HB 413 - INCREASE TOBACCO & ALCOHOL TAXES Number 040 SHELBY STANSBY, Director, Office of Management and Budget, Office of the Governor, reviewed HB 413 for the committee. He explained that while no one likes taxes, they are a part of the overall plan the Governor is promoting. MR. STANSBY stated that compared to the rest of the states, Alaska is near the bottom in the amount of gas taxes it levies. It is still the intention to use the money generated by the gas tax for the repair and maintenance of the roads in the State. MR. STANSBY commented that the intention behind the alcohol and tobacco tax is along the same lines. Users will pay the costs through taxes for the health and treatment programs to combat drug and alcohol abuse. MR. STANSBY noted that there is talk that raising revenues will take the pressure off reducing the budget, but the amount of revenue raised by the taxes is only about 1/8 the amount needed. He further noted that the reserves the state currently has will only last another two or three years at the current spending pattern. MR. STANSBY finished by suggesting that the committee pass the two tax bills on so that the Finance Committee can consider them in the overall financial plan. Number 200 CHAIRMAN HUDSON commented that the alcohol and tobacco tax is estimated at bringing in approximately $15 million and the motor fuel tax is estimated at raising $82 million. Number 218 REP. MULDER asked what the Governor's standpoint was on the constitutional amendment on the dedicated motor fuel tax. Number 221 MR. STANSBY responded that the Governor supports the amendment, but whether he's pushing it this year he doesn't know. He thought Commissioner Campbell could address that. He added that his intention was to use the taxes to help close the fiscal gap and use the money to fix roads. Number 226 REP. MULDER observed that his constituency is much more inclined to dedicate funds than to be taxed and have it go directly into the general fund. Number 231 MR. STANSBY stated that he agrees with that observation, but felt that the scenario has gotten a lukewarm reception by the legislature. Number 234 CHAIRMAN HUDSON noted that HB 509 is not a dedicated tax. Number 245 ELMER LINDSTROM, Special Assistant, Department of Health and Social Services, testified in support of HB 413. He stated that his agency doesn't collect the taxes nor do they have any direct revenue stream from these taxes. The department believes HB 413 can stand on its own as a public health measure and the taxes are a vehicle to provide this. MR. LINDSTROM stated that history tells us that an increase in tobacco and alcohol taxes equals a decrease in consumption, especially among the young. Number 285 CHAIRMAN HUDSON noted that the backup showed some high figures regarding state expenditures for substance abuse and asked Mr. Lindstrom what those expenditures were. Number 300 MR. LINDSTROM replied that the figures Mr. Stansby referred to were simply the funds appropriated for substance abuse treatment. The costs of the abuse of alcohol and use of tobacco show up in all levels of state government. Number 328 RESA JERREL, National Federation of Independent Business (NFIB), testified that her group opposes HB 413. She said a 1993 survey of NFIB members found overwhelming support -- 92 percent -- to reduce state government spending before increasing taxes. Number 350 REP. WILLIAMS asked Ms. Jerrel if she thought the people who abuse products should be responsible for paying for the treatment. Number 365 MS. JERREL reiterated that the NFIB members uniformly oppose any new taxes until government spending comes under control. Number 370 CHAIRMAN HUDSON commented that every time the legislature comes up with an area to cut spending, out comes advocates who consider it sacred. Chairman Hudson assumed that the NFIB is not opposed to taxes forever but not as the first thing to go to. Number 388 MS. JERREL responded that the chair was correct in his assumptions and added that the members of NFIB did have a priority listing of areas of taxation they would like to see if raising revenue through taxes is needed. Number 400 RICK LAUBER, Lobbyist, Anheuser-Busch Company, Inc., testified against HB 413. Mr. Lauber presented the following position paper: Anheuser-Busch is proud of it's leadership role in promoting responsible use of its products. Our "know when to say when" educational advertising campaign has been effective. We have been strong supporters of the designated driver campaign. We were the first major brewer to produce a nonalcoholic malt beverage, O'Douls, and spend millions on it's promotion as a nonintoxicating alternative to beer. Anheuser-Busch not only discourages abuse of its products by adults, but has initiated programs in our schools and colleges to discourage under-age consumption of all alcohol and provide alternatives to the use of intoxicating beverages. We oppose a tax increase on beer. In Alaska beer is already taxed, at a rate nearly 50% higher than the national average. As recently as 1991 the federal government increased the tax on beer drinkers by 100% from $9.00 to $18.00 per barrel. A 50% increase in the tax on beer that this legislation proposes will not translate to an increase on 50% in taxes collected. If the federal experience is an indication. Those opposed to the consumption of any beer will tell you that is a good thing. Not so. Price increases discourage the responsible drinker, mostly in the middle and lower income groups. While studies have shown that beer is not the beverage of choice of the vast majority of alcoholics, they have shown that a price increase of this magnitude is not a deterrent to their abuse. The vast majority of beer is consumed by responsible users. As more and more studies confirm the health benefits of the daily consumption of moderate amounts alcoholic beverages, it does not seem appropriate to discourage the use of moderate amounts of beer. A tax on the wholesale price of beer will be transferred to the retail purchaser. The ultimate tax payer will be the beer drinkers of Alaska. We do not object to paying taxes but feel that the current tax, already far higher than the average of the nation, combined with the recent increase in federal taxes of 100%, is a more than adequate tax on the beer drinkers of Alaska. Number 455 CHAIRMAN HUDSON asked if there was a tax on the nonalcoholic beer Anheuser-Busch promotes. Number 465 MR. LAUBER replied that there was no tax on O'Douls. Number 479 LENNY GORSUCH, Lobbyist, Miller Brewing Company, testified against HB 413. Ms. Gorsuch dittoed Mr. Lauber's testimony. Number 514 REP. WILLIAMS asked for comments on the administration's view that those who imbibe should help pay the cost to the state of alcohol abuse. Number 525 MR. LAUBER stated that if you could design a program that would make the abusers of anything pay for their own services the industry would support it. But the vast majority of users of beer do not abuse the product. Number 565 RICK URION, Lobbyist, Alaska Wine and Spirits Wholesaler's Association, testified against HB 413. Mr. Urion stated that if HB 413 passes Alaska will be the highest by far in taxing spirits. MR. URION noted that the Department of Revenue figures in projecting income from the tax increase did not include the decrease in consumption that the Department of Health and Social Services projects. Number 594 CHAIRMAN HUDSON noted that in 1991 the federal government increased the tax, which resulted in a decrease in actual revenue and asked if there was also a resulting decrease in social costs. Number 610 LOREN JONES, Director, Division of Alcohol and Drug Abuse, Department of Health and Social Services, testified in support of HB 413. Mr. Jones stated that he does not know of any studies that show a correlation between the decrease in consumption related to the economic costs of abuse. MR. JONES noted, however, that insurance companies have looked at the decrease of medical costs after a person has gone through treatment. TAPE 94-25, SIDE B Number 001 MR. JONES further stated that his office conducted an economic cost study in 1985 that looked at the costs of services directly related to alcohol abuse. These costs would include enforcement of drunk driving statutes, number of DFYS cases of child abuse and neglect by parents who abuse alcohol, small business losses, and inmates in jails who committed their offenses while under the influence of alcohol. MR. JONES stated he does not believe that the tax would be disproportionate to the social drinker as it is levied directly to the volume of alcohol you buy. Number 111 JOAN DIAMOND testified via teleconference in support of HB 413. Ms. Diamond stated that Alaska has only raised the tax once since 1960 and has never been adjusted for inflation. She added that the costs to the public are huge and any increase in the tax will not only lower consumption but lower the cost to the public as well. Number 192 PETER MCNUMERA, Director, Division of Public Health, Department of Health and Social Services, testified in support of HB 413. Mr. McNumera stated that he is very concerned about the impact of alcohol on the youth. He believes that the increase in taxes will lower the consumption among youth. Number 234 JIM MURPHY, American Lung Association, testified via teleconference in support of HB 413. Mr. Murphy stated that the legislature has an opportunity now to do two things: raise some revenue for the state and discourage tobacco use by Alaskans by passing HB 413. Number 262 KATHLEEN DOVE testified via teleconference in support of HB 413. She added that she is involved in a prevention program on alcohol and drug abuse. She stated that she supports HB 413 and its efforts to deter young people from using alcohol and tobacco. Number 287 LINDA ADAMS, Executive Director, Alaskans for Drug Free Youth; Advisory Board on Alcoholism and Drug Abuse; and Mayors Task Force on Substance Abuse in Ketchikan; testified via teleconference that all three of these groups are in support of HB 413. MS. ADAMS stated that all the studies have shown that our youth are very price sensitive and that any increase in taxes translates to a decrease in consumption among our youth. MS. ADAMS dittoed the previous supportive testimony. Number 374 FRANCIS YOUNG testified via teleconference in support of HB 413. She stated that the costs to the public is a big factor and includes the costs to educate children whose lives have been impacted by alcohol. MS. YOUNG stated that users should be willing to pay the tax which only covers about 17% of the costs incurred because of abuse. Number 395 KATHY STAROSTKA, Executive Director, Sitka Teen Resource Center, stated via teleconference that the center is overwhelmingly supportive of HB 413. Ms. Starostka stated young people have the least amount of disposable income so this increase would impact them the most. MS. STAROSTKA dittoed the previous supportive testimony. Number 405 CHAIRMAN HUDSON stated that the committee did not have a quorum at the table and would not take action at this time.