigarette tax.  He did not think it           
 was right to tax one segment of society.  It would not stop the               
 kids from smoking.  He had been smoking for 33 years and the price            
 had increased every since he started.  It did not stop him from               
 smoking.  The kids would steal and borrow for cigarettes.  He                 
 stated the current laws needed to be enforced.  He had seen kids              
 burglarize to get cigarettes and then sell them at school to make             
 money.  It was not right to tax something that did not need to be             
 taxed, he declared.  Enforce what already existed.  Some members of           
 his family smoked and some did not.  He tried it and liked it.                
 "Some people were born with that."  He reiterated the cigarette tax           
 was wrong.                                                                    
                                                                               
 Number 2279                                                                   
                                                                               
 GLADYS THOMPSON was the next person to testify via teleconference             
 in Anchorage.  She was a long time resident of Alaska.  She had               
 also lived in the Midwest and New England.  When she was a little             
 kid she remembered signs on the barns that were paid for by the               
 tobacco companies encouraging the farmers who were not doing well.            
 She agreed with the tobacco tax.  She would even double the amount.           
 She recognized the other ramifications that previous testimony                
 referred to that needed to be addressed also.  It was illegal to              
 steal.  Furthermore, she recalled from her earlier days that the              
 signs on the barns were advertizing chewing tobacco.  In Cleveland,           
 Ohio spittoons were placed on the streets for those chewing                   
 tobacco.  She started to smoke when she went to college because of            
 the influence of the movie stars in the 1930's and the 1940's.  It            
 was considered glamorous.  She only enjoyed it to an extent.  That            
 was another example of how the tobacco companies marketed their               
 products to encourage young people to smoke.  She believed they               
 should be put out of business in the long run.                                
                                                                               
 Number 2414                                                                   
                                                                               
 REX SHATTUCK was the next person to testify via teleconference in             
 Anchorage.  He was representing himself and not the tobacco                   
 industry or the health industry.  It appeared that it was only the            
 tobacco and the health industries that were testifying on this                
 issue.  He believed that testimony should be weighed.  He started             
 smoking 28 years ago and quit last year.  The price of a package of           
 cigarettes was not a deterrent nor was it a consideration when he             
 quit, it was due to the urging of his children.  The gradual price            
 increases over the years were not effective.  Two of his parents              
 suffered from emphysema, but that did not spur him to support a 344           
 percent tax increase.  That was the biggest increase ever.                    
                                                                               
 TAPE 97-6, SIDE B                                                             
 Number 0001                                                                   
                                                                               
 MR. SHATTUCK continued by stating that there was not a way to                 
 earmark the money from this tax to education.  He reiterated he did           
 not support a tobacco tax, and he strongly recommended that the               
 committee members review the federal and the state constitution to            
 determine their responsibilities in terms of raising revenues.                
 Furthermore, last year the legislators did a good job of decreasing           
 the budget.  He suggested they do the same thing this year and not            
 increase the revenues.                                                        
                                                                               
 Number 0041                                                                   
                                                                               
 CHAIR JAMES closed the House State Affairs Standing Committee                 
 meeting to public testimony on HB 1 and HB 52.  It was now time for           
 the committee members to deliberate.                                          
                                                                               
 CHAIR JAMES explained there was an amendment that changed HB 1 to             
 look like HB 52.  She called for a motion to adopt the amendment.             
                                                                               
 Number 0062                                                                   
                                                                               
 REPRESENTATIVE IVAN IVAN moved that the committee adopt Amendment             
 1, dated 1/28/97.                                                             
                                                                               
 Number 0081                                                                   
                                                                               
 REPRESENTATIVE CON BUNDE announced he did not have a problem with             
 Amendment 1, dated 1/28/97.                                                   
                                                                               
 REPRESENTATIVE VEZEY objected.  A roll call vote was taken.                   
 Representatives James, Berkowitz, Elton and Ivan voted in favor of            
 the motion.  Representative Vezey voted against the motion.  The              
 amendment was adopted.                                                        
                                                                               
 CHAIR JAMES announced for the record that Representatives Fred                
 Dyson and Mark Hodgins were excused from today's committee meeting.           
                                                                               
 CHAIR JAMES further explained that HB 1 was the vehicle that would            
 move through the committees, while HB 52 would remain in the House            
 State Affairs Standing Committee.  Two tobacco tax bills were not             
 needed.                                                                       
                                                                               
 Number 0127                                                                   
 REPRESENTATIVE BUNDE expressed his appreciation of the efforts of             
 Representative James in soliciting the testimony heard on this                
 subject.  He also thanked the public for taking the time to                   
 testify.  Representative Bunde recapped the goal of CSHB 1(STA) by            
 stating it was designed to achieve an economic barrier to young               
 people starting to smoke, and a user fee for those who wished to              
 continue to smoke.  He responded to prior testimony from the                  
 tobacco industry.  He suggested that the spokes people acquaint               
 themselves with the laws in Alaska.  He explained one had not                 
 bothered to register with the state as a lobbyist.  His latest                
 research showed that the nicotine industry had spent over $200,000            
 in lobbyists.  That alone told him that the bill would work.  The             
 committee members also heard considerable comments about protecting           
 the small business person.  He took those comments to heart.                  
 However, if smuggling was such a challenge, he stated, "I don't               
 think anybody would go so far as to recommend we remove existing              
 taxes."  And, the mail order problem could be addressed through               
 other legislation.  That was something that needed to be looked at.           
 The business people that he heard from supported the notion that              
 the legislators should stop kids from smoking, and research showed            
 that the vast majority of people began smoking when they were                 
 children.  If that was accepted as a fact, then these business                
 people had better be making plans for the future because if they              
 stopped children from smoking they would indeed put themselves out            
 of business over a period of time.  He reiterated he was                      
 sympathetic to the small business owner.  He reminded the                     
 committee, however, that at one time cocaine was put in Coca-Cola             
 because it was thought to be healthy.  And, codeine was put in a              
 lot of patented medicines causing addictions at one time.  As more            
 information was obtained, businesses needed to change.                        
 Furthermore, there were concerns about enforcement and Indian                 
 country.  He thought it was a little unfair to assume that the                
 majority of the Native citizens would become scofflaws and                    
 immediately begin smuggling.  It was necessary to consider the                
 geography of Alaska.  He stated, "Not too many people are gonna go            
 to Egegik to buy smuggled cigarettes."  Moreover, there would not             
 be the common border problems that the Canadians had on the East              
 coast.  The people in Western Canada did not lower their prices               
 because of smuggling problems.  Furthermore, if the state faced the           
 issue of Native sovereignty, he thought that the issue of smuggling           
 tobacco would be only one of many, many challenges the state would            
 face.  The bottom line was that the increase in the tobacco tax               
 obviously worked to reduce the demand.  "If it didn't," he asked,             
 "Why would the nicotine industry be here spending so much time and            
 money to fight this increase."  He thanked the committee members              
 for their time.                                                               
                                                                               
 Number 0335                                                                   
                                                                               
 CHAIR JAMES stated that this issue was not one of her favorite                
 issues.  She believed strongly in a person's right to do what was             
 legal, and smoking tobacco was legal.  She also believed that                 
 imposing a tax at a time when the legislature was trying to cut the           
 budget was not wise.  It violated the pledge to not impose taxes              
 until the budget was under control.  She had never smoked and she             
 hated smoking.  She did not want any children to start to smoke,              
 and she would prefer that everyone would quit.  However, she                  
 recognized the legal right of those that wanted to use tobacco.               
 Therefore, she struggled with this issue and had been very candid             
 about her feelings from the beginning.  She also had a great                  
 passion for school maintenance and construction and the children of           
 the state.  In addition, over the past four years, she had not seen           
 much interest in putting money towards that process.  She did not             
 want to fill the general fund with more money creating a tendency             
 to spend it.  Therefore, the pre-dedicated school fund was much               
 more palatable.  Moreover, she was pleased to have the approval of            
 Representative Bunde as sponsor of HB 1.  She was also pleased to             
 hear the testimony from the public supporting the dedication.  The            
 committee today would also be hearing HJR 18 which called on the              
 people to vote on a constitutional amendment that would allow the             
 raising or lowering of a tax in a pre-dedicated fund and close the            
 opportunity for a law suit.  She thought it was a better idea to go           
 to the public than it was to go to the courts.  She had very little           
 confidence in the court system due to decisions made whimsically by           
 judges.  She felt guilty that she did not have confidence in the              
 judicial system, but she would rather go to the public to vote on             
 this issue.  She was happy to walk together with Representative               
 Bunde the rest of the way with this bill.                                     
                                                                               
 Number 0507                                                                   
                                                                               
 REPRESENTATIVE KIM ELTON stated he hoped the money that went into             
 the school construction and maintenance account was not seen as a             
 substitute for general fund dollars.  The money generated from the            
 tax would not be enough to accomplish what needed to be done in               
 school maintenance and construction.  It should not be seen as the            
 only answer for the problems that many of the school districts                
 faced.                                                                        
                                                                               
 Number 0548                                                                   
                                                                               
 REPRESENTATIVE ELTON moved that CSHB 1(STA) move from committee               
 with the attached fiscal note(s) from HB 52 and with individual               
 recommendations.  There was no objection.  The CSHB 1(STA) was so             
 moved from the House State Affairs Standing Committee.                        
                                                                               
 Number 0569                                                                   
                                                                               
 CHAIR JAMES announced that she was in the process of designing                
 legislation that would improve the enforcement of the current laws            
 surrounding teenage smoking.  She asked for assistance from anybody           
 that knew where more enforcement was needed.                                  
                                                                               
 Number 0599                                                                   
 REPRESENTATIVE ETHAN BERKOWITZ stated that he was offended because            
 a representative of the tobacco industry had not provided                     
 information to him within the time that he indicated.                         
                                                                               
 Number 0630                                                                   
                                                                               
 CHAIR JAMES stated that it had only been one week.  She suggested             
 putting his request in writing to ensure a response.                          
                                                                               
 Number 0640                                                                   
                                                                               
 REPRESENTATIVE VEZEY stated that if a lobbyist promised information           
 one should allow three weeks to four weeks to receive it.