01/25/2007 01:30 PM Senate LABOR & COMMERCE

                                                                                                                                
2:10:48 PM                                                                                                                    
                 SB  41-REPEAL STUDDED TIRE FEE                                                                             
                                                                                                                                
CHAIR ELLIS announced  that he would interrupt testimony  on SB 24                                                              
and SB  39 so  the committee would  take testimony  on SB  41 from                                                              
Mr.  Waitschick,   Alaska   Tire  World,   because  of  his   time                                                              
constraints.                                                                                                                    
                                                                                                                                
MR. WAITSCHICK  asked, "Why does the  State of Alaska need  to tax                                                              
the safety  of our  families during  our winter  months?"  He said                                                              
that  studded tires  add  safety  to everybody  on  the road.  The                                                              
$440,000  raised by  the tax is  a very  small amount  considering                                                              
the training  curve  and frustration  it takes  to use the  online                                                              
system. A  percentage of his  customers couldn't afford  the added                                                              
tax.                                                                                                                            
                                                                                                                                
He next commented  on the point-of-sale tire tax, or  paying a tax                                                              
when you  purchase tires.  He couldn't see  why people  would want                                                              
to  tax  themselves  more  with  the rising  cost  of  energy  and                                                              
materials.                                                                                                                      
                                                                                                                                
CHAIR  ELLIS thanked  him  for his  comments  and indicated  there                                                              
were no questions from the committee.                                                                                           
                                                                                                                                
                 SB  41-REPEAL STUDDED TIRE FEE                                                                             
                                                                                                                                
2:16:30 PM                                                                                                                    
CHAIR ELLIS announced SB 41 to be up for consideration.                                                                         
                                                                                                                                
SENATOR WIELECHOWSKI,  sponsor of SB 41, explained  that this bill                                                              
was proposed  in 2003  at the  request of  Governor Murkowski.  It                                                              
proposed a new  fee of $5 per  tire for the sale of  studded tires                                                              
with  an effective  date of  July 1, 2004.  In FY  2005, this  tax                                                              
generated  $436,440;  in FY  2006,  it generated  $446,771.  After                                                              
this   bill  was   enacted,  the   legislature  commissioned   the                                                              
University  of  Alaska  to  prepare  a  report;  it  was  entitled                                                              
"Socio-Economic  Effects  of  Studded  Tire Use  in  Alaska."  The                                                              
report  found that  studded tires  do  cause some  rutting in  the                                                              
roads,  but  that  they also  create  a  significant  increase  in                                                              
traction, braking  and acceleration,  which ultimately  results in                                                              
fewer  accidents.  An  older  Minnesota  study also  found  a  100                                                              
percent  increase  in accidents  when  studded tires  were  banned                                                              
over a  two-year period. With the  current budget surplus  he said                                                              
it was time to put peoples' safety first.                                                                                       
                                                                                                                                
JOHANNA  BALES, Supervisor,  Excise Audit,  Department of  Revenue                                                              
(DOR), said  she oversees  the tire fee  program and  unlike other                                                              
excise tax  programs that are levied  at the wholesale  level, the                                                              
tire  fee  is  levied  at  the  retail  level  and  it  affects  a                                                              
significant  number of  small  businesses. Over  the  life of  the                                                              
tire  fee, she  has received  numerous complaints  from the  small                                                              
businesses  about  how onerous  the  record  keeping is.  In  2006                                                              
about  606,000 tires,  both studded  and plain,  were sold  in the                                                              
state. Small  businesses had  to account for  every single  one of                                                              
the tires;  they are  also required to  make the determination  as                                                              
to whether  or not that tire sale  is taxable since the  state has                                                              
some  exemptions.   She  said,  "The  program  is   confusing  and                                                              
burdensome  for   them."  She  concluded  saying   the  department                                                              
supports repealing  the studded tire fee and the  tire fee program                                                              
as a whole.                                                                                                                     
                                                                                                                                
2:22:09 PM                                                                                                                    
DANA OWEN,  Committee Aide  to the  Labor and Commerce  Committee,                                                              
explained  that CSSB  41(L&C),  version 25-LS0355\C,  removes  the                                                              
studded  tire fee  as  the original  bill does,  but  goes a  step                                                              
further and  removes the  entire program  including the  $2.50 fee                                                              
on regular tires.                                                                                                               
                                                                                                                                
SENATOR WIELECHOWSKI supported that change.                                                                                     
                                                                                                                                
2:23:37 PM                                                                                                                    
SENATOR  STEVENS  asked  if  there   is  a  cost  associated  with                                                              
collecting the fee.                                                                                                             
                                                                                                                                
MS. BALES  replied that  this program  has one full-time  employee                                                              
and the cost incurred is about $56,000 per year.                                                                                
                                                                                                                                
CHAIR ELLIS asked  if she had prepared her budget  as if this bill                                                              
had become law and she replied yes.                                                                                             
                                                                                                                                
CHAIR  ELLIS thanked  her for  her  testimony said  he would  hold                                                              
this bill over until Tuesday.                                                                                                   
                                                                                                                                
There being no  further business to come before  the committee, he                                                              
adjourned the meeting at 2:25:42 PM.