HB 303-INDIVIDUAL INCOME TAX CHAIR KOTT announced that the next order of business would be HOUSE BILL NO. 303, "An Act relating to the levy and collection of a sales tax; and providing for an effective date." Number 1032 REPRESENTATIVE PORTER moved to adopt CSHB 303, Version 22- LS1206\I, Kurtz, 5/1/02, as the working document. There being no objection, Version I was adopted. Number 1054 REPRESENTATIVE JOHN DAVIES, Alaska State Legislature, explained that Version I amends HB 303 such that it implements the fair tax idea that has been discussed over the last few weeks. This is an income tax that is structured to impact those at the upper end of the income spectrum in the approximate manner those folks would've been impacted under a sales tax. Representative Davies characterized Version I as a hybrid [between a] sales tax and an income tax. This tax is slightly progressive at the lower end and significantly regressive at the higher end. This tax is advantageous in that it doesn't impact municipalities in the way a sales tax would. Furthermore, approximately 10 percent of the income obtained is paid by those workers in Alaska who live outside the state and about 15 percent of it can be [written off] as a credit against the taxable income with the federal government. Therefore, Alaskans end up only paying about 75 percent of the total amount that is raised. Representative Davies viewed Version I as a compromise. CHAIR KOTT closed public testimony. Number 1158 REPRESENTATIVE PORTER expressed the advisability to refer to [Version I] as an individual income tax. Therefore, he moved that the committee adopt Amendment 1, which reads: Page 1, line 1, after "of", Insert "individual" There being no objection, Amendment 1 was adopted. REPRESENTATIVE BERKOWITZ mentioned the need to have protections in terms of privacy for whatever forms are filed. REPRESENTATIVE DAVIES related his understanding that individual taxpayer information is confidential. He recalled having to go into executive session to consider even lumped tax returns from corporations. REPRESENTATIVE PORTER noted that the representative for the Department of Revenue was nodding his head in confirmation. Number 1248 REPRESENTATIVE BERKOWITZ highlighted the trust industry's concern that any income tax not interfere with its business. REPRESENTATIVE DAVIES said that he believes this proposal includes all income that is derived in the state. He further clarified that this proposal would include personal income from trusts. The reporting requirements for trusts was removed. All income an individual derives from a trust must be reported [by the] individual. CHAIR KOTT closed public testimony. Number 1321 REPRESENTATIVE PORTER moved to report CSHB 303, Version 22- LS1206\I, Kurtz, 5/1/02, as amended out of committee with individual recommendations and the accompanying fiscal note. REPRESENTATIVE KOHRING objected, and related his belief that the legislature should work on more spending reductions and reforms to the government bureaucracy. There is much more that can be done to explore efficiencies in government. REPRESENTATIVE JOULE expressed the need to keep in mind the diversity of Alaska. Although he acknowledged that legislators are responding to their constituencies, he believes that Alaskans are at the point of recognizing the need to raise revenue and agree with a personal income tax. Therefore, he said he spoke in favor of the bill. REPRESENTATIVE KOHRING mentioned his desire to include a sunset provision and a vote of the public before becoming effective. He informed the committee that he would offer such amendments on the House floor. REPRESENTATIVE DAVIES pointed out that were this bill to pass, there are triggers that as the constitutional budget reserve (CBR) rises, the amount of the tax decreases. The bill establishes a $2 billion CBR [limit] that is ratcheted down to $175 million total and $3 billion ratchets it down to $100 million total. A roll call vote was taken. Representatives McGuire, Berkowitz, Joule, Porter, Morgan, and Kott voted to report CSHB 303 as amended from committee. Representative Kohring voted against reporting CSHB 303 as amended from committee. Therefore, CSHB 303(RLS) was reported from the House Rules Standing Committee by a vote of 6:1.