HB 106-REPEAL FEES FOR STUDDED TIRES 2:46:19 PM CHAIR JOHANSEN announced that the next order of business would be HOUSE BILL NO. 106, "An Act repealing fees imposed on the sale of new tires, the sale of certain studded tires, and the installation of certain metal studs on tires; and providing for an effective date." 2:46:37 PM JERRY BURNETT, Legislative Liaison;, Director, Administrative Services Division, Department of Revenue, explained that HB 106 repeals the $2.50 tax for new tires and the $5.00 tax on studded tires. The administration doesn't believe the aforementioned tax is an efficient way to raise money. He related his understanding that it's the only tax that the state imposes at the retail level. The administration believes that families who install safer tires shouldn't be penalized. 2:48:09 PM REPRESENTATIVE FAIRCLOUGH inquired as to the governor's plan to replace the revenue generated by these taxes. MR. BURNETT related his understanding that the revenue from these taxes amount to about $1.6 million a year with operational costs of about $55,000 a year. At this point, there is no plan to replace the revenue as it's a very small revenue source and the 2007 revenue projections are great enough [to cover the loss]. If the desire is to replace these taxes, one would want to do so with a tax that is more efficiently administered and one that's not a retail-level tax. 2:49:10 PM REPRESENTATIVE FAIRCLOUGH inquired as to the maintenance costs on the roads. MR. BURNETT said he couldn't answer that, but offered that it's clearly in the tens of millions of dollars or more. He reminded the committee that the revenue from the existing tax on tires goes to the general fund and isn't tied to any specific program. 2:49:36 PM REPRESENTATIVE FAIRCLOUGH asked whether the administration will be recommending an increase in the fuel tax. MR. BURNETT said that he isn't aware of any [proposal] for such an increase. He informed the committee that to replace the tax would require a .4 of a cent tax per gallon. Alaska has the second lowest fuel tax in the nation, he noted. 2:50:18 PM REPRESENTATIVE NEUMAN, continuing on the line of comments by Representative Fairclough, opined that the state will be facing a deficit situation in the next couple of years. He mentioned his support for removing this tax, and then related his understanding that tobacco and alcohol have a retail-level tax. MR. BURNETT clarified that tobacco and alcohol taxes as well as motor fuel taxes are collected by the distributors. 2:51:05 PM CHAIR JOHANSEN related that he has anecdotally heard of the effects of studs on the roads. 2:51:40 PM MARY SIROKY, Legislative Liaison, Office of the Commissioner, Department of Transportation & Public Facilities, confirmed that there are different kinds of studs, which result in different wear and tear on the pavement. She related her understanding that the metal studs are the most abrasive. She highlighted that many are using the new tires, which were developed for all seasons and provide a more significant stopping ability, rather than studs. 2:52:26 PM REPRESENTATIVE NEUMAN inquired as to why the legislation would refer to certain metal studs as opposed to just metal studs. MS. SIROKY said she didn't know why that language was chosen. 2:52:50 PM REPRESENTATIVE NEUMAN asked if the governor intends to remove the tax on studded tires. MR. BURNETT explained that current statute requires a $5 fee for tires with a stud weight of more than 1.1 grams. Therefore, the language referring to certain studs was used because there isn't a $5 fee for those who use the very light weight studs. Mr. Burnett recalled that passage of the tax was to encourage the use of light weight studs. 2:53:31 PM CHAIR JOHANSEN asked if there is any data regarding the impact of the tax. MS. SIROKY said she doesn't know if DOT&PF has any data that speaks to a differential in the wear and tear associated with the passage of the tax. She offered to see if such data exists. MR. BURNETT said that there is no evidence in the trend that fewer studded tires are being sold. However, the law has only be in effect since 2004. 2:54:20 PM REPRESENTATIVE NEUMAN asked if deletion of the term "certain" would be problematic. MR. BURNETT reminded the committee that the effect of this legislation is to remove the taxes on tires, including all studded tires. The reason for the language in the title is that the existing statute taxes only certain studded tires at a differential rate. The language is consistent with what the legislation would actually do. 2:55:12 PM REPRESENTATIVE NEUMAN surmised that if the title remains the same, the intent is to remove the tax on studs and tires and all taxes placed on tires. MR. BURNETT replied yes. 2:55:43 PM REPRESENTATIVE NEUMAN asked if the title of the legislation should be changed to reflect [the intent]. 2:56:01 PM REPRESENTATIVE FAIRCLOUGH opined that it has been appropriately handled. She then read the existing statute, which is specific to metal studs. 2:56:44 PM CHAIR JOHANSEN, upon determining there were no other questions or persons wishing to testify, closed public testimony. He related his understanding that there are a few outstanding questions, and therefore he would hold over HB 106.