Legislature(2001 - 2002)

02/06/2001 03:30 PM Senate STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     ALASKA STATE LEGISLATURE                                                                                   
                  SENATE STATE AFFAIRS COMMITTEE                                                                              
                         February 6, 2001                                                                                       
                             3:30 p.m.                                                                                          
MEMBERS PRESENT                                                                                                               
Senator Gene Therriault, Chair                                                                                                  
Senator Randy Phillips, Vice Chair                                                                                              
Senator Bettye Davis                                                                                                            
MEMBERS ABSENT                                                                                                                
Senator Rick Halford                                                                                                            
Senator Drue Pearce                                                                                                             
COMMITTEE CALENDAR                                                                                                            
SENATE JOINT RESOLUTION NO. 9                                                                                                   
Relating to the development and deployment of the National Missile                                                              
Defense System.                                                                                                               
     MOVED SJR 9 OUT OF COMMITTEE                                                                                             
SENATE JOINT RESOLUTION NO. 12                                                                                                  
Urging the United States Congress to amend the tax code to reduce                                                               
the marriage penalty.                                                                                                         
     MOVED SJR 12 OUT OF COMMITTEE                                                                                            
SENATE BILL NO. 39                                                                                                              
"An Act relating to an assistant adjutant general for national                                                                  
missile defense in the Department of Military and Veterans'                                                                     
     SCHEDULED BUT NOT HEARD                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
SJR 9 - No previous action recorded                                                                                             
SJR 12 - No previous action recorded                                                                                            
SB 39  - No previous action recorded                                                                                            
WITNESS REGISTER                                                                                                              
Senator Loren Leman                                                                                                             
State Capitol Building, Room 5                                                                                                  
Juneau, AK 99801                                                                                                                
POSITION STATEMENT: Sponsor                                                                                                   
Mr. Bob Sremak                                                                                                                  
Sremak-Hightower CPA's                                                                                                          
Suite 400 3111 C Street                                                                                                         
Anchorage, AK 99513                                                                                                             
POSITION STATEMENT: Explained the tax consequences of SJR 12.                                                                 
Ms. Leanna Dube                                                                                                                 
Delta Junction, AK 99737                                                                                                        
POSITION STATEMENT: Supports SJR 9 and SB 39.                                                                                 
ACTION NARRATIVE                                                                                                              
TAPE 01-3, SIDE A                                                                                                             
Number 001                                                                                                                      
CHAIRMAN GENE  THERRIAULT called the Senate State  Affairs Committee                                                          
meeting to order at 3:30  p.m. Senators Phillips, Davis and Chairman                                                            
Therriault were  present. There were three items on  the agenda: SJR
9,  SJR 12,  and SB  39. The  first  order of  business  was SJR  12                                                            
Eliminate Marriage Tax  Penalty. Senator Leman, sponsor, was invited                                                            
forward to explain the resolution.                                                                                              
               SJR 12-ELIMINATE MARRIAGE TAX PENALTY                                                                        
SENATOR LEMAN delivered the following sponsor's statement.                                                                      
SJR  2  expresses   the  Legislature's  support  for   reducing  the                                                            
imbalance  in  the  federal  Tax Code  that  taxes  married  couples                                                            
disproportionately  more  than unmarried  couples  earning the  same                                                            
level of income.                                                                                                                
The marriage penalty impacts  millions of married couples. According                                                            
to the  Congressional Budget  Office (CBO),  under current  tax laws                                                            
married couples  pay an average  of $1,480  more in taxes each  year                                                            
than  two unmarried  people.  Between  66  and 68,000  Alaskans  are                                                            
The  two  primary  penalties  are the  standard  deduction  and  the                                                            
graduated rate  structure. First, the standard deduction  amount for                                                            
joint filers  is not twice  that for those  claiming single  status.                                                            
This means an unmarried  couple can deduct more of their income than                                                            
a  married  couple.   Second,  income  rate  structures   that  push                                                            
taxpayers into higher brackets  are less than twice for joint filers                                                            
than for  those claiming  single status. This  means that a  married                                                            
couple may  be forced into  a higher tax  bracket than an  unmarried                                                            
couple earning the same combined income.                                                                                        
Congress attempted to deal  with the marriage penalty last year when                                                            
it passed  the "Marriage  Tax Relief  Reconciliation  Act of  2000."                                                            
This would  have provided  tax relief to  married couples  penalized                                                            
under current  tax laws, but President  Clinton vetoed the  measure.                                                            
Because  President  Bush  and  his  Cabinet  have  expressed  strong                                                            
support  for reducing taxes,  Congress should  revisit the  marriage                                                            
SENATOR LEMAN  said that Mr. Bob Sremak,  CPA, was online  to answer                                                            
any specific questions  about the standard and graduated deductions.                                                            
CHAIRMAN THERRIAULT asked Mr. Sremak if he had any testimony.                                                                   
MR. BOB SREMAK said that  he had some general comments. He said that                                                            
this was  a complex issue  that is not income  specific; both  upper                                                            
and  lower income  couples  are affected.  Any provisions  that  are                                                            
sensitive  to  earned  income   or adjusted   gross  income  may  be                                                            
impacted. An example is  earned income credits where the more earned                                                            
income  credits on a  return, the  lower the  possibility the  filer                                                            
will  qualify for  the earned  income credit.  Other  areas such  as                                                            
phase out for individual  retirement accounts, child tax credits and                                                            
interest deduction  for interest on college education  are affected.                                                            
It's an inequitable area that must be dealt with.                                                                               
MR.  SREMAK  said  that  anyone  with  children  under  age  14  and                                                            
receiving a  permanent fund check  could have part of that  taxed at                                                            
the parent's rate.  As a married couple, roughly $43,000  of taxable                                                            
income  is the  limit for  staying in  the 15  percent tax  bracket.                                                            
After that, you move into  the 28 percent bracket. It's possible for                                                            
children under  14 years old to be  in the 28 or 31 percent  bracket                                                            
for the permanent fund  dividend. It's tagged onto what the parents'                                                            
incremental rate becomes.                                                                                                       
CHAIRMAN THERRIAULT asked  if the tax was applied to the entirety of                                                            
the permanent fund check because it was unearned income.                                                                        
MR. SREMAK  said  no, it's  phased in.  Basically,  any income  over                                                            
$1,400 would be  taxed at the parents' highest rate.  Generally, the                                                            
first $700 of  unearned income for someone under 14  years old isn't                                                            
taxed,  the next  $700  is at  15 percent,  and then  anything  over                                                            
$1,400  is taxed at  the highest  of either the  child's or  parents                                                            
CHAIRMAN THERRIAULT  asked for questions.  There were none.  He then                                                            
asked for a motion.                                                                                                             
SENATOR PHILLIPS  made a motion to  move SJR 12, as written,  to the                                                            
next committee of referral.                                                                                                     
CHAIRMAN  THERRIAULT  noted  that  there  was  a  zero  fiscal  note                                                            
He asked for any  opposition. There being none, the  bill and fiscal                                                            
note were forwarded to the next committee.                                                                                      
Number 453                                                                                                                      
               SJR 9-NATIONAL MISSILE DEFENSE SYSTEM                                                                        
CHAIRMAN THERRIAULT  said SJR 9 was  the next order of business.  He                                                            
asked Senator Leman to give his statement.                                                                                      
SENATOR LEMAN thanked Chairman  Therriault for the timely scheduling                                                            
of the resolution.                                                                                                              
He said  that the  United States  reigns supreme  as the last  great                                                            
superpower,  but there  is still no  ability to  protect the  nation                                                            
from ballistic  missile attack. He  cited the Department  of Defense                                                            
(DoD) report  titled "Proliferation:  Threat and Response"  pointing                                                            
up  the  growing   threat  the  U.S.  faces  from  foreign   nations                                                            
developing missile  technology. Former Secretary of  Defense William                                                            
S. Cohen wrote that at  least 25 countries possess or are working on                                                            
the capability  to  inflict nuclear,  chemical  or biological  harm.                                                            
They are  working on  either the  weapons or a  means of  delivering                                                            
General  Norton Schwartz  said  much the  same thing  in his  report                                                            
delivered  to the  Joint Armed  Services  Committee  on January  30,                                                            
2001.  He cited  trouble areas  in North  Korea, Iran  and Iraq.  In                                                            
response to  the perceived threats,  the U.S. has been developing  a                                                            
national  missile  defense  system,  but it  has  yet to  be  built.                                                            
Although Alaska  has been mentioned  as a preferred alternative  for                                                            
the  location of  key  system components  like  the  radar site  and                                                            
location  of   the  ground  based   interceptor  sites,   there  are                                                            
unanswered  questions such as design  type, deployment location  and                                                            
building timeline.                                                                                                              
Number 650                                                                                                                      
Defense  Secretary  Donald   Rumsfield  feels  that  the  1972  Anti                                                            
Ballistic  Missile  Treaty   with  the Soviet   Union  is  outdated.                                                            
According to  this treaty, Alaska  is not an eligible site.  Current                                                            
thinking  is that Alaska  is the  only location  that would  provide                                                            
defense of all 50 states.                                                                                                       
During the  campaign, President Bush  said he supported development                                                             
of the National  Missile Defense System  and Alaska's delegation  is                                                            
supportive  as well.  The resolution  encourages  President Bush  to                                                            
move development forward as soon as technologically possible.                                                                   
CHAIRMAN THERRIAULT  asked for questions  for Senator Leman.  Seeing                                                            
none, he called  on Leanna Dube from  Delta Junction to testify  via                                                            
LEANNA DUBE said  she works for the City of Delta  Junction and that                                                            
the  economy  of  Delta  Junction  continues   to  suffer  from  the                                                            
downsizing  of  Fort   Greeley.  The  national  missile   deployment                                                            
environmental  impact statement of  2000 identifies Fort  Greeley as                                                            
the  preferred  alternative   for  placement  of  the  ground  based                                                            
interceptor  and command  and control  elements.  The City of  Delta                                                            
Junction  therefore, supports  both SJR  9 and SB  39 as a means  of                                                            
revitalizing the economy of the area.                                                                                           
CHAIRMAN THERRIAULT  asked Ms. Dube  to fax a copy of her  letter to                                                            
him at (907) 465-3884.                                                                                                          
He asked for any other  questions or anyone else wanting to testify.                                                            
There were none.                                                                                                                
CHAIRMAN  THERRIAULT  noted  that  there  was  a  zero  fiscal  note                                                            
accompanying  the resolution.  He asked for  amendments. There  were                                                            
none. He asked for the rule of the committee.                                                                                   
SENATOR PHILLIPS made a  motion to move SJR 9 and fiscal note to the                                                            
next committee of referral.                                                                                                     
There were no objections.                                                                                                       
         SB 39-ASST. ADJUTANT GENERAL FOR MISSILE DEFENSE                                                                   
CHAIRMAN THERRIAULT announced  that Major General Phil Oates was not                                                            
available  to testify on SB  39 so it would  be held over  until the                                                            
meeting Thursday, February 8, 2001.                                                                                             
The meeting was adjourned at 3:40 p.m.                                                                                          

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