Legislature(2003 - 2004)
03/18/2004 01:47 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 18, 2004
1:47 PM
TAPES
SFC-04 # 52, Side A
SFC 04 # 52, Side B
CALL TO ORDER
Co-Chair Gary Wilken convened the meeting at approximately 1:47 PM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice Chair
Senator Ben Stevens
Senator Donny Olson
Senator Lyman Hoffman
Senator Fred Dyson
Also Attending: SENATOR JOHN COWDERY; SENATOR HOLLIS FRENCH;
SENATOR RALPH SEEKINS; SENATOR BERT STEDMAN; SENATOR GARY STEVENS;
SENATOR GENE THERRIAULT; SENATOR TOM WAGONER; REPESENTATIVE MARY
KAPSNER; JOE BALASH, Staff to Senator Therriault; BOB BARTHOLOMEW,
Chief Financial Officer, Alaska Permanent Fund Corporation,
Department of Revenue; PHELAN STRAUBE, Staff to Senator B. Stevens;
Attending via Teleconference: There were no teleconference
participants.
SUMMARY INFORMATION
Presentation on POMV Proposal
By Senator Therriault
SENATOR GENE THERRIAULT noted he offered a proposal in the form of
a committee substitute working draft to SJR 18, 23-LS1007\I [copy
on file.] He indicated this is because both his proposal and SJR 18
relate to a Percent of Market Value (POMV) approach to managing the
Alaska Permanent Fund. He recalled earlier discussions were held on
a POMV method of management and he cited evidence that POMV is a
good management formula.
Senator Therriault described that in transition to a true POMV
system the concept of principal is removed. He noted this concept
is problematic for some. He asserted that before Alaska voters
would approve any changes to the Permanent Fund, they must have
confidence in the proposal. He stated that the complexity of the
POMV proposal presented by the Trustees of the Fund, presents "many
hurdles" to win final approval from the general public. Although
most legislators have gained an understanding of the POMV
methodology, he surmised that public concerns must be addressed.
Senator Therriault explained the proposed committee substitute
provides assurance that the principal of the Fund would be
protected in the event of a series of "down" years of poor
performance of the stock market. He noted the proposal would
preserve the existing Constitutional language stipulating that the
principal of the Fund could only be invested and not spent. He
furthered that the committee substitute would establish a
Constitutionally based earnings reserve sub-account into which all
income of the Fund shall be deposited immediately upon receipt.
Appropriations from the Permanent Fund would be limited to, and
could only be made from, this sub-account, he stated. Therefore, he
remarked the principal of the Fund would remain protected.
Senator Therriault relayed a claim that once the legislature begins
spending from the Permanent Fund, it would "only be a matter of
time before the entire Fund is gone." He suggested that a sub-
account would provide assurance that the principal were protected
and could not be spent. He qualified that the proposed committee
substitute retains POMV-type language that would limit the amount
that could be appropriated in any fiscal year to prevent the
legislature from appropriating too much during years of high
investment earnings. He gave as an example the current situation in
which approximately $5 million of realized and unrealized gains are
contained in the earnings reserve account. He pointed out that the
legislature would be completely within its power to appropriate
this entire amount in one fiscal year. By contrast, he stated the
proposed committee substitute would prevent such overspending and
thereby protecting the value of the Fund. He explained the sub-
account establishment that would then be managed as a POMV and
payouts from that sub-account would be limited to five percent of
the value of the total Fund.
Senator Therriault acknowledged concerns voiced that the dividend
program would be threatened if any earnings from the Fund were
utilized for any purpose other than the dividend program itself. He
assured this proposal would provide Constitutional protection of
the dividend.
Senator Therriault cautioned against amending the Alaska
Constitution in a manner that removes flexibility for determining
the amount of future dividend payouts. This proposal, he stated
would retain flexibility if required in the future.
Senator Therriault spoke to the limitations of how funds could be
withdrawn from the Permanent Fund and for what purpose:
expenditures would be restricted to education and dividends. He
commented that the public questions how funds would be spent if
used for government services. He predicted this provision would
allay those concerns.
Senator Therriault noted the various percentages of POMV available
for appropriation proposed by different legislators. He recommended
allowing each legislature to make this determination. He suggested
if the voters approved this proposal, a second dividend could be
offered in December 2004 that would represent the amount available
for dividend payouts if this procedure had been in place earlier.
He stressed this additional dividend would be a one-time occurrence
during the current calendar year. He stated this additional
dividend would demonstrate that dividends may not benefit from the
peaks in Fund performance, but would also be insulated from the
consequences of years of poor market performance or "valleys". He
opined that most Alaskans understand the Fund performance is
currently in a valley and is likely to remain for several years. He
emphasized this would be a separate issue for consideration.
Senator Therriault noted the 30 days normally required to certify
an election and detailed the timeframe in which this issue would be
decided, as well as timeframe for the Department of Revenue
issuance of secondary dividend payment.
Senator Therriault commented this is a method in which to "bridge
the gap" in gaining approval for a POMV method and to address
concerns relating to spending from the principal of the Permanent
Fund.
Senator Bunde appreciated the addressing of public concerns, noting
they do not "go away". He noted the Legislature currently expends
approx $5 million annually to distribute dividends and implement
the program and asked how the secondary dividend process would be
funded.
Senator Therriault replied that printing and distributing costs
would be the only expenses of a secondary dividend payout, noting
that applications would already be processed and qualification for
the secondary dividend would be based on qualification for the
regular dividend of 2004.
Senator Therriault furthered that status quo is likely to result in
larger dividends in the near term, but lower dividend payments in
the future.
Senator Bunde agreed, but questioned the expense of a multiple
dividend distribution and asked if it would be less costly to
inform residents of both dividend amounts with the intent to
distribute one dividend payment in December 2004. He relayed
concerns of school boards in rural areas about the receipt of
dividends in October causing school disruptions as families travel
on "week-long shopping trips". He asked if a delay of regular
dividend payments to December would accomplish the same result.
Senator Therriault noted this would be possible, but cautioned
against such action. He stated that people have come to expect
payment in October and would be suspicious of any delay. He
suggested the operating costs of a secondary dividend could be a
lesser amount since many recipients receive the payments
electronically.
Senator Hoffman agreed to the importance of securing voter
confidence before any changes are made to the Permanent Fund. He
spoke of having one more chance to convince voters of the
legislators' intentions. He cited language on page 2, line 6 of the
proposed committee substitute and stated this does not provide that
assurance, noting, "may". He commented this language could also be
interpreted as "may not" and instead recommended, "shall". He
predicted questions would remain. He then addressed the dialog on
the varying percentages proposed for distribution of funds from 80
percent for dividends and 20 percent for government services to
equal percentages to each. He asserted that a formula providing at
least 60 percent for dividends should be guaranteed. He attributed
the failure in the special election of September 1999 to approve a
plan to utilize a portion of the Permanent Fund earnings for
government services to the lack of understanding of the issue.
Senator Therriault explained that if the Fund performs poorly and
no funds were available for distribution for 2004, the issue of the
language providing for a second dividend payment would be
irrelevant. However, he deferred on the decision of whether to
include "may" or "shall" in the enabling legislation. He also
stated that a 50-50 division of available funds to dividends and
government services could result in larger dividend payments than
the current status quo. He therefore recommended that the
legislature could adopt statutory language to determine an actual
percentage division that is contingent upon adoption of this
resolution by voters. This, he stated would allow voters to
understand the impact on their dividend payments.
Senator Hoffman agreed to the necessity of "may" under the current
formula utilized for calculating the dividend, but expressed that
under a POMV method funds would always be available.
Senator Therriault clarified that under a pure POMV methodology
this would be correct, however if the formula were written with the
intention to protect the principal of the Fund, the risk remains
that there is always s chance of no earnings available to spend.
Senator Hoffman commented that if in the future, once voters
understood and approved a constitutional amendment would he support
"shall".
Senator Therriault reiterated "shall" would be more appropriate for
a pure POMV method; however, 'may" would allow flexibility for
legislators.
Senator Hoffman preferred consideration to voters than to
legislators.
Senator Olson referenced other legislation to change the use of the
earnings of the Fund was introduced in the Senate State Affairs
Committee during a previous session and asked why it was not
enacted.
Senator Therriault replied that questions arose at that time
relating to federal taxation if the fund were changed. Since then,
he stated the Alaska Permanent Fund Corporation has had adequate
time to review the matter and secure a legal opinion that federal
taxation of the Fund would not occur.
Senator Olson asked if any other obstacles are anticipated in
addition to the federal taxation issue.
Senator Therriault replied that the federal taxation question has
received a definitive answer. He knew of no other obstacles.
Co-Chair Green asked if further definition of "public education"
were considered.
Senator Therriault suggested the Committee could further restrict
the definition if desired.
Co-Chair Green asked if Senator Therriault's intention is that of
an expectation that an appropriation from the established earnings
reserve sub-account for public education would be higher than the
normal appropriation for education.
Senator Therriault responded this funding might only comprise a
portion of the funding necessary for public education with the
remainder appropriated from the general fund. He noted this would
depend on the amount needed each year to adequately fund education.
He qualified that additional funding could be necessary.
Co-Chair Green surmised that earnings of the Permanent Fund would
therefore be one component of education funding.
Co-Chair Green asked clarification of the earnings that would be
deposited into the sub-account and asked if this could consist of
dividends on investments and returns on investments, or funds from
other sources that would be deposited into the earnings reserve
sub-account.
Senator Therriault answered that only the earnings from investments
of the Fund would be deposited into the proposed sub-account. He
clarified that the provisions relating to the deposits of royalties
from oil and gas resource development into the Fund would remain
unchanged.
Senator Bunde commented, "much has been made" of the wisdom of not
allowing dedicated funds. He noted this proposal would provide for
dedicated funds.
Senator Therriault stipulated that if any funds were appropriated
from the proposed earnings reserve sub-account those funds could
only be allocated for education. He agreed this would be a "flavor"
of dedicated funds.
Senator Bunde understood that if the "fiscal political realities"
of the legislature chose to make an appropriation from the Fund for
education, such an appropriation would supplant the general fund
appropriation to education. He commented this could thus make other
general fund monies available for other State services.
Senator Therriault acknowledged this could occur.
Co-Chair Green cited from Section 15 of the proposed committee
substitute, "All income from the permanent fund shall be deposited
in the general fund unless otherwise provided by law." She asked
if Senator Therriault anticipated difficulty obtaining voter
approval to deposit income directly into the general fund.
JOE BALASH, Staff to Senator Therriault, testified that currently
statute provides that funds are deposited into the statutorily
established earnings reserve account. He reminded that in the years
1976 through 1980, earnings were deposited to the general fund.
Senator Hoffman asked if adequate funds would remain for inflation
proofing if the proposal to issue two dividend payments were
adopted.
Senator Therriault replied that the POMV method does not require
cash for inflation proofing, but rather the Fund would retain three
percent of earnings for automatic inflation proofing.
Senator Hoffman surmised this proposal would not implement a true
POMV method and that an issuance of a second dividend payout would
remove additional funds from income earnings. He wanted to know if
adequate funds would remain to ensure the Fund were inflation
proofed.
Senator Therriault clarified that although not a pure POMV, this
proposal would allow the Fund to operate as a POMV in that no more
than five percent of the value of the Fund could be distributed. He
emphasized this method would retain a "firewall between earnings
and principal" to prevent an "erosion of the principal". He pointed
out that a series of "down years" could erode the principle of the
Fund if it were operated under a pure POMV. He qualified the chance
of this is minimal, but possible. He qualified that if a second
payout were made it would be possible that adequate funding would
not be available for appropriation to education services in the
first year.
Senator Therriault deferred to the Corporation to address technical
issues.
Senator B. Stevens noted that inflation proofing would occur on
June 30 and that the projected balance of the earnings reserve
account made on December 31, 2003 is expected to change and would
be approximately $850 million after dividend a payout and inflation
proofing. Therefore, he remarked, the concerns are unwarranted.
Senator Therriault calculated that during the first transition
year, after inflation proofing and the first dividend payout,
adequate funds would be available in the current earnings reserve
account for a second dividend payout. In future years, he stated,
management of the Fund would change to a POMV-type methodology.
Senator Hoffman asked how the ballot resolution would guarantee
that dividends would be made. Under the current program, he cited
claims of the potential that no funds would be available for
dividends in some years. He stated that the assurance of continued
dividends has been a "selling point" of a POMV proposal according
to accounts he has received. He therefore supported changing the
aforementioned language from "may" to "shall" to guarantee dividend
payments.
Senator Therriault responded that the current proposed language
would provide no less guarantee of a dividend than the existing
program provides.
Co-Chair Wilken announced that the proposed resolution would not be
reported from Committee at this meeting. He stated that the matter
of the specific language could be addressed at a future hearing.
Co-Chair Green remarked that the proposed committee substitute
language provides more assurance of a dividend than the existing
program.
Senator Bunde commented that "shall" would imply a guarantee of a
dividend and would subsequently "enshrine" the dividend.
Senator Therriault noted that "shall" could result in a challenge
similar to the situation in the litigation Bess versus Ulmer,
relating to the difference between constitutional amendments and
constitutional changes.
SENATOR HOLLIS FRENCH asked if the balance of the earnings reserve
account established within the Fund would be included in the
calculation of the five percent to determine the POMV.
Senator Therriault affirmed it would.
Senator French asked if public education, in this context, would
include the University of Alaska.
Senator Therriault replied that the language could be written to
include or exclude the University of Alaska and could be contained
in either the Constitution or in statute. He commented that the
Constitution should only contain language that is necessary, and
that he would recommend a statutory definition of public education
for this purpose.
Senator French expressed concern that the proposal is a "hybrid" of
the current system and the POMV system, and that rather than
combining the benefits of each system, could contain the
weaknesses. He remarked that the public is able to understand the
existing system; that market performance affects the amount of the
dividend. He stated that this proposal does not provide the benefit
of the POMV system to the Fund managers. He explained that the
"insulation" from dependence on the amount of funds available in
the earnings reserve account for a dividend payout would not be
provided. This proposal, he predicted would likely increase the
public's expectation of receiving a dividend and would create
pressure to provide dividends.
Senator Therriault remarked that the risk would be low, especially
given the current balance of the earnings reserve account of $5
billion. He furthered this would not increase pressure on the
trustees of the Fund to generate a profit from the management of
the Fund.
BOB BARTHOLOMEW, Chief Financial Officer, Alaska Permanent Fund
Corporation, Department of Revenue, understood the proposal would
retain the concept of principal in the Constitution. He relayed
that the Trustees underwent significant discussion on the matter.
SFC 04 # 52, Side B 2:34 PM
AT EASE 2:34 PM / 2:35 PM
Mr. Bartholomew emphasized the importance of understanding the
Permanent Fund is invested as one entity, although comprised of
"three different buckets" for accounting purposes: $23 billion is
the principal, which is the accumulation of all revenues from oil
development, other special appropriations and inflation-proofing;
$4 billion is unrealized earnings, which is the increase value of
assets that had not been sold; and, $1 billion of realized earnings
account, which is actual income from interest payments on bonds,
dividends from stocks, rental income from properties, etc. He
qualified that the principal is actually a combination of the
deposits and unrealized gains. He stated that as long as the assets
are not sold, the unrealized gains are part of the principal. If
the Fund managers decide to sell an asset, the unrealized gain
converts to realized income and becomes available for
appropriation.
Mr. Bartholomew shared that the Board decided to recommend a change
from this current method to a POMV method because of the volatility
in the market. He noted that market volatility could make
significant amounts of money available in years of high performance
that could be saved as a "cushion" for use during years of poor
market performance. However, he cautioned that if the market
"drops" before assets are sold and the value of the Fund is
reduced, dividend payouts would be dependant upon future earnings
and that possibly no money would be available for distribution.
Mr. Bartholomew relayed that some deem it appropriate that if
earnings are not adequate dividends should not be paid.
Mr. Bartholomew stated that historically, the earnings reserve
system has operated as intended, although it peaked in March 2000
at $8 billion. He told of four factors in the year 1999 that
reduced the amount of earnings reserve funds available for
dividends the following year to $100 million: approximately $2
billion was paid out in three dividends, approximately $1 billion
was transferred from the earnings reserve account to the corpus of
the Permanent Fund to offset the effects of inflation, and an
extended bear market eliminated much of the unrealized appreciation
of assets, and the legislature in FY 99 appropriated $250 million
to the principal of the Fund. He cautioned of the risk in years of
bear markets if the balance of the earnings reserve account is
diminished, that no funds would be available to pay dividends. He
calculated the probability of having no dividend at ten to fifteen
percent each year and the probability of paying dividends at 80
percent. He stressed this is a decision that must be made.
Senator B. Stevens referenced the witness' statement that the
amount of realized earnings was reduced to $100 million as of July
1, 2003, and the amount of unrealized earnings was $1.1 billion as
of December 31, 2003 totaling $1.2 billion. Senator B. Stevens also
cited the Corporation's December 31, 2003 projection of the amount
of unrealized earnings on June 30, 2004 of $3.4 billion and
realized earnings balance of $850 million after inflation proofing
and a dividend payout. He calculated the total to be $4.2 billion.
Mr. Bartholomew affirmed.
Senator B. Stevens stressed the need to clarify this for the record
because the witness had incorrectly testified that the earnings
reserve account was reduced to less than $100 million.
AT EASE 2:43 PM / 2:45 PM
Co-Chair Wilken referenced a spreadsheet titled, "Alaska Permanent
Fund, Financial Projections 2004 - 2014, as of December 31, 2003"
[copy on file.]
Mr. Bartholomew outlined the data included in the spreadsheet
clarifying the amounts available for distribution and inflation
proofing and the balances of the earnings reserve account.
Senator Therriault summarized this proposal is a hybrid intended to
address concerns and offer solutions.
AT EASE 2:50 PM / 2:52 PM
Sales Tax Proposal Worksession
By Senator B. Stevens
Senator B. Stevens referenced a handouts titled, "Comparison of
State and Local Retail Sales Taxes 2003 (January 2003)" [copy on
file] and pointed out this demonstrates that several states
implement a sales tax in conjunction with local sales taxes. He
referenced a table titled, "Appendix B. State Sales Tax Rates, as
of January 1, 2003" from the Tax Policy Handbook for State
Legislatures [copy on file.] He noted the three largest exemptions
from sales taxes as food, prescription drugs and non-prescription
drugs. He then referenced another spreadsheet titled, "Table 1,
2002 Municipalities: Class, Populations and Tax Types" [copy on
file], which lists municipalities of Alaska, their status as first
class cities, home rule boroughs, etc., population, and types of
taxes imposed, if any. He also distributed draft legislation, 23-
LS1051\S, [which would later be introduced as SB 366] relating to a
State sales tax [copy on file].
Senator B. Stevens pointed out that this State sales tax proposal
allows very few exemptions. He stated the old methodology has
depended upon tangible objects; however, a significant portion of
Alaska's economy has shifted to non-tangible services.
Senator B. Stevens noted the inclusion of heating oil as an
exemption from the proposed sales tax, in addition to goods and
services used for manufacturing.
Senator Bunde reiterated the conversation at the previous meeting
of the Senate Finance Committee that an income tax would allow for
no exemptions. He remarked that the purpose of a tax is to generate
revenue and that the more exemptions allowed, the less revenue that
could be collected. He suggested that if a debate between a sales
tax and an income tax were to ensue, exemptions should be allowed
for neither.
Senator Hoffman asked Senator Bunde if his intent is that large
purchases would have no tax limits.
Senator Bunde responded if the plan were to raise money this would
be appropriate.
Senator B. Stevens noted that this could create a conflict, as the
intent is to establish a maximum tax per purchase. He stated he was
researching how this would impact local government sales tax
limits.
Senator Hoffman asked if this proposal would establish two systems
of sales tax exemptions for those communities that impose a local
sales tax.
Senator B. Stevens replied this proposal would impose a State sales
tax in addition to a local tax, although both taxes would be
governed by the State rules. He explained that local exemptions
would be "absorbed" into the State process and therefore one
community would not exempt taxation on an item that another
community would tax.
PHELAN STRAUBE, Staff to Senator B. Stevens, clarified that the
proposed legislation would establish exemptions that would
supersede any local exemptions. He gave the tax exemption extended
to senior citizens by the City and Borough of Juneau as an example,
noting that this legislation would not allow exemptions for senior
citizens. He qualified that local governments could provide rebates
for certain purchases or to certain purchasers if desired.
Senator B. Stevens assured this proposal would not reduce revenues
to local governments, as one percent of the State portion would be
appropriated to those local governments that currently impose a
sales tax.
Co-Chair Wilken asked clarification of the portion of the collected
tax returned to local governments.
Senator B. Stevens detailed that the State would collect four
percent of the amount of purchases made in communities that did not
impose a local sales tax. Purchases made in those communities with
a local sales tax would be assessed four percent, plus the
percentage of the local sales tax. He continued that the State
would retain three percent and return to the local government the
percentage it levied plus an additional one percent. He gave an
example a community with a three-percent sales tax. Under this
proposal, he stated the consumer would be levied a seven-percent
tax, the State would retain three-percent and the community would
receive four-percent.
Co-Chair Wilken asked if therefore the highest amount that the
State would collect would be three percent of the purchase price.
Senator B. Stevens corrected the State could receive up to four
percent. He stated this would be from purchases made in those
communities that assess no local sales tax.
Co-Chair Wilken requested further examples.
Senator B. Stevens compared Fairbanks and Juneau. He noted that
because the Fairbanks North Star Borough collects no sales tax,
purchased made in that area would be assessed a four-percent tax,
all of which would be retained by the State. He then explained that
the tax revenues received by the City and Borough of Juneau under
this proposal would increase from the current five percent to six
percent. He noted the tax assessed on purchases would increase from
five percent to nine percent. He pointed out that the Juneau
government would have the options of retaining the additional
funding for government services, reduce the amount of the local tax
to four percent, or offer rebates.
Senator B. Stevens furthered that if the Fairbanks North Star
Borough chose to implement a three-percent tax, consumers would be
assessed seven percent on purchases; the State would retain three
percent and the Fairbanks government would receive four percent,
consisting of the three percent it levied and a one percent "bonus"
from the State. He suggested the Fairbanks government could decide
to lower property taxes as a result of the revenues received from
sales taxes, or decide to increase funding for education, roads or
other services.
Senator Hoffman asked if a community that currently imposes no
sales tax could implement a one-percent sales tax to become
eligible to receive one-percent of the State portion.
Senator B. Stevens replied that under this proposal, a local
government must impose a minimum sales tax of three percent to
qualify for the additional one-percent "revenue sharing".
Senator B. Stevens clarified the minimum amount the State would
collect would be three percent of purchases and the maximum amount
would be four percent of purchases, depending upon whether the
local government imposed a sales tax of at least three-percent. He
informed that the four-percent amount was chosen for this proposal
because it would be among the lowest amounts collected by states
imposing a statewide sales tax.
Co-Chair Wilken noted that if a local government was restricted to
a revenue or taxation limit, it could not accept the additional one
percent and that money would revert to the State. Otherwise, he
surmised the local government would be forced to reduce the local
tax percentage.
SENATOR BERT STEDMAN requested further discussion on the issue of
limiting the maximum amount of sales tax that could be collected on
each purchase. He. He asked if the proposal would allow the State
tax limitation and a local limitation to differ.
Senator B. Stevens replied that $60 would be the highest amount
levied on single purchases by the State, although the limit could
be higher for the local sales tax portion on purchases. He agreed
this is an issue that must be resolved. He emphasized the intent is
to not preclude any municipality from collection of taxes currently
in place.
Senator Stedman knew of some municipalities that limit the tax to
the first $1,000 of each purchase, and proposals to increase the
amount to $5,000. He asked the flexibility provided to local
governments if the State limited the tax to the first $1,500 of a
purchase.
Senator B. Stevens indicated the issue would require further
investigation to determine the impact on communities.
Senator Olson asked how the sales tax would be enforced in small
communities and gave examples of residents selling candy bars out
of their homes. He reported that some high school students practice
this type of retail sales.
Senator B. Stevens was unsure how the Department of Revenue would
implement a statewide sales tax. He noted that systems are in place
in some boroughs and assumed the process would be related to the
tax collection systems merchants have in place. He admitted
"leakage" and abuse would occur, but noted the federal Internal
Revenue Service (IRS) also experiences such problems.
SENATOR TOM WAGONER furthered on Senator Stedman's comments,
pointing out that a tax limit on sales of $1500 would cost
consumers an additional $75 on purchases made in Kenai over
purchases of the same amount made in Anchorage. He predicted that
shoppers would travel to Anchorage for larger purchases.
Senator B. Stevens remarked this occurs currently.
Senator Wagoner corrected this does not occur because the sales tax
collected by the Kenai Peninsula Borough is levied on a maximum of
$500 of each invoice, with a total tax of $25.
Co-Chair Wilken noted the existence of obstacles that must be
addressed.
Senator Hoffman referenced Sec. 43.44.040. Payment of use tax.,
established by Section 13 on page 6, lines 5 - 8 of the proposed
committee substitute. He noted the 30-day deadline for submitting
collected taxes. He expressed concern that this would create
hardship for businesses that collect a minimal amount. He suggested
extended reporting periods to allow businesses to submit taxes and
reports after accumulating a reasonable amount.
Senator B. Stevens agreed to this suggestion. He stated the
submission process should not be so onerous as to create more work
than the initial transaction.
ADJOURNMENT
Co-Chair Gary Wilken adjourned the meeting at 03:21 PM
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