Legislature(2005 - 2006)SENATE FINANCE 532

04/13/2005 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled But Not Heard
Moved SJR 14 Out of Committee
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Scheduled But Not Heard
9:07:16 AM                                                                                                                    
     SENATE JOINT RESOLUTION NO. 14                                                                                             
     Urging  the United  States Congress  to amend  the tax code  to                                                            
     permanently  repeal the federal estate and generation-skipping                                                             
     transfer tax.                                                                                                              
This was the first hearing for this resolution in the Senate                                                                    
Finance Committee.                                                                                                              
DEBBIE GRUNDMANN, Staff for Senator Charlie Huggins, read testimony                                                             
into the record as follows.                                                                                                     
     Before  you is Senate Joint Resolution  14 - Urging  the United                                                            
     States  Congress to amend  the tax code  to permanently  repeal                                                            
     the federal estate and generation-skipping transfer tax.                                                                   
     The estate  of a deceased individual  is required to  pay a tax                                                            
     to  the federal  government commonly  known  as the death  tax.                                                            
     This tax is on assets  that have been previously taxed and then                                                            
     requiring  the survivors  to pay  taxes on  those assets  again                                                            
     through an  inheritance tax. In 2005 the top  tax is 47% with a                                                            
     1.5 million dollar exclusion.                                                                                              
     This is a tax that is                                                                                                      
          1. Bad on economic growth - disincentive to start small                                                               
          or family owned businesses, build a family farm or ranch                                                              
          with the goal of passing it on to your children.                                                                      
          2. May give little incentive to save and invest                                                                       
          3. This tax hurts families at a very fragile time.                                                                    
     In 2001  Congress enacted bipartisan  legislation to  phase out                                                            
     and eventually  repeal the death  tax until 2010. Therefore  in                                                            
     2010 the  estate tax is repealed;  however, it springs  back to                                                            
     life  in 2011 at  its old rate  of up to  55 percent and  at an                                                            
     exemption level of only $1 million.                                                                                        
     President Bush has  included the permanent repeal of the estate                                                            
     tax in  his Fiscal Year 2006  budget proposal. Legislation  has                                                            
     also been  introduced this year  in the US Senate and  US House                                                            
     to  permanently   repeal  the  estate  tax.  The  US  House  is                                                            
     scheduled  to  vote  on  permanent  repeal of  the  estate  tax                                                            
     legislation this week.                                                                                                     
     With passage  of this resolution  we will offer our  support to                                                            
     Congress  to act this  year ending this  tax on work,  savings,                                                            
     job creation  and the American dream. I encourage  your support                                                            
     of this legislation.                                                                                                       
9:09:22 AM                                                                                                                    
SENATOR  CHARILE HUGGINS  remarked this resolution  "falls  into the                                                            
'right thing to do' category."                                                                                                  
9:10:14 AM                                                                                                                    
Senator Stedman  supported this resolution,  although an  estate tax                                                            
should be levied  on multi-million dollar estates  to "slow down the                                                            
concentration  of wealth". He reminded of the situation  of the late                                                            
1800s and early  1900s when a few  families owned a majority  of the                                                            
wealth  in the  nation.  This  was the  reason  the estate  tax  was                                                            
implemented.  He supported increasing  the limit and abolishing  the                                                            
tax for  middle  income and  higher income  Alaskans.  He noted  the                                                            
value of farms,  fishing permits,  boats, small businesses  and real                                                            
estate is significant;  however a cap should be imposed  and the tax                                                            
should be implemented for  high value estates. Otherwise, the wealth                                                            
of  the nation  would  again  become  concentrated.  Some  extremely                                                            
wealthy  families, including  the  Bill Gates  family, have  brought                                                            
this concern forward.                                                                                                           
9:11:51 AM                                                                                                                    
Co-Chair  Green asked  if  the extremely  wealthy  families  support                                                            
paying an estate tax.                                                                                                           
9:11:55 AM                                                                                                                    
Senator  Stedman  understood  those families  oppose  the  permanent                                                            
exemption  of  all  residents  because  an  estate  of  hundreds  of                                                            
millions  of  dollars  or  billions  of  dollars  transferred   from                                                            
generation to  generation is a different issue than  the inheritance                                                            
of a family  business or property.  It is not good public  policy to                                                            
have  a few  people in  control  of the  majority  of the  country's                                                            
9:13:00 AM                                                                                                                    
Co-Chair  Wilken told  of the difficulties  in paying  taxes  on the                                                            
estates  of  his late  parents.  He  must carry  life  insurance  to                                                            
prevent his heirs from  having to liquidate his assets to pay estate                                                            
taxes. He did  not oppose estate taxes  on significant estates,  but                                                            
opposed the tax on middle class estates.                                                                                        
9:16:10 AM                                                                                                                    
Co-Chair Wilken  recalled a similar resolution was  before the State                                                            
Senate a few  years prior, which did  not pass because the  question                                                            
was raised  about the  impact of  this repeal  on the State  general                                                            
fund.  No answer  was provided  at  that time.  He  again posed  the                                                            
9:16:31 AM                                                                                                                    
Ms. Grundmann responded  that the permanent repeal of the estate tax                                                            
would have zero fiscal impact on the State general fund.                                                                        
9:16:57 AM                                                                                                                    
MIKE  WILLIAMS,  Auditor,  Tax  Division,   Department  of  Revenue,                                                            
testified via teleconference  from an offnet location to affirm that                                                            
the  current federal  structure  provides  that  there  would be  no                                                            
fiscal impact on the state of Alaska.                                                                                           
9:18:13 AM                                                                                                                    
Senator  Stedman  noted the  limited  time  allowable  for heirs  to                                                            
procure the  funds necessary  to pay the  estate tax. Many  families                                                            
are forced to sell off assets to raise money for this tax.                                                                      
9:19:10 AM                                                                                                                    
Senator Huggins gave an  example of the state of Nebraska, where his                                                            
wife was  raised. A  number of the  small farms  in that state  have                                                            
been passed down  to family members over many generations.  Often in                                                            
these instances, acreage  must be sold off to pay the estate tax and                                                            
the  farm becomes  smaller.  This  is not  conducive  to  successful                                                            
family farming.                                                                                                                 
9:20:35 AM                                                                                                                    
Senator Olson  understood that taxes  have been paid on investments                                                             
and other earnings.  However, he cautioned  against allowing  "super                                                            
monopolies"  from controlling the  nation's wealth. He exampled  the                                                            
Carnegie  and Rockefeller  families, which  controlled the  nation's                                                            
economy  until estate  taxes  were created  and other  actions  were                                                            
9:21:43 AM                                                                                                                    
Senator  Huggins remarked  that those families  have many  attorneys                                                            
structuring their assets  in such a manner as to avoid estate taxes.                                                            
The  impact on  these  families  is minimal.  The  average  American                                                            
families however are not protected.                                                                                             
9:23:10 AM                                                                                                                    
Senator Dyson  appreciated this resolution.  The federal  government                                                            
has  enacted  anti-trust  legislation  to  prohibit  monopolies.  He                                                            
opposed the concept that  government should limit a family's ability                                                            
to become rich.                                                                                                                 
9:24:11 AM                                                                                                                    
STEVE  BOYD,  Alaska  Chapter  of National  Electrical  Contractors                                                             
Association, testified  that this resolution represents the position                                                            
the union has  held for many years.  He told of the hardship  of the                                                            
estate tax on second and third generation-owned businesses.                                                                     
9:25:21 AM                                                                                                                    
Co-Chair  Green pointed  out that  the US Congress  is debating  the                                                            
matter this week.                                                                                                               
9:25:35 AM                                                                                                                    
Senator Bunde supported the bill.                                                                                               
9:25:54 AM                                                                                                                    
Co-Chair  Wilken offered a  motion to report  SJR 14 from  Committee                                                            
with individual recommendations and accompanying fiscal note.                                                                   
Without objection SJR 14  MOVED from Committee with zero fiscal note                                                            
#1 from the Department of Revenue.                                                                                              
AT EASE 9:27:03 AM/9:31:48 AM                                                                                               

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