Legislature(2021 - 2022)ANCH LIO DENALI Rm
10/14/2021 10:00 AM House WAYS & MEANS
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| Audio | Topic |
|---|---|
| Start | |
| HB141 | |
| HB4005 | |
| Presentation(s): Local Sales Taxes in Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 141 | TELECONFERENCED | |
| *+ | HB4005 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
October 14, 2021
10:04 a.m.
MEMBERS PRESENT
Representative Ivy Spohnholz, Chair
Representative Adam Wool, Vice Chair (via teleconference)
Representative Andy Josephson
Representative Calvin Schrage
Representative Andi Story (via teleconference)
Representative Mike Prax (via teleconference)
Representative David Eastman (via teleconference)
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Kevin McCabe
COMMITTEE CALENDAR
HOUSE BILL NO. 141
"An Act relating to an appropriation limit; relating to the
budget responsibilities of the governor; and providing for an
effective date."
- HEARD & HELD
HOUSE BILL NO. 4005
"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
PRESENTATION(S): Local Sales taxes in Alaska
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 141
SHORT TITLE: APPROPRIATION LIMIT; GOV BUDGET
SPONSOR(s): REPRESENTATIVE(s) SPOHNHOLZ
03/20/21 (H) READ THE FIRST TIME - REFERRALS
03/20/21 (H) W&M, FIN
04/29/21 (H) W&M AT 11:30 AM DAVIS 106
04/29/21 (H) Heard & Held
04/29/21 (H) MINUTE(W&M)
BILL: HB4005
SHORT TITLE: STATE SALES AND USE TAX
SPONSOR(s): REPRESENTATIVE(s) TARR
10/04/21 (H) READ THE FIRST TIME - REFERRALS
10/04/21 (H) W&M, FIN
WITNESS REGISTER
MEGAN HOLLAND, Staff
Representative Ivy Spohnholz
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented an explanation of changes in the
committee substitute (CS), Version D, for HB 141 on behalf of
Representative Spohnholz, prime sponsor.
REPRESENTATIVE GERAN TARR
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 4005, as the prime sponsor.
NICOLE REYNOLDS, Deputy Director
Tax Division
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions and provided information
during the hearing on HB 4005.
NILS ANDREASSEN, Executive Director
Alaska Municipal League
Juneau, Alaska
POSITION STATEMENT: Presented a PowerPoint presentation on
local sales taxes in Alaska.
DAN STICKEL, Chief Economist
Tax Division
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions during the presentation
on sales tax.
ACTION NARRATIVE
10:04:58 AM
CHAIR IVY SPOHNHOLZ called the House Special Committee on Ways
and Means meeting to order at 10:04 a.m. Representatives
Schrage, Josephson, Spohnholz, Wool (via teleconference), Prax
(via teleconference), and Eastman (via teleconference) were
present at the call to order. Representative Story (via
teleconference) arrived as the meeting was in progress. Also
present was Representative McCabe.
HB 141-APPROPRIATION LIMIT; GOV BUDGET
10:06:00 AM
CHAIR SPOHNHOLZ announced that the first order of business would
be HB 141 HOUSE BILL NO. 141, "An Act relating to an
appropriation limit; relating to the budget responsibilities of
the governor; and providing for an effective date."
10:06:56 AM
MEGAN HOLLAND, Staff, Representative Ivy Spohnholz, Alaska State
Legislature, on behalf of Representative Spohnholz, prime
sponsor, presented an explanation of changes in the proposed
committee substitute (CS), Version D, for HB 141 [included in
the committee packet], which read as follows [original
punctuation provided]:
Section 1:
Page 1, line 7
The word "of" is added following "principal" to read
"appropriations required to pay the principal of and
interest on general obligation bonds." This is a
grammatical edit to improve the precision of language.
Page 2, lines 18-21
New language allows exceeding the appropriation limit
for capital investments and deferred maintenance of up
to 10% over the limit for that fiscal year.
Section 2:
Lines 23-28
A conforming change that adds capital improvements to
the requirement that the governor produce an annual
report with a calculation of the appropriation limit.
Page 2 line 30 - page 3, line 2
Adds a requirement that the legislative finance
division prepare a report analyzing the appropriation
limit and the rate of growth every three years. The
report would be submitted to finance committee chairs
in each legislative body.
Section 4 of bill version G was removed and
sections in version D are renumbered accordingly.
This section previously limited calculation of
the revised appropriation limit and subsequent
mandatory reports to appropriations that take
effect during or after fiscal year 2023.
Section 4:
Lines 6-7
Establishes a "hard floor" by calculating the limit
for fiscal year 2023, ($5.771 billion), and removes
the calculation for that fiscal year from transition
language clarifying that spending for school bond debt
and state-declared disasters will not be included.
10:09:55 AM
CHAIR SPOHNHOLZ summarized the list of changes in HB 141,
Version D, as explained by Ms. Holland. Essentially, she said
the proposed CS would establish a higher floor at $5.7 billion
plus a 10 percent additional spending allowance for capital
projects to allow for strategic investments while maintaining a
meaningful cap.
10:11:09 AM
REPRESENTATIVE JOSEPHSON moved to adopt the proposed committee
substitute (CS) for HB 141, labeled 32-LS0454\D, Marx, 10/4/21,
as the working document. There being no objection, Version D
was before the committee.
10:11:49 AM
The committee took a brief at-ease.
10:13:08 AM
CHAIR SPOHNHOLZ explained that there were two spending caps in
existence: a constitutional spending cap that allowed for $9.8
billion in spending and a statutory spending cap that allowed
for $5.8 billion in spending. She noted that there were no
enforcement or accountability measures in place, opining that
the constitutional cap was too high, and the statutory cap
didn't have the appropriate "feedback loops." She reported that
CSHB 141(W&M) would allow reestablish the spending cap at $5.7
billion plus 10 percent for capital investment and set future
appropriation limits based on an average for the previous three
fiscal years' UGF budget when adjusted by the greater of
population or inflation. Further, she pointed out that the
limit would exclude spending for state-declared disasters and
dividends. Additionally, the bill required that the Office of
the Governor calculate the appropriation limit each year and
submit it with the annual budget request, which she believed to
be the most important part of the legislation, as it would
create an accountability measure for the administration and the
legislature to consider the spending cap. She emphasized the
importance of considering whether the capital budget and the
permanent fund dividend (PFD) should be excluded from the
spending cap and encouraged substantive discussions on these
matters.
10:16:31 AM
CHAIR SPOHNHOLZ, in response to a question from Representative
Josephson, said the bill, as drafted, excluded dividends. She
reiterated her belief that the decision to include or exclude
dividends from the spending cap was an important policy call.
10:18:30 AM
REPRESENTATIVE WOOL pointed out that the dividend was treated
like a budget appropriation. He opined that such a large,
fluctuating budget item should be included in the spending cap.
CHAIR SPOHNHOLZ acknowledged his position.
10:20:07 AM
REPRESENTATIVE STORY agreed with Representative Wool that the
dividend should be included in the spending cap in an attempt to
protect Alaska's resources. She addressed the concept of
accountability and asked the sponsor to expound on that.
CHAIR SPOHNHOLZ discussed the importance of a spending cap as
part of a comprehensive fiscal plan. She shared her belief that
strategic investments in the Alaska Permanent Fund managing the
growth of government incrementally, as opposed to rapid "booms
and busts," would be good for everyone.
10:24:58 AM
REPRESENTATIVE JOSEPHSON opined that there would be bipartisan
division amongst legislators on this issue.
10:25:58 AM
REPRESENTATIVE PRAX believed that if the dividend was included
in the spending cap, the legislature would not be resolving the
conflict regarding spending.
10:27:36 AM
CHAIR SPOHNHOLZ announced that CSHB 141(W&M) was held over.
HB 4005-STATE SALES AND USE TAX
10:27:41 AM
CHAIR SPOHNHOLZ announced that the next order of business would
be HOUSE BILL NO. 4005, "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."
10:28:15 AM
REPRESENTATIVE GERAN TARR, Alaska State Legislature, prime
sponsor, presented HB 4005. She summarized a PowerPoint
presentation, titled, "HB 4005 Statewide Sales and Use Tax"
[hard copy included in the committee packet]. Beginning on slide
2, she expressed her concern that a cut to the dividend was a
regressive option that would disproportionally affect middle
income families the most. She turned to slide 3, highlighting
conclusions made by the Institute of Social and Economic
Research (ISER) on the economic impact of PFD cuts. She
proceeded to slide 4, which read as follows [original
punctuation provided]:
Concepts for HB 4005
upsilon Lessons from 2017
upsilon Spreading burden among all who benefit from public
services upsilon Getting comfortable with a sales tax
upsilon Who pays and how soon
upsilon Deductions
upsilon Management
REPRESENTATIVE TARR advanced to slide 5, which read as follows
[original punctuation provided]:
Lessons from 2017
upsilonHouse Majority passes 4-part Fiscal Plan
upsilonZero support from Senate Majority leads to failure
upsilonGovernor must support proposals forwarded by
legislature
REPRESENTATIVE TARR continued to slide 6, which read as follows
[original punctuation provided]:
Do you want only Alaskans to contribute to public
services? No!
upsilon Everyone who use benefits from public services should
have a way to contribute
upsilon Population of Alaska (733,000) is a medium size city
in lower 48
upsilon Denver, Seattle, San Francisco, Indianapolis,
Charlotte, Columbus, Jacksonville, Fort Worth, and
Austin are all around or more than our entire
population of 733,000
upsilon Very large state (2.5 times the size of Texas, the
next largest state and Texas, California, and Montana
combined are all smaller than Alaska)
upsilon 20% of workforce is out of state residents and 2.26
million visitors (2019)
REPRESENTATIVE TARR continued to slide 7, which read as follows
[original punctuation provided]:
Getting Comfortable with a Sales Tax
upsilon 45 other states have statewide sales and use tax
upsilon 21 with Democratic Governors
upsilon 24 with Republican Governors
upsilon Alaskans spend more on domestic travel than residents
of any other state
upsilon Hawaii 4% GET plus legislature authorized
counties to collect surcharge
upsilon City and County of Honolulu: 0.5% effective
January 1, 2007 to December 31, 2030
upsilon HONOLULU (KHON2) Counties are poised to
increase hotel room taxes up to 3%. It is a move
that affects not just visitors, but also many
Hawaii residents. Tourism experts said Hawaii
hotels already add 15% in taxes to the hotel room
rates. That will soon go up to 18%. (Jul 8, 2021)
10:37:57 AM
REPRESENTATIVE SPOHNHOLZ was usure how domestic travel related
to the sales tax proposal.
REPRESENTATIVE TARR pointed out that when Alaskans travel to
other paces, they are contributing to those economies.
Similarly, she argued that visitors to Alaska should be
contributing to Alaska's economy. She resumed the presentation
on slide 8, which provided a table of who would be affected by
various tax proposals, how much they would pay, and how soon
revenue would be collected. She addressed exemptions on slides
9-10, which read as follows [original punctuation provided]:
Exemptions
upsilon Don't want to disproportionately burden rural
communities and lowincome (sic) families
upsilon Exempt basic essentials
upsilon Food from grocery store
upsilon Medicine, including medical services, drugs,
durable medical equipment, mobility enhancing
equipment, and prosthetic devices
upsilon Child care services
upsilon Feminine hygiene products (No Period tax!)
Exemptions
upsilon Some deductions must be included
upsilon State can't tax feds
upsilon State or an instrumentality of the state
upsilon Others included could be considered or expanded
upsilon Financial services
upsilon Non-profits (now just 501(c)(3) (there are 29
501(c) categories)
REPRESENTATIVE TARR proceeded to slide 11, which read as follows
[original punctuation provided]:
Management (new version)
upsilonMunicipalities and Boroughs levy the tax, collects it
and remits to state
upsilonExemptions for local sales and use tax can be
different from state
upsilonNeeds to be reauthorized every 7 years
10:48:03 AM
REPRESENTATIVE TARR advanced to slide 12, which read as follows
[original punctuation provided]:
One part of a seven-part Fiscal Plan
REVENUE GENERATION:
upsilon HJR 7: The constitutional amendment protecting the
Permanent Fund by changing to the percent of market
value (POMV) management, limiting the annual draw to
5%, and saying there shall be a dividend as provided
by law (introduced by Governor Dunleavy on February
18, 2021).
upsilon HB 73: Legislation that establishes a 50/50 split
between government expenditures and dividends for the
annual draw (introduced by Governor Dunleavy on
February 18, 2021).
upsilon HB 104: Legislation that increases the base tax rate
per gallon for four separate motor fuels (8 cents for
highway, 5 cents for marine, 4.7 cents for aviation,
and 3.2 cents for jet, introduced by Representative
Josephson on February 19, 2021).
upsilon HB 130: Legislation that closes tax loopholes in
Alaska's corporate income tax structure (introduced by
Representative Wool on March 10, 2021).
NEW LEGISLATION:
upsilon HB 4004: Legislation that increases the minimum tax
on oil and gas from 4% to 6%, suspends all other
components of the oil and gas tax until December 31,
2024, (introduced by Representative Tarr on August 30,
2021).
upsilon HB 4005: Legislation establishing a sales tax which
exempts food for groceries, heating oil, health care
services (including services at a health care
facility, drugs, durable medical equipment, mobility
enhancing equipment, and prosthetic devices, childcare
services, feminine hygiene products), among other
exemptions (introduced by Representative Tarr on
August 30, 2021).
BUDGET REDUCTIONS:
upsilon Address five major public health and public safety
crisis of child abuse, domestic violence, sexual
assault, mental health, and substance misuse
REPRESENTATIVE TARR advanced to slide 13, which read as follows
[original punctuation provided]:
Impact to Alaskans 2% general sales and use tax
In terms of the impact to Alaskans, here are some
estimates
PFD $2350 per person (50/50 plan)
Fuel Tax - $32 for every 10,000 miles driven in a car
with 25 mpg
Sales Tax - $200 for every $10,000 in spending on
taxable items
Total = $2118 after paying taxes
Double the tax burden
PFD $2350 per person (50/50 plan)
Fuel Tax - $64 for every 20,000 miles driven in a car
with 25 mpg
Sales Tax - $400 for every $20,000 in spending on
taxable items
Total = $1886 after paying taxes
Hypothetical family of four is better off by $4,450
with sales tax, does not children
REPRESENTATIVE TARR concluded on slide 14, which read as follows
[original punctuation provided]:
Other Considerations
upsilon Is state management necessary?
upsilonLessons learned since 2015 and online sales tax
Nils Andreassen of AML to speak to this issue
upsilon Should all 501(c) organizations be exempt?
upsilon29 different categories- did not change in this
version
upsilonVolunteer fire departments (could be (c)(3)
or (c)(4)
upsilonVeteran organizations (c)(23)
10:53:06 AM
REPRESENTATIVE JOSEPHSON asked why the legislature should invest
energy into this proposal given the likelihood that the governor
would veto it. He further noted that the legislation lacked a
companion bill in the Senate.
REPRESENTATIVE TARR suggested that several senators had
indicated interest in this proposal; however, she was unsure
whether a companion bill would be introduced. She conveyed that
she had asked the governor to indicate his willingness to
support a sales tax, adding that she wished such a statement had
been made by the administration.
REPRESENTATIVE JOSEPHSON expressed his concern that the
legislation was being proposed as part of a seven-part plan. He
was unclear on how that could be accomplished.
REPRESENTATIVE TARR relayed that recently, people seemed to be
more willing to consider proposals that that they may not align
with. She said, "[We're] just getting to a place where we just
need to do something."
11:00:59 AM
REPRESENTATIVE TARR, in response to a question from
Representative Prax, said her intention was that businesses
would not pay sales tax when purchasing something they would be
selling. She continued to explain that businesses would obtain
a seller's permit.
11:04:04 AM
REPRESENTATIVE WOOL expressed his concerns with the proposal and
asked for specifics on what kind of items and services would be
taxed. He pointed out that prices in rural Alaska were already
high and opined that the addition of a sales tax would be
extremely regressive. He recalled a slide from a prior
presentation on HB 37 that highlighted data from ISER and ITEP,
indicating that those who make less than $100,000 per year would
pay more on a sales tax than an income tax. He noted that 81
percent of Alaskans make less than $100,000 annually. He
maintained his concern about the regressivity of the proposal.
He discussed the impact of dividend cuts and wondered how the
bill sponsor would acquiesce to the various exemptions that many
groups would lobby for.
REPRESENTATIVE TARR acknowledged his concerns. She discussed
the impacts that government shutdowns have on state employees.
She reiterated that the state could bring in $300 million in new
revenue while keeping food, medicine, and heating oil exempt.
She suggested adding essential items for children, such diapers,
to the list of exemptions.
11:15:31 AM
CHAIR SPOHNHOLZ, directing her question to Ms. Reynolds, asked
whether this proposal could truly be implemented by July 1,
2022, as suggested in the sponsor's presentation.
11:17:01 AM
NICOLE REYNOLDS, Deputy Director, Tax Division, Department of
Revenue, expected a bill such as this to take at least 12 months
to implement.
CHAIR SPOHNHOLZ, referring to the fiscal note, asked whether the
local tax collections reduced the implementation cost and by how much.
MS. REYNOLDS said that change in the legislation did not affect
the fiscal note.
11:18:11 AM
REPRESENTATIVE JOSEPHSON recalled that Representative Tarr had
implied that if HB 4005 had been law, it would have improved the
political impasse that occurred last summer. He asked her to
elaborate on that thought.
REPRESENTATIVE TARR shared her belief that to the extent that
new revenue solves the dividend debate, HB 4005 would be
beneficial.
CHAIR SPOHNHOLZ opined that such a complex piece of legislation
could take years to implement even if expedited by the
department.
11:20:37 AM
REPRESENTATIVE WOOL asked whether the sponsor's constituents
would have reacted differently to the proposal if they knew that
those making under $100,000 would pay more under a sales tax
compared to an income tax. Additionally, he asked whether a
$1,000 increase to the PFD would offset the sales tax.
REPRESENTATIVE TARR said a dividend of over $1000 would offset a
sales tax; further, she acknowledged that her constituents
preferred an income tax.
^PRESENTATION(S): Local Sales Taxes in Alaska
PRESENTATION(S): Local Sales Taxes in Alaska
11:22:41 AM
CHAIR SPOHNHOLZ announced that the final order of business would
be the Local Sales Taxes in Alaska presentation.
11:23:07 AM
NILS ANDREASSEN, Executive Director, Alaska Municipal League,
presented a PowerPoint on local sales taxes in Alaska titled "In
Consideration of a State Sales Tax," subtitled, "Highly
regressive broad-based revenue that is politically plausible but
in conflict with a local tax base in the majority of
communities." He directed attention to slide 2, which
highlighted the significance of state spending as a critical
component of GDP. He continued to slide 3, which illustrated
Alaska's economic growth. He indicated that Alaska's economy
had grown significantly over time; further, that state spending
had shown a smoothing effect. He suggested that reducing the
budget as a means to addressing the structural deficit would
impact the state's entire economy.
11:26:56 AM
CHAIR SPOHNHOLZ, referring to the graph on slide 3, asked which
color represented government spending.
MR. ANDREASSEN replied the dark green on top. He proceeded to
slide 4, titled "An 'appropriate' level of taxation that which
is goal-oriented," which read as follows [original punctuation
provided]:
•Building tax capacity is closely linked to the
process of economic development and growth. This is a
broader concept of state capacity to providefor a
range of capabilities that are needed for the state to
function effectively.
•Tipping points (IMF): Countries that are immediately
to the left of the tipping point on average grow by
around 20 to 25 percent in real terms over 10 years;
Countries immediately to the right of the threshold
grow by more than 30 percent over 10 years
•Tax revenues above 15 percent of a country's gross
domestic product (GDP) are a key ingredient for
economic growth and, ultimately, poverty reduction.
•Getting to at least this 15 percent level helps
countries generate sufficient domestic resources that
can be invested in health, education, and
infrastructure.
•States with a broad-based tax perform better
MR. ANDREASSEN indicated that taxes would not come without
consequences on slide 5, which showed the impacts of different
tax proposals.
11:31:41 AM
MR. ANDREASSEN presented slide 6, titled "Income Tax
Considerations," which read as follows [original punctuation
provided]:
• An income tax is the most "fair" way to tax
Alaskans. It:
• Can be structured as flat or progressive,
falling the same on all income categories or more
at higher levels.
• Is applied to businesses and individuals, and
is implemented by governments and nonprofits just
like any other employer.
• Addresses concerns about S corps or Trusts not
captured by current corporate tax.
• Captures out of state worker wages, at a
roughly similar level as sales tax does of
tourist dollars.
• Is common and well-understood, and easily
implementable
• Local governments are prohibited from implementing
this kind of tax, leaving it to the State to do if
any.
• AML developed an income tax calculator here
MR. ANDREASSEN presented slide 7, "Sales Tax Shopping Cart,"
which read as follows [original punctuation provided]:
• A sales tax is the most "regressive" of revenue
options. It:
• Falls disproportionately on lower income
households, as a share of income, thus making it
regressive.
• Competes with current local taxation in more
than 100 communities.
• Would increase the sales tax to as much as 9%
in some communities.
• Would require the most significant
administrative burden of all taxes.
• Would not fall on expenditures of nonprofits
and the government, thus not capturing as much as
15% of Alaska's economy.
• A sales tax is found in 45 of 50 U.S. states, thus
making it one of the most common form of taxation. It
is the most common form of taxation at the local
level, along with property tax.
• To see what the costs of goods would increase to
with the addition of a statewide sales tax, AML
produced a sales tax shopping cart.
11:36:17 AM
MR. ANDREASSEN presented slide 8, "Sales Tax Shopping Cart,"
which read as follows [original punctuation provided]:
A monthly shopping bill, just based on our list of 15
items, varies widely across communities.
• The base bill alone can be twice as much in
some as others
• Local sales tax ranges from $0 to $94
• The State's would add between $14 and $33 to
this
• The % range of the total bill relative to
Anchorage can be as much as 111%
MR. ANDREASSEN presented slide 9, "Considerations," which read
as follows [original punctuation provided]:
• Tax base in-state and out-of-state sources
• Exemptions what is taxed, or not?
• Distribution by income level who does this impact
across income levels?
• Distribution by geography who does this impact
across regions?
• Revenue growth how does an income tax grow over
time?
• Interaction with local taxes what effect does this
have on local tax structures?
• Economic effects what effect does a sales tax have
on the economy?
11:41:35 AM
MR. ANDREASSEN presented slide 10, which indicated that sales
tax administration at the local level had no parallel at the
state level; further, that remote sales tax collection could
change what was possible. He moved immediately to slide 11,
"Primary form of local government tax," which read as follows
[original punctuation provided]:
• 106 local governments with sales tax
• Many in place since incorporation pre-Statehood
• Sales tax offices can employ as many as 4
individuals
• Multiples sales tax administrators with decades of
experience • Local variation rates, caps, exemptions
respond to local circumstance
• Stable very little increase over the last 20 years
• Growth occurs as economy and population grows
• Preservation of tax base, too, as needs increase
11:45:37 AM
MR. ANDREASSEN continued to slide 12, "Single-level,
streamlined, statewide administration," which displayed a
screenshot of the website for the Alaska Remote Sales Tax
Information Portal. He discussed the parameters of remote sales
tax remittance. He turned to slide 13, which displayed a
screenshot of the sales tax remittance portal, indicating that
local governments had built single-level administration - a one-
stop shop for registration, reporting, and payment.
11:49:03 AM
REPRESENTATIVE JOSEPHSON asked how many AML members were using
remote sales tax collection and whether there was substantial
foregone revenue if not.
MR. ANDREASSEN said 40 members were directly involved with
remote sales tax collection effort. He continued to explain
that the Wayfair case found that [businesses] must be part of
the process; therefore, if others outside the process were
benefiting, they were doing so only through the voluntary
compliance of sellers. He conveyed that the benefits to remote
sales tax collection was an estimated 5-20 percent more in sales
tax revenue. He resumed his presentation on slide 14,
explaining that the remote sales tax website functioned as
portal for jurisdictions and sellers with complete reporting and
accountability. He presented slide 15, "Remote Sales Tax
Growth," which showed a graph comparing 2020 sales tax with 2021
and read as follows [original punctuation provided]:
•Grown from 14 jurisdictions in first year to 40 now;
from 200 sellers to over 1,200
•Represents on average 7% of total sales, relatively
small portion of overall budget
MR. ANDREASSEN proceeded to slide 16, which displayed a
screenshot of the sales tax lookup website. He noted that
different rates and exemptions could be accounted for at a
jurisdictional level with this tool, providing businesses with
an ease of use. Slide 17 addressed multi-jurisdictional rate
and exemptions, pointing out that the current system accounted
for multi-layered jurisdictional variability.
11:56:13 AM
MR. ANDREASSEN presented slide 18, "A Sales Tax of Last Resort,"
which was subtitled, "How to structure a state sales tax in
Alaska without negatively impacting the current local option,
rates, and exemptions." He moved immediately to slide 19,
"Improved bill HB 4005," which read as follows [original
punctuation provided]:
• Updating 2016 bill, an iteration of previous bills
• HB4005 has removed takeover of local government
decision-making and control exemptions, code,
collection
• The starting point for the State's sales tax
policy should not be the elimination of that at
the local level - this is a step toward
collaboration
• Reduced rate still competes with local tax base
where there's currently a tax in place
• Increased expectation of residents that tax
needs to be reduced, with greater ability
perceived to be to do so at the local level
• Expanded exemptions reduces regressivity
• More administratively feasible to offer credit;
lesser burden on sellers
MR. ANDREASSEN addressed what's missing on slide 20, which
compiled portions of the uniform code that were absent from the
bill. He argued that a comprehensive, successful sales tax
statute would require the inclusion of this language. He
advanced to slide 21, "Some options to consider," which read as
follows [original punctuation provided]:
• State rate capped when combined with local rate, not
to exceed national average of 7.27%; with no cap on
local rate
• Align State sales tax law with Uniform Code already
in place
• Join the Alaska Remote Seller Sales Tax Commission
• Provide for intergovernmental agreement either to
collect on behalf of local government or to have local
government collect on behalf of State
• Reinstitute Community Revenue Sharing formula prior
to 50% reduction in 2015 to make up for tax base
impact, accessible to communities with current sales
taxes
• Implement over time, exempting collection in current
sales tax jurisdictions
12:03:42 PM
MR. ANDREASSEN presented slide 22, "Intergovernmental Agreement
Colorado," which read as follows [original punctuation
provided]:
(1) The general assembly hereby finds and declares
that:
• (a) It is in the best interest of the state,
local governments, and taxpayers to have sales
tax collected in the most efficient and effective
manner feasible;
• (b) Sales taxes can be administered and
collected most efficiently when the governmental
entities that collect the taxes cooperate and
share responsibilities to collect and distribute
revenues from the taxes;
• (c) The administrative burden on taxpayers is
lessened when governmental entities cooperate and
agree on the processes used to administer and
collect sales taxes;
• (d) Broad authority and precedent exist for
governmental entities to operate more efficiently
and effectively by contracting with each other to
cooperate in carrying out their respective
responsibilities;
• (e) The purpose of this section is to encourage
the state to work cooperatively with counties and
other local governments in the administration and
collection of sales taxes in the state to enhance
efficiencies and procedures for the benefit of
both the department of revenue and local
governments.
(2) The executive director of the department of
revenue may enter into an intergovernmental agreement
with any county for the purpose of enhancing the
systemic efficiencies and procedures used in the
collection of state and local sales taxes. Such
agreement shall be entered into on behalf of and for
the benefit of both the county and the department. In
addition, a municipality may be included as a party to
the agreement to further the same efficiencies and
procedures to be enhanced by the agreement between the
executive director and a county. The agreement may
allow the parties to share in providing any function
or service lawfully authorized to each of the parties,
including the sharing of costs, information, or duties
related to the collection of sales taxes within the
boundaries of the county.
MR. ANDREASSEN presented slide 23, "Steps to Decision-Making,"
which read as follows [original punctuation provided]:
• Conduct an updated REMI analysis of macro level
shocks to economy from budget reductions, PFD
reductions, sales, income, and other taxes
• Regional analysis to see total tax burden relative
to income or GDP
• Testimony from local government finance officers,
managers, and sales tax administrators about
collection and importance at local level
• Consult with legal counsel that specializes in sales
tax
• Testimony from Craig Johnson at the Streamlined
Sales Tax and Use Commission (SSUTA) value, needs,
benefits
• Testimony from Scott Paterson at Avalara, an
original director of the SSUTA and current head of one
of the CSPs (also bought TTR, our lookup and API
software)
• Testimony from Erin Neer at MUNIRevs, the software
vendor that built the ARSSTC registration and
reporting portal
• Testimony from the State of Colorado, which has a
system relatively similar to what Alaska could
consider
12:06:53 PM
REPRESENTATIVE JOSEPHSON commented that there was anecdotal
evidence that members of the Republican Party that served in the
legislature were more inclined to agree to a sales tax than an
income tax. He asked whether increases to community assistance
and school bond debt reimbursement could "swing the pendulum" of
AML.
MR. ANDREASSEN was unsure whether AML would be willing to give
up local control and the ability to leverage local economies to
meet the needs of residents.
12:10:30 PM
CHAIR SPOHNHOLZ, referring to slide 4, asked Ms. Reynolds
whether the state had analyzed state revenues compared to GDP
growth over time.
MS. REYNOLDS deferred to Mr. Stickel.
12:11:15 PM
DAN STICKEL, Chief Economist, Tax Division, Department of
Revenue, offered to follow up with the requested information.
CHAIR SPOHNHOLZ highlighted a concern about the current
government funding structure. She pointed out that the private
sector relied upon the public sector to provide for services,
such as roads, courts, schools, and law enforcement. She
believed that understanding the relationship between the state
funding structure and GDP was an important metric for the
committee to comprehend.
12:12:16 PM
REPRESENTATIVE STORY pointed out that inflation had increased
the cost of goods by 5 percent. She asked how the high rate of
inflation impacted AML's position on a state sales tax.
MR. ANDREASSEN acknowledged that inflation would increase the
cost of everything, which in turn, would have a corresponding
increase on the tax.
12:14:00 PM
CHAIR SPOHNHOLZ provided closing remarks and thanked Mr.
Andreassen for his presentation.
12:16:47 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
12:17 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4005 Sponsor Statement.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| HB 4005 Sectional Analysis.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| HB 4005 Fiscal Note - DOR.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| HB 4005 Supporting Documents.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| AML Presentation - Local Sales Taxes, 10.14.21.pdf |
HW&M 10/14/2021 10:00:00 AM |
|
| CS for HB141(W&M) v. D.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB 141 |
| HB 141 Fiscal Note, 5.3.21.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB 141 |
| HB 141 Sponsor Statement.pdf |
HW&M 4/29/2021 11:30:00 AM HW&M 10/14/2021 10:00:00 AM |
HB 141 |
| HB 141 Sectional Analysis. v.D.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB 141 |
| HB 141 Explanation of Changes, v.G to v.D.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB 141 |
| HB 4005 Presentation, 10.14.21.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| HB 4005 COST Testimony 10.13.21.pdf |
HW&M 10/14/2021 10:00:00 AM |
HB4005 |
| DOR Response to HWM 2021.10.28.pdf |
HW&M 10/14/2021 10:00:00 AM |