SENATOR KELLY introduced SB 269 (INCREASE TOBACCO & ALCOHOL TAXES) sponsored by request of the Governor, and invited PAUL DICK from the Department of Revenue to testify. Number 065 MR. DICK explained SB 269 would increase the excise tax rates on tobacco products and alcohol such as liquor, wine, and beer. He said it would increase the taxes by 50% on all but wholesale tobacco, which is chewing tobacco and snuff. The taxes on these two items would increase 100%. He referred to the outline in the fiscal note showing the increases and the revenue impact in each one of the categories. The total revenue increase, MR. DICK estimated to be $14.9 million a year as outlined in the fiscal note. He offered to answer questions. SENATOR SHARP asked when the taxes on tobacco and alcohol were last increased and by how much. MR. DICK said cigarettes were increased in 1989, but he wasn't sure of the amount of increase. The liquor category increased in 1983, and he reviewed the different categories and the amount. SUZANNE PERRY, representing the Division of Alcoholism and Drug Abuse in DHSS, testified in support of SB 269. She presented some statistical correlations between consumption and alcohol problems in the State of Alaska, which ranks #4 in the nation with per capita consumption. She said the increase in the excise tax, which she dubbed user fees, would have a direct impact, particularly on the youthful drinking in the State, and she used beer as an example. Number 099 Next SENATOR KELLY called on RESA JERREL, State Director for the National Federation of Independent Business, who spoke in opposition to the legislation, and she reviewed the information from the 4,400 members on the subject of taxes from their 1993 ballot. She quoted the membership as voting 92% to not increase taxes until there was a reduction in the operating budget, and she suggested the State privatize operations that could be done by private industry. She used printing as an example. MS. JERREL referred to the position paper from the NFIB/Alaska with a list of commercial activities presently operated by State and local agencies. She thought privatization should be considered as an alternative to bring down the size and cost of State and local government. She offered to answer questions. LENNIE GORSUCH, representing Miller Brewing Company, testified in opposition to what Miller Brewing considers a substantial increase in taxes, an increase which would be felt by countless Alaskans. She quoted figures to show Alaskan taxes on beer is well above average for the Western States and the nation, making Alaska at double the national average. MS. GORSUCH claimed excise taxes on beer places a disproportionate burden on lower income people, nor does taxation curb alcohol abuse. Number 154 MS. GORSUCH explained an alcoholic will buy a drink no matter the price, but increasing taxes will discourage an underage drinker. She said the real solution lies in enforcement of current laws and through education. She described the involvement by the Miller Brewing Company in numerous programs aimed at safe drinking, but those who do drink are not a safety hazard to themselves or to the public at large. She concluded it was popular to aim a sin tax in times of cash crunches, but she said the brunt of this tax will be felt by the working men and women of low and middle income. SENATOR KELLY asked MS. GORSUCH what was happening on the National level in terms of taxes on tobacco and alcohol. MS. GORSUCH said she didn't have any current information, but offered to do some research. SENATOR KELLY wanted to know if Congress was expected to pass an increase in either of the two this year, and MS. GORSUCH said there was a substantial tax in 1991 on beer. Number 196 SENATOR KELLY next called on MIKE FRANKLIN, a long-time local family practioner, who spoke on behalf of the Alaska Division of the American Cancer Society, and he reviewed a meeting in Anchorage where SB 269 was discussed. He quoted the American Cancer Society as taking the position in favor of increasing the tax on tobacco products, and he offered proven research to the committee showing tobacco as the young people's entry level drug. He claimed price does dictate the amount of use, and he referred to a study showing an increase in price of tobacco products, particularly chewing and cigarettes, caused a decrease in the use and the rate at which young people become addicted. MR. FRANKLIN concluded by urging the committee to consider the SB 269 as a "cancer control" measure. RICK LAUBER, representing the Anheuser Busch Company, endorsed the testimony from MS. GORSUCH, and he responded to the question on Federal taxation, saying a tax in 1991 doubled the alcohol tax. He took on the charge that an increase in sin taxes on beer would reduce consumption, and he agreed it would decrease consumption, but also the revenue. He said it would not reduce the consumption by those who are addicted to alcoholic beverages, and beer is not the choice of beverage for those who abuse alcohol. Number 254 MR. LAUBER claimed the vast number of beer drinkers did not abuse the use of beer, and in fact, there was a health benefit to daily and moderate consumption of small amounts of alcoholic beverages. He claimed a couple of beers a day would increase a person's lifetime, and he likened it to a daily half hour jog. He concluded by quoting MS. GORSUCH on the down side of the proposed alcohol tax. SENATOR KELLY directed MR. FINK to get some comparative figures on other state alcohol and tobacco taxes for comparison. Next he called on RICK URION, representing the Alaska Wine and Spirits Wholesaler's Association. MR. URION also supported the responses by MS. GORSUCH and opposed Section 3 of SB 269, dealing with alcoholic beverages, but had no opinion on the tobacco tax. He reviewed the arguments on the generation of revenue and the decrease in consumption. He quoted information on the increase in Federal excise taxes, and the loss of revenues. MR. URION described an attempt by PRESIDENT CLINTON to pay the cost of the National Health Care legislation on items mentioned in this bill, but he said PRESIDENT CLINTON had decided alcohol is not a source of revenue and does not intend to increase taxes on alcohol in the foreseeable future. MR. URION said the industry he represents understands the problems caused by the abuses of alcoholic beverages. He explained those he represent spent time and money promoting moderation and felt the efforts were paying off. Number 300 MR. URION protested alcohol was not the cause of all the social ills, nor was it responsible for the $200 million in cost said to be in the State budget directly related to alcohol abuse. Conversely, he suggested, if there was no alcohol, there could be the same sum cut from the budget, which he also didn't believe. MR. URION concluded by maintained the consumption of spirits has declined in Alaska by 21% since 1983, and he said the passage of Section 3 would not result in more revenues. He urged the bill not pass. SENATOR LINCOLN protested that alcohol is responsible for over 50% of the people incarcerated in eleven institutions in our State, and of those people confined, 95% are there due to alcohol. She claimed there would be a reduction in the over all budget to the State, and she questioned his statistic on the decrease in the consumption of alcohol. MR. URION repeated the consumption of alcohol has decreased 21% since 1983. SENATOR LINCOLN quoted his testimony on a further reduction in the consumption of alcohol if the bill were passed, and MR. URION said she was correct. He said there would also be a reduction in revenues. SENATOR LINCOLN thought the reduction in consumption through the passage of SB 269 was wonderful. MR. URION agreed her motivation was fine, but he said the original motivation of the sponsor was to increase revenues, which would not happen. There being no further testimony, SENATOR KELLY decided to hold the bill in committee awaiting information on the rates from other states.