Legislature(1999 - 2000)
02/18/1999 08:05 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
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HB 89 - ADVISORY VOTE ON PF EARNINGS RESERVE ACCT HB 90 - APPROP: EARNINGS RES. TO BUDGET RESERVE HB 91 - INCOME TAX: INDIV/ESTATES/TRUSTS Number 350 CHAIR JAMES announced the following bills would be presented as a package: HB 89, "An Act authorizing an advisory vote on the use of the Alaska permanent fund earnings reserve account; relating to certain procedures for the special election; and providing for an effective date"; HB 90, "An Act making a special appropriation from the earnings reserve account of the Alaska permanent fund to the constitutional budget reserve fund; and providing for an effective date"; and HB 91, "An Act relating to taxation, including taxation of income of individuals, estates, and trusts; and providing for an effective date." CHAIR JAMES called an at-ease at 8:25 a.m. in order to set up the projector. The committee came back to order at 8:30 a.m. Number 390 WILSON CONDON, Commissioner, Department of Revenue, appeared before the committee with respect to HB 89, 90 and 91, which together represent the Governor's package pertaining to the state's current fiscal situation and possible solutions. He pointed out that all Alaskans do not believe there is a problem. Therefore, the discussion should first address whether there is a problem, and if so, identify it. Commissioner Condon suggested comparing Alaska's revenue portfolio in 1975, two years before the North Slope production began, to the state's revenue portfolio in 1998. In fiscal year (FY) 1975, $330 million of the state's revenue was from the oil industry. He stated, "We, of course had an oil and gas (indisc. - noise) we had a corporate income tax then as we do now, we had a number of sales and use taxes, principally pertaining to tobacco, alcohol. We had some natural resource taxes, we had earnings on the money that was invested in our treasury and we had an individual income tax that provided just a little over a quarter of the state's revenue at that time." COMMISSIONER CONDON moved forward 25 years to look at Alaska's revenue portfolio for the most recently completed fiscal year, which illustrates that Alaska has become much more dependent on oil revenue. He noted that the state has no corporate income tax but has some sales and use taxes, and other natural resource taxes. He further noted that the individual income tax was repealed in 1980. Number 444 COMMISSIONER CONDON presented a slide depicting Alaska's revenue proportions, oil and non-oil, from 1975 through 1998. Roughly 30 percent of the state's revenue depended on oil in 1975. As a consequence of the bounty of the North Slope, lots of oil and high prices, Alaska became a very rich state and very dependent on oil revenues. Commissioner Condon pointed out that for many years Alaska was over 80 percent dependent on oil and gas industry revenues. Currently the proportion has fallen below 80 percent. The change in proportion reflects the drop in oil revenue and consequently the drop in the proportion. Non-oil revenues remain relatively stable, close to $500 million a year, as has been the case for the last decade. COMMISSIONER CONDON said the news media have focused on the low oil prices and amplified the problem. North Slope production in 1998 was a little over 2 million barrels a day. Today, North Slope production has dropped below 1.2 million barrels a day, a 40 percent drop in production and roughly a 40 percent drop in oil revenue, whatever the price or revenues happen to be. This decline began in 1988 and will continue after 2000. Commissioner Condon forecasts a small bump-up after 2000, but believes it likely that following 2003 the decline would continue unless there are some new major discoveries on the North Slope, or oil prices went very high so that it was economic to develop some of the known resources that are there, but (indisc.) on economic to develop today. So, that is the part of the story that doesn't get talked about a lot, but which really drives the long-term structural difficulty that we've got to deal with. We've become very dependent on oil revenue and oil production has dropped almost in half over the decade from 1988 to today." COMMISSIONER CONDON pointed out that since the oil price crash at the end of 1985 and the beginning of 1986, prices have averaged $16.50 per barrel at the destinations where Alaskan North Slope crude oil is delivered to refineries. The price is currently hovering around $10 a barrel, with a forecast for the average price to be in the mid-$11 range for the upcoming fiscal year. It is expected that fiscal year 2000 will see prices around $12.50 a barrel, increasing into the low-$16 range around FY 2003. The need for changes in the industry has always been there, but declining prices have moved that quest a couple of years closer than it was. Number 548 COMMISSIONER CONDON referred to a table that compared total state general fund revenue for FY 1998 and FY 1999. He detailed the 20 mil property tax imposed on the oil industry statewide; the corporate income tax levied on the oil and gas industry; the severance tax; and revenue from royalties for the North Slope and Cook Inlet state-owned land. He pointed out the non-oil revenues, between $450 and $500 million, expected in FY 1999. He said the total revenue for FY 1998 was $1.827 billion, and the projected 1999 figure is almost $1.3 billion. COMMISSIONER CONDON then directed attention to the expenditure side of the general fund over the last decade. In 1992-1993, the unrestricted general fund budget pushed $3 billion, declined to a $2 billion to $2.5 billion figure, and is currently at $1.3 billion. He agreed that the budget deficit is larger than it has been over the last few years; however, the same structural problem has been present most of the decade. Spending has averaged $4 million to $5 million more than the general fund revenue each year. The warrants did not bounce, he added, because the state was able to turn to a savings account created in 1990, the Constitutional Budget Reserve (CBR) fund. This fund contained proceeds from the settlements of disputes about taxes and royalties pertaining to the mineral industries, principally the oil and gas industry. COMMISSIONER CONDON referred to a table showing the history and projections of the CBR fund. He said after the fund was created in 1990, almost $5 billion in various settlement revenue was deposited. The fund was invested and earned income, and funds were not withdrawn to balance the budget in 1991 or 1992. Beginning in 1993, however, the state began to draw on the CBR to balance the budget. Over the next six years, amounts were withdrawn each fiscal year through 1998, and the balance at the end of FY 1998 was between $3.5 and $3.6 billion. With the withdrawals the state has had to make so far this year, the balance is a little under $3 billion. More disputes are expected to settle, resulting in more deposits for this fund, and these are projected at a little over $100 million a year over the next five fiscal years. Based on current oil projections, in terms of price and volume, the draw on the CBR will be approximately $1.1 billion this year, almost $1.1 billion for fiscal year 2000, and then in the high $800 million range for the next three years. If that happens, the fund will be exhausted some time in early fiscal year 2003. Number 686 REPRESENTATIVE HUDSON asked if the committee could get a copy of all of the slides in the order they were presented. COMMISSIONER CONDON agreed to that. He continued his presentation by stating, "If we flat-line the budget, and if we are right on our forecast about oil prices and volumes, then we are going to run out of our CBR fund in February of 2003." He added, "If we were to slightly increase the budget at 2 percent a year, we would exhaust our CBR fund in December of 2001. If our budget levels are set at the level that will pertain to the plan that the legislative majority has been following for the last three years, with a $40 million cut this year and a $30 million cut next year, and oil stays at $10.50 a barrel, then we will exhaust the CBR in April of 2002." He further stated, "If we average $16.50 a barrel this year and following years, we would get out to May 2004." He emphasized that this problem exists because the state became so dependant on oil revenue and oil production is dropping. TAPE 99-3, SIDE B Number 001 COMMISSIONER CONDON outlined various considerations made by Governor Knowles, reflected in this proposed legislation. The first was whether the state can balance the budget on a sustainable basis, and if so, whether it shouldn't be done. He agreed that budget reductions must be responsible, and that it should be determined what services should and must be provided to Alaskans. Commissioner Condon cited another consideration as the health of Alaska's economy, in which government plays a large role. He said Alaska is often compared to Alberta, Canada, where the government had restructured its budget. However, Alberta's economy is very different from Alaska's economy; there are not many people waiting to employ Alaska's public sector workers if they are suddenly out on the job market. Commissioner Condon reiterated that budget reductions must be responsible. He said public officials' responsibility goes to public services, as well as to the place of government in the economy. Number 079 COMMISSIONER CONDON identified the third principle as maintaining a healthy permanent fund dividend (PFD), which is important to the Governor. Fourth is the growth of the state's savings accounts. He indicated the need with to avoid simply funding savings. He said if new taxes are necessary, the Governor believes that any new tax should be fair and broad-based. Commissioner Condon recognized that people have differing views of fairness. He pointed out that any broad-based tax includes the questions of horizontal equity, neighbor comparisons, and vertical equity; he mentioned the progressiveness of a tax system. He emphasized the importance to the Governor of not changing the PFD program without a vote of the people. COMMISSIONER CONDON discussed tools to address a $1 billion-plus deficit today, with a $800 million deficit in the future. He noted that everyone wants as large a PFD as possible, and no one wants to pay taxes if it can be avoided. Therefore, he surmised that most would say that if expenditures could be cut, that route should be chosen. He said the general fund operating budget is a little over &2.2 billion, and the state has a $1 billion problem. COMMISSIONER CONDON utilized an overhead that separated the general fund operating budget into more manageable areas. One area is the core state government, which includes the legislature, the courts, executive branch agencies, and state employees around the state. The core state government will spend approximately $780 million in the FY 1999 general operating budget. Due to a policy chosen many years ago, the majority of local schools have been funded out of the state treasury. Most states contribute to a considerable portion of local school budgets from the state's treasury. Alaska contributes to elementary and secondary education out of the state treasury on a percentage basis. Commissioner Condon noted that although assistance to local governments is still provided, that assistance has shrunk significantly over the years. A significant portion of the university's budget, $172 million in FY 1999, is provided from the general fund. Number 220 COMMISSIONER CONDON noted that nonprofits provide services such as health services statewide; the $110 million in grants to nonprofits and independent agencies should be viewed as a part of core state government. He referred to the formula programs, social safety net programs such as Adult Public Assistance, the Alaska Temporary Assistance Program, Medicaid and the Longevity Bonus Program. He said if the legislature and court systems were shut down, as well as the nonprofit agency programs, but if the social safety net was continued, along with local schools and the university system, there still wouldn't be enough to close the gap. Number 252 REPRESENTATIVE OGAN pointed out that the general operating budget reflects $2.2 billion, while the actual spending - considering the off-budget items, federal pass-through and total state spending - is $6.2 billion. He asked where the rest of the money is going. COMMISSIONER CONDON explained that the $6 million budget includes the dividend, which is $900 million, and inflation proofing, which is about $300 million at today's inflation rate. If just talking about the operating budget, he believes the number comes back to a little over $4 billion. He indicated it is $2 to $3 billion of general fund, with roughly one billion of federal money; another billion shows up in the appropriation bill, the off-budget part of this. He said $200 million has "already been appropriated to an agency and then is sent to another agency and the legislature wants to control that, as they should." COMMISSIONER CONDON pointed out that the legislature appropriated $14-$15 million to operate the Child Support Enforcement Program, which requires the heavy use of lawyers. About $1 million is used for legal services to that program. Therefore, the Department of Law's budget reflects that $1 million moving from the Department of Revenue to the Department of Law to operate the Child Support Enforcement Program. Commissioner Condon explained, "So, $15 million is appropriated to us, and then of that 15, another million is appropriated over to the Department of Law. And that activity throughout state government, whether you're talking the provision by the Department of Law's legal services, the way we handle the use of data processing in our budget, and so on - the billing of Department of Transportation personnel to individual capital projects and so on. When you add all of that up, it's about $200 million of the billion dollars. Then we have all of the independent corporations and the money that they spend, the permanent fund, the housing finance corporation, the Alaska Industrial Development and Export Authority, the Municipal Bond Bank, the student loan corporation." COMMISSIONER CONDON said the legislature controls the budgets for all of those corporations mentioned. Those corporations generate revenue that is intended to be used to run the program. If attempts are made to obtain the revenue generated from those corporations to utilize in other departments, those quasi-business entities will disappear along with the money. Commissioner Condon acknowledged the importance of the legislature's controlling the expenditure of this money since the legislature is the policy maker. From a revenue forecasting perspective, Commissioner Condon found $110-$120 million that was not included in the general fund revenue forecast for FY 1998. He emphasized the importance to determine the correct number in order that the discussion can move forward to address the problem. Commissioner Condon said, "I believe ... that maybe it's a $100 million smaller than what I've testified to, but it is not a $1 billion smaller, and you got a $1 billion problem, and maybe it's $900 million." Number 336 CHAIR JAMES said she believes this exercise to be extremely important for everyone. Noting that state spending is $6 million, recognizing other federal spending, military spending, and private sector spending, she asked what the top amount of money is in the state that fuels our economy, and what portion the $6 million is of that. COMMISSIONER CONDON said he did not know. REPRESENTATIVE HUDSON said about $15 billion total in the state. CHAIR JAMES asked if that included the $6 billion. REPRESENTATIVE HUDSON replied yes. COMMISSIONER CONDON told members he did not have those figures but would provide them. He added that all available options take money from the Alaska economy somewhere. Number 396 REPRESENTATIVE COGHILL referred to the core state government and the dedicated funds that are off-budget. He asked whether the retirement funds are dedicated funds or fall under the core state government. COMMISSIONER CONDON said they are dedicated funds. The ongoing contributions taken out of employee paychecks and the state match are reflected in the core state government. Persons receiving a retirement check are not reflected in the core state government, nor are the funds used to pay the management fees for managing the money in the retirement portfolio or administrative costs of the Division of Retirement and Benefits and the Department of Administration. Benefits paid to state employees other than the retirement benefits are included in the core state government funds. REPRESENTATIVE OGAN pointed out that if money is taken out of the economy by a tax, that takes the money out of the private sector economy and places it in the government economy, which helps Juneau. He said the $6 billion contains $2 billion of the permanent fund, which results in $4 billion with federal pass-through. He agreed with Commissioner Condon that the budget gap cannot be closed by laying off every state employee; he suggested, however, that if some programs were eliminated, progress could be made towards closing the budget gap. Alaska provides many programs that other states do not offer. If some of those programs were eliminated, the budget could possibly be seriously reduced. COMMISSIONER CONDON acknowledged that the budget could be reduced by cutting programs, but it is difficult to take a significant proportion of $1 billion out of programs without eliminating a large percentage of the functions of state government. Number 452 REPRESENTATIVE COGHILL agreed, but pointed out that a $4 billion gap would result in a $12,000 burden for each person in Alaska. COMMISSIONER CONDON concurred. He said the point is how far one can cut and still maintain responsibility to Alaska's citizens. Number 463 COMMISSIONER CONDON turned to the permanent fund as a possible tool for decreasing the budget gap. He said the income of the permanent fund, which has a market value of $25 billion, is projected to surpass oil revenues after 1998. Thinking of the permanent fund as an endowment, he asked how much could be taken from it for dividends while preserving the purchase power of the fund. Setting aside the formula specified in statute, Commissioner Condon said the purchase power of the fund could be preserved while taking out 5 percent of the market value of the fund annually. With regard to endowments across the country, some universities invest more aggressively than the permanent fund does; those universities strive for 5.25 percent payout per year. COMMISSIONER CONDON said he did not believe it likely that investing at a risk level that would generate more than 5 percent per year would be tolerated, however. If 5 percent were taken from the permanent fund and investments were made at the current risk level, the fund would be inflation-proofed. He noted that 5 percent of $25 billion is $1,250,000,000 per year. Taking 4 percent from the permanent fund would result in $1 billion per year. If public spending was not touched and the permanent fund was utilized for $800 million a year to pay government expenses, the dividend program would be cut in half. He mentioned the desire to maintain the dividend program close to its level today, saying only $400-$500 million would be available. Number 530 CHAIR JAMES inquired as to the statutory amount placed in the dividend from the oil revenues. COMMISSIONER CONDON said approximately $100 million per year in today's oil prices, placed in the principal of the fund. REPRESENTATIVE OGAN referred to the graph provided by Commissioner Condon, which illustrates over the last 20 years quite a few peaks. He said the portion referring to the next 20 years indicates a pessimistic view with regards to the price of oil. He asked whether that information is politically motivated. COMMISSIONER CONDON said no. The graph is an honest professional judgment about oil prices and oil production volumes. There has been a price of $40 per barrel for oil, which may happen again, but at a production level much lower than that earlier $40-per-barrel production level. He said the fiscal gap cannot be solved with the permanent fund, if the dividend is to be preserved; the Governor believes it is important to preserve the PFD program and does not believe the fiscal gap could be resolved with a combination of budget cuts and the permanent fund; therefore, there must be some manner in which to raise public revenue. The Governor believes that should be accomplished through a broad-based tax. Number 569 COMMISSIONER CONDON used an overhead to compare Alaska's tax program with an average of all the state's tax programs. For 1998, Alaska's oil and gas tax revenues, except the oil and gas corporate income tax, constituted almost 60 percent of the state's tax revenue, or over 70 percent when the oil and gas corporate income tax is included. Alaska's taxes rely heavily on the oil and gas industry. Alaska does receive some property tax revenue, some excise tax revenue, and corporate income from oil and gas as well as outside oil and gas, and some other small taxes. On average, one-third of the tax revenue in other states comes from sales and income taxes. COMMISSIONER CONDON presented the next overhead; it illustrated the entire public revenue picture for Alaska, including the nontaxed revenue and federal revenue, in comparison to other states. He said other states turn to broad-based taxes for a little less than 20 percent of their revenue; Alaska does not take that approach. Five states do not have a state sales tax, and seven states do not have an individual income tax. Tennessee and New Hampshire have an individual income tax that is only imposed on interest in dividends, not on wages and salaries. In general, those states with individual income taxes apply them to wages, salaries and investment income. Alaska is the only state without a statewide sales tax nor a statewide individual income tax. Number 627 COMMISSIONER CONDON, in response to Representative Ogan, agreed to provide a graph that illustrates how much each individual was paid with respect to their income and number of dependents. He alluded to a scenario with $350 million in taxes; he asked what kind of per-capita state income tax load Alaskans would carry, relative to people in other states. He said under the aforementioned scenario, Alaska falls in the middle. Number 0648 REPRESENTATIVE WHITAKER said he did not believe this would be a per-capita tax, but that a significant portion of the population would be excluded. He expressed interest in having information that showed what those actually paying the tax would pay. COMMISSIONER CONDON acknowledged that who pays, relative to who does not, is important. He indicated that he would need to have some slides regarding that information as this discussion continues. Commissioner Condon suggested the committee would conclude that the Governor's proposal is very progressive with regard to who pays the tax. The Governor invites comments on the fairest manner in which to raise tax revenue on a broad base. Number 677 DON RULIEN, CPA [Certified Public Accountant], testified via teleconference from Anchorage. Mr. Rulien expressed concern with the state withholding on crew shares. Currently federal law requires fishermen to issue a 1099 form for earnings of $600 or more per fisherman. To change this to "all earnings from every crew member" will be difficult. Mr. Rulien also expressed concern with how these fishermen would be trained to do this, which may result in a large cost to the state. He mentioned the three-mile limit and the different reporting requirements for withholding; he further mentioned review of the filing of these tax forms. He said newspapers have reported that the form will be the size of a postcard, but in order to come up with a state income tax portion based on the federal filing, many computations will be required. Mr. Rulien believes a closer look at the form is necessary. For CPAs, a state income tax will require more work. JOHN LETOURNEAU, CPA, testified via teleconference from Anchorage. If adoption of a tax is chosen, he suggested that the statutory language tie the tax more directly to the Internal Revenue Code than it does currently. The proposed legislation includes language referring to the federal income tax, which he believes was not a defined term under the Internal Revenue Code. TAPE 99-4, SIDE A Number 005 MR. LETOURNEAU stated, "If this deletion were ... to make it into law, it appears to me ... that our ability to look to the well-developed set of law under the Internal Revenue Code would be removed. And we would now be pretty much ... at the mercy of looking to the lesser body of law in the state of Alaska, which if we were to search for guidance would require more regulations, which would imply a broadening of the ... state's requirement to provide information, which kind of appears to be contra to lessening the burdens of government." Mr. Letourneau said he would forward to the committee both his testimony and his suggested technical amendments. DENNY KAY WEATHERS testified via teleconference from Cordova. She first read the testimony of her husband, Eric Weathers, which follows. ERIC WEATHERS: The state can only tax something they create. They cannot tax "people" because they did not create them. The state can tax corporations and individuals who work for the state and municipalities because their source of income was created by the government. The state may tax the permanent fund because it is state-owned and created. The only thing a tax will do is to make more government and more government spending, and can only be paid by those who are employed and/or benefit from that government. An unconstitutional tax on private businesses and "people" will generate more tax consuming public servants and welfare. If a tax is to be imposed, it must be apportioned. For example, if I pay $100 everyone else will each pay their $100. When government taxes "We the People," the government becomes the master and the "people" the slaves. The IRS cannot tax a private persons just compensation without deceit, and neither can the state. Remember that the "people" created the Constitution and government for the people's use and it is the right of the "people" to alter or abolish it, and to institute a new government if the government becomes too repressive. I strongly urge you not to impose an unconstitutional individual income tax. Thank you for the opportunity to testify. Number 088 MS. WEATHERS read her own testimony into the record as follows: The Constitution of the United States of America recognizes two classes of taxes. The first one is the "direct" tax authorized by Congress under ... Article 1; Section 2, Clause 3: "Representatives and direct taxes shall be apportioned among the several states which may be included within this Union, according to their respective numbers ..." and, Article 1, Section 9, Clause 4: "No Capitation, or other direct taxes shall be laid, unless in proportion to the census or enumeration herein before directed to be taken." The second one is "indirect" taxation authorized by Congress under ... Article 1, Section 8, Clause 1: "The Congress shall have power to lay and collect taxes, duties, imposts and excises to pay the debts and provide for the common defense and general welfare of the Unites States; but all duties, imposts and excises shall be uniform throughout the United States." The State of Alaska also recognizes direct and indirect taxes and I believe the State recognizes "franchise taxes" too ... Franchise tax: An annual tax on the privilege of doing business in the state. A tax on the franchise of a corporation .... All three taxes mentioned above are constitutional taxes. But HB 91 is not a direct tax nor a indirect tax and it does not fall under the franchise tax. What type of tax is contained in HB 91? Our government in Alaska seems to want to reward the unproductive and penalize the producer. Politicians have been writing laws designed to confiscate the fruit of the working peoples labor and use those confiscated dollars to buy the votes of the unproductive. This is wrong and "We the People" are realizing it. Just remember, Tax protest is our American political heritage. It was tax protestors who formed our two greatest documents, the Declaration of Independence and the Constitution for the United States of America. Our first four presidents were notorious tax protestors who were criminals under the laws of England. The Revolutionary War fought between 1775 to 1783 was for many reasons and the Declaration of Independence lists those reasons...interestingly one of those reasons was and I quote "For imposing taxes on us without our consent" is it time for another revolution? I strongly urge you not to impose an unconstitutional individual income tax. Madame Chair, please could your committee answer my two questions stated within my testimony and do you have any questions for me. Thank you for this opportunity to testify. REPRESENTATIVE OGAN said that if there is an income tax, he would want to have a vote of the people. Number 155 ROY CARLSON testified via teleconference from the Matanuska-Susitna Legislative Information Office (Mat-Su LIO). Mr. Carlson said, "Let me give a brief summary of the three bills, 89, 90 and 91. Briefly, no, no, and hell no." With regards to HB 90, Mr. Carlson was opposed to an advisory vote. These three bills seem to be a "cry wolf" approach to the state's financial problem. Mr. Carlson believes that people should have as much government as they are willing to pay for. If an advisory vote is the course, a list of the services and the tax consequences of those services would be very helpful to the legislature. MR. CARLSON expressed opposition to the actual appropriation of money embodied in HB 90. Although he agreed with Commissioner Condon that a long-term plan is necessary, the current long-term plans have a major flaw: all of the plans have been created by people with an interest in the plan. An objective view of what is needed in the budget can be obtained from people who do not benefit from the budget. Mr. Carlson said, "There is nothing so innovative as a government employee protecting his job." MR. CARLSON referred to HB 91. He said he would fall into the over-$50,000 tax bracket, and he noted that people in that bracket presently pay 90 percent of the taxes. He indicated his dislike of paying for national defense, Medicare, Medicaid, the Anchorage Native hospital, and the Bush subsidies, and he said he would like some help. For those reasons, Mr. Carlson believes an income tax is an unfair approach. MR. CARLSON restated that the three bills represent a "cry wolf" approach to the problem. He said Commissioner Condon very expertly has shown the worst-case approach. To Mr. Carlson, a little more moderate view is that the state probably has, depending upon the level of significant cuts the legislature will make, probably five to seven years. He stated, "In fact, I can solve your budget problem for you in an afternoon with coffee breaks. All you have to do is take the revenue in, go ahead and give the amount of money up to the caps, out of the budget reserve, and then take an across-the-board cut, hand it to the Governor, and make him do his job as a financial manager." Mr. Carlson expressed the need for a committee to identify the long-term needs, with the priority that the state is willing to pay for. A long-term revenue approach is a good idea, and "perhaps, at that point, we look at tax." He concluded by saying the Governor is taking advantage of the "crisis" of low oil prices. Number 252 ALAN LEMASTER testified via teleconference from Gakona. With regards to Representative Ogan's comment that Alaska is one of the most socialistic states in the country, Mr. Lemaster expressed dismay at the installation of an income tax, which seems repressive against those who are producers in the state, the wage earners. He asked: If a tax is necessary, why is an income tax the approach? He pointed out that a sales tax would tax people according to their ability to purchase. Many other states utilize sales tax very effectively to raise funds for their governments. CHAIR JAMES noted that four people from Juneau had called in and would like their comments read into the record. She read the following comments into the record: STEVE IRWIN and CHARLOTTE CARROLL: No to taxes -- get spending in line with income; that's what households have to do. DENNIS PIPER: Adamant no to income tax. We are taxed enough; sales, property and hidden taxes. Cut back on spending. If you must, use money from permanent fund to reduce deficit. ALVIN EVANS: Expresses great displeasure about the proposed tax by the governor. No taxes, cut spending. Add $.02 for gas tax so everybody pays. He could go for a flat tax which would be equitable and fair for everyone. GREG JERUE: Against tax, get spending down. There are lots of places that can be cut; more cuts to the Arts , for instance. He could accept a small gas tax, like $.02 a gallon. REPRESENTATIVE OGAN requested that Commissioner Condon provide the committee with the per capita spending of the state governments that do not have income tax, and of the states that do not have sales tax, compared to Alaska. COMMISSIONER CONDON agreed to provide that information. CHAIR JAMES expressed interest in hearing more about the permanent fund issue. [HB 89, HB 90 and HB 91 were held over.]
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