Legislature(2023 - 2024)DAVIS 106
03/29/2023 06:00 PM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB110 | |
| HB142 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 142 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| *+ | HB 110 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
March 29, 2023
6:32 p.m.
MEMBERS PRESENT
Representative Ben Carpenter, Chair
Representative Jamie Allard
Representative Tom McKay
Representative Kevin McCabe
Representative Cathy Tilton
Representative Andrew Gray
Representative Cliff Groh
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Robert Myers
COMMITTEE CALENDAR
HOUSE BILL NO. 110
"An Act relating to the Alaska permanent fund; relating to
permanent fund dividends and the dividend fund; transferring the
dividend program from the Department of Revenue to the Alaska
Permanent Fund Corporation; relating to the duties of the
Department of Revenue; relating to the duties of the Alaska
Permanent Fund Corporation; and providing for an effective
date."
- HEARD & HELD
HOUSE BILL NO. 142
"An Act relating to a state sales and use tax; authorizing the
Department of Revenue to enter into the Streamlined Sales and
Use Tax Agreement; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 110
SHORT TITLE: PERM FUND; XFER DIVIDEND PROG TO APFC
SPONSOR(s): REPRESENTATIVE(s) CARPENTER
03/13/23 (H) READ THE FIRST TIME - REFERRALS
03/13/23 (H) W&M, FIN
03/27/23 (H) W&M AT 6:00 PM DAVIS 106
03/27/23 (H) Scheduled but Not Heard
03/29/23 (H) W&M AT 6:00 PM DAVIS 106
BILL: HB 142
SHORT TITLE: STATE SALES AND USE TAX
SPONSOR(s): REPRESENTATIVE(s) CARPENTER
03/27/23 (H) READ THE FIRST TIME - REFERRALS
03/27/23 (H) W&M, FIN
03/27/23 (H) W&M AT 6:00 PM DAVIS 106
03/27/23 (H) <Bill Hearing Canceled>
03/29/23 (H) W&M AT 6:00 PM DAVIS 106
WITNESS REGISTER
KENDRA BROUSSARD, Staff
Representative Ben Carpenter
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided the sectional analysis of HB 110,
on behalf of Representative Carpenter, prime sponsor; provided
the sectional analysis of HB 142 on behalf of Representative
Carpenter, prime sponsor.
ACTION NARRATIVE
6:32:29 PM
CHAIR BEN CARPENTER called the House Special Committee on Ways
and Means meeting to order at 6:32 p.m. Representatives Gray,
Groh, McCabe, McKay, Allard, Tilton, and Carpenter were present
at the call to order.
HB 110-PERM FUND; XFER DIVIDEND PROG TO APFC
6:33:38 PM
CHAIR CARPENTER announced that the first order of business would
be HOUSE BILL NO. 110, "An Act relating to the Alaska permanent
fund; relating to permanent fund dividends and the dividend
fund; transferring the dividend program from the Department of
Revenue to the Alaska Permanent Fund Corporation; relating to
the duties of the Department of Revenue; relating to the duties
of the Alaska Permanent Fund Corporation; and providing for an
effective date."
6:34:04 PM
The committee took a brief at-ease.
[Chair Carpenter passed the gavel to Vice Chair McCabe.]
6:34:37 PM
CHAIR CARPENTER, as prime sponsor of HB 110, read the following
sponsor statement [included in the committee packet], which read
as follows [original punctuation provided]:
For almost thirty years, Alaskans could count on their
annual dividend checks as the state legislature
followed the law that directed the dividend to be paid
by a statutory formula. Since 2017, the permanent fund
dividend has been subjected to the budget process,
where the dividend competes with government spending
and cutting the dividend often becomes the deficit
reduction solution.
HB 110 returns the permanent fund dividend to a
statutory transfer and takes it out of the
appropriation process.
HB 110 ensures the growth of the permanent fund. HB
110 eliminates one of two potentially conflicting
sections of statute that calculate income available
for distribution from the permanent fund. The
remaining calculation of income available for
distribution from the permanent fund will be a five-
year average of five percent of market value of the
fund.
HB 110 preserves Governor Hammond's vision of the
dividend being the first call on the distribution from
the fund. The first call on the distribution will be
for the required payment of dividends of fifty percent
of the POMV draw.
HB 110 preserves the corpus of the permanent fund.
After the required dividend payment, the remainder of
the fifty percent POMV allowable draw, or the balance
of the earnings reserve fund, whichever is less, will
be available for government spending.
HB 110 transfers the administration of the permanent
fund dividend from the department of revenue to the
permanent fund corporation. The dividend fund will
therefore be transferred to the permanent fund
corporation.
While an amendment to Alaska's Constitution in needed
to enable a constitutional dedication of income from
the permanent fund, HB 110 makes the intent of the
legislature to pay a dividend by statute clear.
6:36:57 PM
KENDRA BROUSSARD, Staff, Representative Ben Carpenter, Alaska
State Legislature, on behalf of Representative Carpenter, prime
sponsor, provided the sectional analysis of HB 110 [included in
the committee packet], which read as follows [original
punctuation provided]:
Sections 1-21
Conforming language for the transfer of the permanent
fund dividend program from the Department of Revenue
to the Permanent Fund Corporation.
Section 22
Removes the District Court's jurisdiction over review
of the constitutionality of the dividend payment.
Sections 23-28
Conforming language for the transfer of the permanent
fund dividend program from the Department of Revenue
to the Permanent Fund Corporation.
Section 29
Amends Public Finance statute to eliminate one of two
conflicting calculations for the income available for
distribution from the permanent fund earnings reserve
account. The income available for distribution from
the account is five percent of the average market
value of the fund (POMV) (permanent fund balance,
including the earnings reserve fund) for the first
five of the preceding six years.
Section 30
Requires the Permanent Fund Corporation to make the
annual permanent fund dividend payment without
appropriations. The dividend amount is calculated as
50 percent of the amount available for distribution,
or 50 percent of the five percent average POMV from
Section 29 but shall never exceed the balance in the
earnings reserve fund.
Section 31
Conforms the Amerada Hess language that does not allow
income from the settlement to be available for
distribution for the dividend or general fund.
Section 32
Allows the legislature to appropriate an amount from
the earnings reserve account to the state general fund
to spend on government.
Section 33
Limits the combined total transfer from the earnings
reserve fund to the dividend fund and to the general
fund to the lesser of 5% POMV and the balance of the
earnings reserve fund.
Section 34
Conforms the mental health trust language that does
not allow the net income from the trust to be
available for distribution for the dividend or the
general fund.
Section 35-45
Conforming language for the transfer of the permanent
fund dividend program from the Department of Revenue
to the Permanent Fund Corporation.
Section 46
Provides for a transition for the transfer of
administration of the dividend program to the
permanent fund corporation and transfers the balance
of the dividend fund to the permanent fund on July 1,
2024.
Section 47
Provides for an effective date of July 1, 2024.
6:39:27 PM
The committee took a brief at-ease.
6:39:50 PM
CHAIR CARPENTER, addressing the fiscal notes, pointed out the
Office of Management and Budget (OMB) component 981 would
allocate funds to the Permanent Fund Dividend (PFD) division.
He stated that transferring the permanent fund program from the
Department of Revenue (DOR) to the Alaska Permanent Fund
Corporation (APFC) would result in a reduction of $8.5 million
in fiscal year 2024 (FY 24). He read the analysis to the fiscal
note [included in the committee packet], which read as follows
[original punctuation provided]:
This bill transfers the duties of administering the
Permanent Fund Dividend (PFD) program from the
Department of
Revenue to the Alaska Permanent Fund Corporation
(APFC). This includes determining the value of each
dividend and the
payment of each dividend. The bill also moves the
Dividend Fund to APFC as a separate fund within the
Corporation. This
fiscal note assumes the Permanent Fund Dividend
Division moves from the Taxation and Treasury
appropriation to the
Alaska Permanent Fund Corporation appropriation.
He explained the second DOR fiscal note, OMB number 109. He
said that there are asterisks in the space for FY 24, which
represents that the figure is indeterminate. He read the
analysis of the second fiscal note [included in the committee
packet], which read as follows [original punctuation provided,
with some formatting changes]:
HB 110 seeks to make several changes to the state's
permanent fund dividend program (PFD program). Among
these is transfer of the management of the PFD program
from the Commissioner of the Department of Revenue to
the Executive Director of the Alaska Permanent Fund
Corporation. This fiscal note pertains only to this
element of HB 110.
An important dynamic to understand is that the
Department of Revenue is an integral part of the
administrative enterprise of the State of Alaska. The
Alaska Permanent Fund Corporation (APFC) is a
quasi-public corporation that is almost entirely
segregated from the State's administrative enterprise.
As a division in the Department of Revenue, the
Permanent Fund Dividend Division (PFDD) is reliant on
certain services provided by multiple state agencies,
including the Department of Revenue, Office of
Information Technology, Division of Finance, Division
of Shared Services, and the Criminal Investigations
Unit. Removing PFDD from the State's administrative
enterprise would require APFC to replicate the
administrative infrastructure on which the PFD
Division currently relies.
While this is not an impossible transition project, it
is a project that would require substantial resources,
planning and care in project execution. APFC would
need to create and provide IT, cybersecurity,
accounting, and administrative support and
infrastructure to PFDD. Since PFDD maintains the
confidential personal and banking information of most
Alaskans, the highest degree of care must be taken
during the transition to ensure the information
remains secure and its integrity maintained.
At this time, APFC's assessment of the costs of this
project are necessarily rough estimates, and therefore
this fiscal note is indeterminate. To achieve any
degree of accuracy in budgeting for the costs of such
a project, APFC would likely need to procure a project
manager experienced in major data and system
transition and implementation. APFC estimates the cost
of a project manager to scope this project and prepare
a project plan would be approximately
$100,000-$250,000.
The following is a summary of projected costs that
APFC can currently envision that would be in addition
to the current budget of PFDD.
IT Costs
Replace Office of Information Technology Functions.
PFDD currently budgets $200.0 Inter-Agency for OIT
support services. APFC estimates incremental costs of
$409.0 to add four new positions to cover all core IT
services (user administration, helpdesk, cloud server
administration etc.):
$217.0 Personal Services. Two helpdesk positions (IT
Specialist) needed to match a doubled workforce.
$392.0 Personal Services. Two infrastructure positions
(IT Specialist) needed to match a doubled workforce
and manage the new workload in Azure and cloud
administration.
Licensing for SQL servers, Windows workload servers,
M365 cloud Software as a Service licensing, Azure
services and Data Storage.
PFDD currently budgets $111.7 Inter-Agency to OIT for
licenses and IT infrastructure. APFC estimates
incremental costs of $109.0 Services.
Network. PFDD currently pays $15.0 for network access.
APFC anticipates a doubling of its current network
cost from $12.0 to $24.0. This would represent a
savings of $3.0. Horizon Virtual Desktop Interface
licensing. APFC anticipates a doubling of its current
costs. This would be an incremental cost of $90.0
Services.
PFDD Workstations.
APFC would add PFDD to its three-year refresh cycle.
APFC estimates an incremental cost of $300.0
Commodities.
PFDD Applications Security.
PFDD has a number of applications: Dividend
Application Information System (DAIS), Revenue
Permanent Fund Information System (RPFI), and the
ILINX imaging system. APFC would need to evaluate each
application for security as well as determination
whether to locate the application in the Microsoft
Azure Cloud. APFC does not have a cost estimate at
this time for this item.
PFD Application Portal.
PFDD currently relies on the OIT myAlaska portal to
manage online applications and identity verification.
APFC would need to replicate a secure and resilient
portal to replace myAlaska. APFC does not have a cost
estimate at this time for this item.
PFDD Applications Upgrade.
APFC anticipates a need for a rebuild of PFDD
applications into a contiguous and agile ecosystem. A
goal here is increased security, increased automation,
improved PFD application processing time, and enhanced
flexibility on PFD distribution. APFC does not have a
cost estimate at this time for this item.
Finance and Investment Costs
Modifications to Accounting System.
Consulting time will be required to export and import
data files. APFC estimates one-time incremental costs
of $20.0 Services.
Align Accounting Positions for Management of the PFD
Fund.
Investment management of the PFD Fund would have to be
done under a different asset allocation with separate
reporting and tracking of expenses. The PFDD
accounting positions would need to be aligned with the
APFC accounting positions. APFC estimates an
incremental cost of $50.0
Personal Services.
Financial Audit.
APFC would assume the responsibility to obtain an
independent audit of PFDD and the PFD Fund. APFC
estimates incremental costs of $75.0 Services.
Other Costs
Office Rent.
APFC does not anticipate any changes to PFDD's
Anchorage and Fairbanks office space. To the extent
that removal of PFDD from the State's administrative
enterprise requires relocation of PFDD out of the
State Office Building, there may be incremental costs
for rent, moving and office build-out. APFC does not
have a cost estimate at this time for these items.
6:50:38 PM
REPRESENTATIVE GRAY, having reviewed the second fiscal note,
expressed the opinion that moving the PFD program from DOR to
APFC would be extraordinarily difficult, expensive, and risky
for the Alaska public. He questioned whether the proposed
legislation could accomplish the intent without moving the
program.
CHAIR CARPENTER responded that dividends would continue to be
paid from DOR; however, the bill would solve a political problem
by stabilizing the way the state carries out dividend
distributions. It would take the dividend out of the
appropriation process and change the way the legislature manages
the PFD program. He said that the proposed legislation would be
moving the program "one step further away" from the legislature
and the executive branch. He explained that this would be done
by sequestering the fund under the purview of APFC.
CHAIR CARPENTER said there are many unknowns in the fiscal note,
and the "headspace" is about $8 million from the first fiscal
note, which he explained would be the savings generated from DOR
and available for the costs to move the permanent fund program
to APFC. As to the costs above the $8 million, he said, this is
currently unknown and will be unknown until the fund transfer is
underway. He reiterated that the policy aim of HB 110 would be
to solve the political equation by removing the PFD program from
the legislative and executive processes and have the program be
a function of APFC; thus, APFC would annually cut checks to
Alaskans and the state. He pointed out that to carry out the
change, there would need to be a constitutional amendment which
repeals Wielechowski v. Alaska, 403 P.3d 1141, (2017). He spoke
to the section of HB 110 which would remove jurisdiction of the
lower courts. He said this would send the message that the PFD
program issue needs to be solved without the legislative,
executive, or judicial branch being involved.
6:55:16 PM
REPRESENTATIVE GROH expressed the understanding that HB 110
would remove district court jurisdiction over the
constitutionality of the dividend payments; therefore, lawsuits
could only be held in the superior court. He questioned whether
Section 22 of the proposed legislation would be a "messaging
section."
CHAIR CARPENTER responded in the affirmative, explaining that
the constitution prevents the legislature from directing the
superior court or supreme court on their jurisdiction. However,
he said, Section 22 would be more than just "messaging," as it
also conveys that no case could be brought into the lower courts
against the state for how the state is managing the APFC
dividend program. He offered that this would not likely happen;
nonetheless, it would send a message from the legislature to the
courts that all three branches of the government are separate
from the PFD program and the legislature, "so that we stop
fighting over that money."
REPRESENTATIVE GROH referred to language within the sectional
analysis which relates that APFC would be required to make the
annual PFD payment without appropriations. He expressed the
understanding of this intention; however, he pointed out that
the sponsor statement relates that an amendment to the state's
constitution is needed to enable a constitutional dedication of
income from the permanent fund. He questioned whether the
language is sending the wrong message, in that, the intent of
what the legislature wants to do would require a constitutional
amendment in order to require annual payments of dividends
without legislative appropriation.
CHAIR CARPENTER explained that a constitutional amendment would
be presented both as a resolution and an accompanying bill, and
this would constitutionalize and dedicate the PFD program
outside of the appropriations process.
REPRESENTATIVE GROH expressed concern that moving the PFD
program from DOR and into APFC would confuse or divide the
fund's mission by adding an additional function of paying PFDs
to APFC.
CHAIR CARPENTER related that members of APFC have indicated it
would be a new role, but doable.
7:00:59 PM
VICE CHAIR MCCABE announced that HB 110 was held over.
HB 142-STATE SALES AND USE TAX
7:01:06 PM
VICE CHAIR MCCABE announced that the final order of business
would be HOUSE BILL NO. 142, "An Act relating to a state sales
and use tax; authorizing the Department of Revenue to enter into
the Streamlined Sales and Use Tax Agreement; and providing for
an effective date."
7:01:27 PM
CHAIR CARPENTER, as prime sponsor, read the sponsor statement
for HB 142 [included in the committee packet], which read as
follows [original punctuation provided]:
State leaders should naturally be motivated to grow
Alaska's private economy. The prospect of jobs and
opportunity would allow our children to stay in
Alaska, would attract development that would bring
infrastructure investment, and would make retiring
here comfortable for all employeesnot just those who
had government jobs.
Inertia in the state Capitol, however, keeps the state
legislature focusing on government growth without
corresponding economic growth. We can change that with
a long-term fiscal plan for the state that
incentivizes such growth. The Alaska legislature has
the opportunity this session to pass a package of
bills and resolutions that will:
Take the permanent fund dividend payment out of the
annual budget process and require the PFD to be paid
by the formula in law,
• Place a limit on government spending in a manner
that incentivizes economic growth,
• Reform our state government management and budgeting
practices, and
• Promote economic growth with business tax cuts, make
carbon credits available to Alaska resource
developers, streamline regulations, make obtaining
licenses easier.
As part of a package of bills that includes all these
structural reforms, we can institute a low rate,
broad-based sales tax that will bring a small share of
the ensuing economic activity to government, and
further incentivize legislators to pursue economic
growth.
HB142 imposes a two-cent tax on all sales of goods and
services purchased in Alaska and allows the
legislature to share half of the tax revenue with
certain municipalities that meet certain criteria,
including low property taxes.
According to the Tax Foundation, forty-five states and
the District of Columbia collect statewide sales
taxes. Local sales taxes are collected in 38 states.
In some cases, they can rival or even exceed state
rates. The five states with the highest average
combined state and local sales tax rates are Louisiana
(9.550 percent), Tennessee (9.548 percent), Arkansas
(9.46 percent), Alabama (9.25 percent), and Oklahoma
(8.98 percent). Sales tax rates differ by state, but
sales tax bases also impact how much revenue is
collected from a tax and how the tax affects the
economy.
HB142 is designed after the South Dakota system as the
broadest-based tax in the nation. Broad-based systems
keep rates low, keep compliance simple, and create as
few economic distortions as possible. Except for the
five states that have no sales tax, a two-cent
statewide sales tax would maintain Alaska's ranking as
the lowest state and locally combined sales tax rate
in the nation.
7:04:52 PM
CHAIR CARPENTER, in response to a question from Representative
McKay as to whether the sponsor statement should state "two-
cent," said that a two percent tax would be literally a two-cent
per dollar tax.
7:05:27 PM
KENDRA BROUSSARD, Staff, Representative Ben Carpenter, Alaska
State Legislature, on behalf of Representative Carpenter, prime
sponsor, provided the sectional analysis of HB 142 [included in
the committee packet], which read as follows [original
punctuation provided]:
Section 1
HB 142 amends AS 28.10.021 to add sales and use taxes
for vehicles.
Section 2
HB 142 amends AS 43.05.240 (a) to add sales tax
collectors to those who may file for grievance if
their seller's permit or resale exemption certificate
is revoked.
Section 3
AS 43 is amended by adding a new chapter to institute
a statewide sales tax of two percent of sale or lease
of tangible property or services and a two percent use
tax on tangible personal property. The use tax is
applied to tangible personal property acquired outside
of Alaska as the result of a transaction that would
have been subject to the sales tax if it had occurred
in Alaska. The use tax is also applied to tangible
personal property that has been converted to a use
that is subject to tax. The use tax is additionally
applied to services in Alaska that would be subject to
a sales tax if purchased in this state (remote
purchases).
HB 142 provides exemptions to the sales tax for sales
that are exempt by federal law 26 USC (Internal
Revenue Code): government, tax-exempt corporations,
employee wages, interest on loans and deposits, stock
dividends, financial services fees, insurance
premiums, personal uses of property or between
business partners, the sale, lease, or construction of
real property.
HB 142 provides tax credits for sales or use taxes
paid to another state.
HB 142 requires businesses to acquire a seller's
permit before doing business in Alaska.
HB 142 exempts resales from taxation.
HB 142 allows the department of revenue to suspend or
revoke a seller's permit if the person who holds the
permit fails to comply with the provisions of this
law.
HB 142 requires the department of revenue to enter the
Streamlines Sales and Use Tax Agreement, a multi-state
agreement for processing of cross-state transactions.
HB 142 allows for a municipal share. The legislature
may appropriate half the revenue collected from this
tax to municipalities. A municipality may receive an
appropriation under this section if the municipality
does not collect either:
o Property taxes in excess of ten mills; or
o An oil and gas production tax or gas pipeline
property tax.
Section 4
Contains conforming language.
Section 5
Provides for a transition to allow the department of
revenue to adopt regulations under the Administrative
Procedures Act.
Allows for services contracted before the effective
date of the tax to be exempt from the tax.
Allows for persons to apply for a seller's permit or a
resale permit before the effective date of this act.
Section 6
Provides an immediate effective date for Section 5.
Section 7
Provides an effective date for the remainder of this
act of January 1, 2025.
7:08:53 PM
CHAIR CARPENTER expressed the understanding of the gravity of
putting forward a bill instituting a sales tax. He advised that
in order to move the state forward in the direction of pro
economic growth in the non-oil, private sector economy, the
state would need to start moving in this direction. He said
that, as a compromise, he is presenting HB 142 as an option for
a broad-based revenue source, tying the legislative budget
decisions to economic activity in the state. He argued that
people in the state work in the private sector economy, and this
is critical to why Alaskans want to be in the state. He said a
sales tax, or broad-based tax, which ties the economy to
government spending is important. He stressed that HB 142 is
not the only item being presented, rather, it is one component
of a policy package intended to have a positive economic benefit
to the state.
7:11:33 PM
REPRESENTATIVE GRAY raised the concern of higher costs for
expenses, like groceries, in rural Alaska. He stated that the
average price of milk in Anchorage is $4.20, while it is $8.80
in Bethel; therefore, he deduced that if people in rural Alaska
are paying twice as much for groceries, the tax would be twice
as much. He expressed the understanding that, under the
proposed tax program, those who can least afford the tax would
be the ones paying most of it.
7:12:35 PM
REPRESENTATIVE MCKAY advised Representative Gray that the tax
would have to be based on population. He expressed the
understanding that most people live on the Railbelt, while about
a quarter of the population live in rural areas. Furthermore,
he illustrated an example where 75 percent of the state's
population live in the $4.50 per gallon of milk region while 25
percent live in the $16 per gallon of milk region.
REPRESENTATIVE GRAY, interjected, expressing the belief that it
is unfair for people in Bethel to pay more.
7:13:27 PM
VICE CHAIR MCCABE, referring to the comment that the tax would
not be fair for rural populations, questioned whether the
concern is that the revenue generated would be less.
REPRESENTATIVE GRAY clarified that rural residents would be
paying a disproportionately high amount of tax compared to
Anchorage residents. He asked if there is a way to implement
the program without rural Alaskans paying a disproportionate
amount of the tax.
7:14:14 PM
CHAIR CARPENTER suggested that the legislature investigate ways
to reduce the cost of a gallon of milk in rural Alaska. He
suggested that modernizing transportation in the region would be
a better solution.
REPRESENTATIVE GRAY concurred.
CHAIR CARPENTER said, "If there is a will there's a way." He
suggested that the only way would be to grow the state's
economy, as solutions to big problems do not come without a
growing economy. He advised that a two-cent tax on an $8 gallon
of milk would be 16 cents. He explained that if municipalities
can share in the state revenue, then a portion of the state's
tax would be distributed to these municipalities. He suggested
that this could somewhat alleviate the higher cost of goods.
7:16:13 PM
REPRESENTATIVE GROH inquired about the emphasis on boosting the
economy and pointed out that HB 142 would apply a tax on
commerce. He recounted an article regarding the complexity and
resource-heavy process, and how this would impact small
businesses. He asked if Representative Carpenter shared his
concern that a sales tax would burden Alaska's small businesses.
CHAIR CARPENTER responded that a business collecting sales tax
and passing the tax onto the consumer would not be a business
paying the tax, rather the consumer would be paying it. He
argued that regardless of whether the policy is income tax or
sales tax, the cost would be passed on to the consumer.
REPRESENTATIVE GROH commented about the compliance cost, which
he said is the actual cost of collecting the taxes. He
acknowledged that a few cities in the state collect sales tax,
but his community of Anchorage has never had such a tax. He
asked Chair Carpenter if he would seek a sales tax compliance
exemption for small and local businesses.
CHAIR CARPENTER pointed out that Anchorage is currently
struggling with finances. He said the concept of a sales tax
that works in partnership with small businesses is not
unattainable; it is a cost of doing business. He said he is not
concerned about the business community being able to figure this
out since larger corporations, for example, can figure out
larger and more complex corporate income taxes. He said, if the
state were going down the path to eliminating the permanent fund
dividend as a way to continue funding state services, this would
hurt small businesses more than the compliance cost of a sales
tax.
REPRESENTATIVE GROH suggested that an alternative to a sales tax
would be a high-earner tax. He relayed that, according to the
federal reserve, the median household income is $81,000. He
asked how much an average household is expected to pay annually
in sales taxes.
CHAIR CARPENTER expressed uncertainty and stated he would follow
up to the committee.
REPRESENTATIVE GROH asked if each household would get a sales
tax return showing how much it paid in sales taxes throughout
the year.
CHAIR CARPENTER expressed uncertainty.
7:20:11 PM
REPRESENTATIVE ALLARD commented that, although Anchorage does
not have sales tax, there is a 10-cent per gallon tax on fuel.
7:20:40 PM
VICE CHAIR MCCABE said there are many cities in Alaska that have
a sales tax, including Wasilla. For example, if the city needs
to construct a new library, the city could put a question to the
voters as to whether they approve an increase in sales taxes for
a set period of time. Furthermore, he said Wasilla has zero
debt, explaining that, despite not having outside traffic with
tourists, for example, the sales tax in the city would work
"fabulously." He expressed the understanding from the data
presented from the fiscal policy working group, there are not
enough high earners in Alaska to satisfy the amount of money the
state needs; therefore, as regressive as it may seem, the only
possibility is a broad-based sales tax. He asked if Chair
Carpenter agrees with this statement.
CHAIR CARPENTER answered that he has spent time looking at a
sales tax and does not prefer an income tax. He commented that
states with income taxes, or progressive income taxes, are not
as competitive as states which have sales taxes. He advised
that if the committee is going to make a good decision, it
should have a conversation comparing the two types of taxes.
7:22:46 PM
REPRESENTATIVE GROH referred to a study by the Institute of
Social and Economic Research at the University of Alaska
Anchorage, which showed that more than 70 percent of Alaskans
would do better and pay less under an income tax over a sales
tax. Furthermore, he suggested that if the legislature had
passed an income tax in 2017, $700 million would have been
generated. He questioned whether these factors have been
considered in the decision of a sales tax, which focuses on
nonresidents, versus an income tax, which focuses on high
earners.
CHAIR CARPENTER expressed uncertainty concerning the options.
He said that the only thing before the committee right now is a
sales tax; however, he suggested that it is more likely the
permanent fund dividend will be taxed instead, and this would be
the most regressive tax. He said that, if the options are
either the most regressive tax or a less regressive tax, and he
has political agreement to "pass the lesser of those two evils,"
then he would suggest passing the sales tax.
7:24:50 PM
VICE CHAIR MCCABE announced that HB 142 was held over.
7:25:01 PM
The committee took an at-ease from 7:25 p.m. to 7:26 p.m.
[Vice Chair McCabe returned the gavel to Chair Carpenter.]
7:29:21 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
7:29 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0110A.PDF |
HW&M 3/27/2023 6:00:00 PM HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB110-DOR-APFC-03-24-23.pdf |
HW&M 3/29/2023 6:00:00 PM |
|
| HB110-DOR-PFD-03-24-23.pdf |
HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB 110 Sponsor Statement.pdf |
HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB 110 Sectional Analysis.pdf |
HW&M 3/29/2023 6:00:00 PM |
HB 110 |
| HB0142A.PDF |
HW&M 3/29/2023 6:00:00 PM HW&M 2/26/2024 6:00:00 PM |
HB 142 |
| HB 142 Sponsor Statement.pdf |
HW&M 3/29/2023 6:00:00 PM HW&M 2/26/2024 6:00:00 PM |
HB 142 |
| HB 142 Sectional Analysis.pdf |
HW&M 3/29/2023 6:00:00 PM HW&M 2/26/2024 6:00:00 PM |
HB 142 |
| W&M Foundation for Discussion Power Point 3.29.2023 Slide.pdf |
HW&M 3/29/2023 6:00:00 PM |