HOUSE SPECIAL COMMITTEE ON WORLD TRADE AND STATE/FEDERAL RELATIONS April 8, 1999 5:10 p.m. MEMBERS PRESENT Representative Ramona Barnes, Chair Representative John Cowdery, Vice Chair Representative Beverly Masek Representative Gail Phillips Representative Joe Green Representative Ethan Berkowitz Representative Reggie Joule MEMBERS ABSENT All members present COMMITTEE CALENDAR * HOUSE JOINT RESOLUTION NO. 34 Relating to the federal estate and gift taxes. - MOVED HJR 34 OUT OF COMMITTEE * HOUSE JOINT RESOLUTION NO. 33 Urging the United States Senate to decline to ratify the treaty from the United Nations Framework Convention on Climate Change adopted in December 1997 at Kyoto, Japan. - MOVED HJR 33 OUT OF COMMITTEE (* First public hearing) PREVIOUS ACTION BILL: HJR 34 SHORT TITLE: REPEAL ESTATE AND GIFT TAX SPONSOR(S): REPRESENTATIVES(S) COGHILL, Barnes Jrn-Date Jrn-Page Action 3/31/99 624 (H) READ THE FIRST TIME - REFERRAL(S) 3/31/99 624 (H) WTR 4/08/99 (H) WTR AT 5:00 PM CAPITOL 124 BILL: HJR 33 SHORT TITLE: U.N. TREATY ON CLIMATE CHANGE SPONSOR(S): REPRESENTATIVES(S) PHILLIPS, Green Jrn-Date Jrn-Page Action 3/26/99 583 (H) READ THE FIRST TIME - REFERRAL(S) 3/26/99 583 (H) WTR 4/08/99 (H) WTR AT 5:00 PM CAPITOL 124 WITNESS REGISTER REPRESENTATIVE JOHN COGHILL, JR. Alaska State Legislature Capitol Building, Room 416 Juneau, Alaska 99801 Telephone: (907) 465-3258 POSITION STATEMENT: Testified as sponsor of HJR 34. SCOTT KOHLHAAS, Membership Chairman Alaska Libertarian Party 234 East 15th Avenue, Number 604 Anchorage, Alaska 99501 Telephone: (907) 258-2848 POSITION STATEMENT: Testified in support of HJR 34. PAMELA LaBOLLE, President Alaska State Chamber of Commerce 217 Second Street, Suite 201 Juneau, Alaska 99801 Telephone: (907) 586-2323 POSITION STATEMENT: Testified in support of HJR 33. GARY C. NEWMAN 1083 Esro Road Fairbanks, Alaska 99712 Telephone: (907) 488-2001 POSITION STATEMENT: Testified in opposition to HJR 33. ACTION NARRATIVE TAPE 99-09, SIDE A Number 0001 CHAIR RAMONA BARNES called the House Special Committee on World Trade and State/Federal Relations meeting to order at 5:10 p.m. Members present at the call to order were Representatives Barnes, Cowdery, Masek, Phillips, Green, and Joule. Representative Berkowitz arrived at 5:15 p.m. HJR 34-REPEAL ESTATE AND GIFT TAX Number 0038 CHAIR BARNES announced that the first order of business was House Joint Resolution No. 34, relating to the federal estate and gift taxes. She asked Representative Coghill to come forward and testify on HJR 34. Number 0090 REPRESENTATIVE COGHILL, JR., Alaska State Legislature, came forward to testify. He stated that HJR 34 was a resolution asking the federal government to speed up the process of H.R. 86 which would repeal the Internal Revenue Code of 1986, Subtitle B, and essentially eliminate the so-called "Death Tax". He said that HJR 34 was in existence because the estate tax in Alaska is tied directly to the Death Tax. He indicated that "any dollar that we get from the Death Tax or from the estate tax is directly tied to that federal law; for example, if we repeal our estate tax, then it all goes to the federal government." REPRESENTATIVE COGHILL further explained that there is a motion in the United States Congress to repeal the Death Tax in order to ensure that American children receive the inheritance they are entitled to. He stated that HJR 34 is a way to convey that "from Alaska we think that taxing people after they have worked and actually paid taxes on the inheritance that they have is bad policy". He asked that the federal estate and gift tax be repealed in an expeditious manner. REPRESENTATIVE COWDERY asked if limits existed on inheritance in Alaska. He wondered if it was "$600,000 per person before a tax comes into place." Number 0289 REPRESENTATIVE COGHILL replied that he understood it to be 20 percent of the federal tax. However, he believed that the federal tax would depend on the wage. The federal tax could range from 35 percent to 55 percent depending on the size of the estate. REPRESENTATIVE COWDERY rephrased his question to ask whether or not there was an exact dollar limit on the size of the estate. REPRESENTATIVE COGHILL responded that he did not believe a dollar limit existed. REPRESENTATIVE GREEN agreed with Representative Coghill's response. He wondered if an exact dollar limit existed for state tax, though. REPRESENTATIVE COGHILL replied that the computation at the state level is just 20 percent of whatever the federal requirement is. Number 0415 SCOTT KOHLHAAS, Membership Chairman, Alaska Libertarian Party, testified via teleconference from Anchorage in support of HJR 34. He read the following testimony into the record: I am here today with a song in my heart to support House Joint Resolution No. 34. The estate tax is a confiscatory tax. It is a tax on dead people. It is a double tax because they have already paid taxes on it. People spend their whole lives accumulating whatever they can and the government decides: "No. This is not going to go to their children. This will go to us." When I grew up, my dad used to tell me: "Scott, we are better than Russia because in Russia you cannot own property, but here you can." I believed in that. I thought we were different, and I thought we were better, but then I grew up and I learned about things like the property tax and the inheritance tax and the gift tax. I learned that our government, too, believes that really they own everything and that it should all go back to them eventually. I have been thinking that if the government feels they have assets - who cares? It is the people without assets that are voting us in. Then I see something like this sponsored by Representatives Coghill and Barnes, and I have hope again. I am here to ask you to vote for HJR 34 and help move along H.R. 86. Let's get rid of the estate and gift taxes. CHAIR BARNES asked if any of the committee members had questions. There were no questions. Number 0590 REPRESENTATIVE COWDERY made a motion to move HJR 34 with a zero fiscal note out of committee and asked for unanimous consent. There being no objections, HJR 34 moved from the House Special Committee on World Trade and State/Federal Relations. HJR 33-U.N. TREATY ON CLIMATE CHANGE Number 0635 CHAIR BARNES announced that the next order of business was House Joint Resolution No. 33, urging the United States Senate to decline to ratify the treaty from the United Nations Framework Convention on Climate Change adopted in December 1997 at Kyoto, Japan. REPRESENTATIVE PHILLIPS testified as the sponsor of HJR 33. She read the following statement for the record: This Resolution is an issue of fairness and protection, protection against higher costs for Americans and the loss of American jobs. The Resolution urges the United States Senate to decline to ratify the treaty from the United Nations Framework Convention on Climate Change [Kyoto Treaty] adopted December, 1997 in Kyoto, Japan. The treaty, if ratified by the U.S. Senate, would commit the U.S. to reducing our carbon dioxide levels to 7 percent below the levels of 1990. If the U.S. Senate ratifies this treaty, the U.S. will be placed at a considerable economic disadvantage to many other countries with no assurance that these efforts would substantively impact global warming. In spite of the lack of sound scientific evidence supporting the conclusion that carbon emissions are a major contributing factor to global warming, the Kyoto Treaty sets very tough standards for the U.S. and other industrialized countries to meet. However, the treaty exempts 129 developing nations. China, Mexico, India, Brazil and South Korea are among the many nations exempted from these treaty requirements. Not considered by the Framework Convention were the rapidly increasing greenhouse gas emissions of the exempted developing nations. As early as 2015, these countries are expected to surpass emissions of the U.S. and other countries included under a more strict application of the treaty. Number 0800 Forcing the reduction in our carbon emissions will no doubt result in more government regulation and, potentially, imposition of carbon production permits, rationing and taxes on consumer carbon emissions. These actions would result in sharply increasing costs of production and in the loss of many American jobs. Finally, the charge of the United Nations Framework Convention on Climate Change was to address the greenhouse gas emissions problem on a global basis. The Kyoto Treaty fails to do this. While the U.S. should make every effort to do its part to address the global warming problem, the burden should not fall disproportionately on our shoulders while other countries are exempted from this responsibility. Your support for this message to the U.S. Senate would help ensure the Kyoto Treaty is not ratified. Number 0867 REPRESENTATIVE PHILLIPS noted that in the packets provided to the committee members there was a policy statement from the Energy Council stating that the Energy Council unanimously took a stand against the U.S. Senate's ratification of the Kyoto Treaty. She further noted that there was more supporting information for perusal included in the bill packet for HJR 33. CHAIR BARNES asked if any members of the committee had questions. There being none, she inquired if there were any people on-line wanting to testify. There were none and she asked Pam LaBolle to come forward and testify. [Two testifiers, Cam Toohey and Lori Cameron, whom Representative Phillips said were in support of HJR 33 had planned to speak via teleconference, but were unable to because of technical difficulties.] Number 1079 PAMELA LaBOLLE, President, Alaska State Chamber of Commerce, came forward to testify in support of HJR 33. She expressed that the Alaska State Chamber of Commerce did not feel that there was enough scientific evidence to support the direction the Kyoto Treaty took. REPRESENTATIVE BERKOWITZ asked, "What is the scientific evidence that was relied on, and what is the scientific evidence that runs counter?" MS. LaBOLLE responded that there is a "great deal" of evidence to support both sides. She stated that there has not been a complete and definitive determination that says a drastic action is needed. Number 1210 CHAIR BARNES recalled that, at the time of the Kyoto Treaty, there was considerable discussion about the U.S. picking up the burden for the exempt countries with respect to carbon dioxide gas emissions. She asked Ms. LaBolle to comment on this issue. MS. LaBOLLE agreed with the comments Chair Barnes made. She added that more evidence is being found on other sources of carbon dioxide not previously known about. She stated that it does not make sense for developing countries whose populations are ever increasing to be exempt from the Kyoto Treaty. CHAIR BARNES commented that she had been to China and the pollution was so severe that she did not know "they had a sky". She thanked Ms. LaBolle for her testimony. Number 1358 REPRESENTATIVE COWDERY added that he felt America sets the standards for environmental conservation and remarked that he was very supportive of HJR 33. REPRESENTATIVE BERKOWITZ asked Representative Phillips if the main point of HJR 33 was to support U.S. Senate Resolution No. 98. Number 1514 REPRESENTATIVE PHILLIPS replied that the point of HJR 33 is to urge the U.S. Senate to oppose ratification of the Kyoto Treaty developed at the United Nations Framework Convention on Climate Change. REPRESENTATIVE BERKOWITZ asked whether the terms referred to on page 2, line 6, of HJR 33 are the same terms laid out in U.S. Senate Resolution No. 98. REPRESENTATIVE PHILLIPS responded that the terms given in U.S. Senate Resolution No. 98 may not be exactly the same as those defined in the Kyoto Treaty since the resolution was adopted prior to the Kyoto meeting. Number 1610 GARY C. NEWMAN came forward and testified in opposition to HJR 33. He read the following testimony for the record: This resolution says that climate change isn't a certainty and because every country isn't 100 percent on board that the U.S. shouldn't participate. It further asserts that there might be taxes imposed to reduce our contribution to the burning of fossil fuels. I'm going to be quite candid because I think that refusing to acknowledge that fossil fuel consumption has a negative impact on our world's climate is like burying your head in the sand as the rise of the ocean erodes the sands around you. Saying that there is still some uncertainty about the interaction of our impacts on the world's climate is a fair statement, but I think we take out household fire insurance on far smaller odds than the likelihood of our impact on climate change. I think it's most obvious that we can and are having an impact on the climate, and nearly all of the scientific community accepts this. I am somewhat refuting--and we could get into numbers schemes as to how many scientists support it or don't support it, but overwhelmingly more and more folks are finding this is the case. I think by the time it is totally refutable, it is going to be far too late to mitigate the severe impacts on the world's bio-regions. In Alaska, along with other polar regions, the impacts of climate change are felt sooner and are far more severe than in temperate regions. This is just a function of how the world's climate operates. If you wonder why our traditional fish stocks are down, why tuna are coming farther north than before, why permafrost melting is impacting our infrastructure and roads and buildings more than ever, these are the sorts of impacts that actually cost us money. You are looking at one of the areas here in Alaska where we are more likely to be severely impacted. I think we ought to be in the forefront of advocating the reduction of climate change impacts because it is going to cost us a lot more in the long run to deal with the impacts. Representative Barnes, you may recall that there was a House joint resolution passed under Governor Cowper's administration that asked the administration to detail ways that the state of Alaska could help reduce our contribution to global warming. The report prepared for the legislature, I thought, was less than settling, but at least was an attempt to look forward rather than backward. As to the failure of other countries such as China or South Korea to be included in the Kyoto accords, of course, it would be nice for everybody to be on board, but we are the richest country in the world, and I think we can set a better example than we do now by consuming more fossil fuels per capita than any other country in the world. I think we can afford to share some of our better technology with these other countries, and that is also in our best interest. If you wonder where Arctic haze comes from, I don't think anyone would argue that it's coming from the Far East in places like China and Russia. Those sorts of things are actually contributing to messing with our climate, our local climate here in Alaska. I think reduction of our carbon consumption would, instead of sharply increasing costs and the loss of thousands of jobs, as this resolution suggests, ... give us a better quality of life at a sustainable level. It has taken us only a hundred years to expend fossil fuel resources that took nature millions of year to put there. You can't continue that indefinitely. Now, would you pay a few hundred dollars more for a car that got 30 miles per gallon instead of 15? If you look at it over three years, you are probably going to save over a thousand dollars. That's a no-brainer. Of course, you would want to look a little bit to the long term. I know it is hard to do that in the legislature when you are elected every two years and you have, basically, the run on (indisc.) for that. We need to look forward. And we need to look a little further forward than just the next election. Number 1892 I think that the most successful energy conservation program in our state is the Five Star Home Program that some of you folks may be aware of. It gives a small discount on the interest rate to folks that have better and more efficient homes from the standpoint of energy conservation; better forced ventilation allows people to live more healthy and allows them to save money in operating their house. That is a win-win situation. And I look at some of the concerns of this resolution, and it looks like it's impact of carbon taxes and government interference; it looks like it's just trying to sow some fear, uncertainty and doubt, but I don't think it's in our best interests in our state. I'm basically trying to clearly state that in the long run it is cheaper to make changes now from our very profligate consumption of finite resources than it is to mitigate the impacts later. For our kids and their kids' sake, I'd like you to turn this resolution around and support the concept of trying to reduce our carbon emissions. Number 1951 REPRESENTATIVE GREEN stated, "It may be a pretty good leap from the fact that we are opposed to Kyoto protocals and to say that because of that we are not trying to do something to reduce the emissions of our fossil fuel burning. This country has made tremendous strides in that direction and will continue to do so whether it's because of an economic imposition, a lack of resources or whatever the reason. There have been tremendous changes. You see ... in Los Angeles, Denver-places in the past that were really, really terrible smog areas-much, much cleaner air now. But to limit us, to put handcuffs on our development, I think is absolutely the wrong direction. And you see that same concept in countries that are developing. Those countries, ... because of poorer economics they are the ones that pollute the worst. My point to you is that, I think rather than to handcuff this thing, we will go along with Kyoto and drop back to a pre-1990 type emissions. What we need to do is encourage us to go ahead and continue our research, but not to handcuff us economically to do it. We will do less good under economic constraints than we will by allowing the economics to develop and then use those to develop better technology." MR. NEWMAN inquired if Representative Green was asking him a question. REPRESENTATIVE GREEN responded that he wanted to know if Mr. Newman thought that it made sense to not hinder economic development, and, at the same time, continue research. Number 2040 MR. NEWMAN expressed the desire to point out the difference between smog and "the type of pollution we are talking about that is climate-change induced." He agreed that the U.S. has made some strides in the reduction of carbon dioxide emissions, but he said: By the same token, we are not going quite as far as we could and we are not looking at this as an opportunity. We are looking at it as something that is going to cause us pain, or gas is going to cost more. I will give you an example. During the Iraqi wars, gas prices shot up. Everyone was complaining: 'Oh, gee, gas prices are high, but we are trying to fight a dictator, so I guess we have to live with that'. But if you put a five-cent-per-gallon tax on to help defer some of the carbon emissions and maybe put that into more research to be able to come up with some better technologies, people will be complaining a lot more. So, it is a matter of perspective as to what is better for the short term and what is better for the long term. Number 2119 I am urging us to take the long term. If we can come up with better technology, it is better for us to even give it to China and South Korea because it is going to help not only our climate, It's going to help their climate and it's going to help the world's climate. So, I am saying that we have more of an opportunity in this country to do it than anywhere. And in Alaska we have a definite problem if we don't because if the makers of the resolution are wrong and, in fact, there is definitely some impact on climate, it's going to hit us harder here than any other place in the country just by the nature of how the world's climate works. I can tell you I live in areas where there is permafrost and you melt it a degree or two and you are going to find some impact on how that is. You talk about money for roads and money for other sorts of things that are state responsibilities, you are going to be hurting and you talk about the problems with the fish, the disaster relief funds and that's a problem right now. REPRESENTATIVE PHILLIPS commented that there was scientific evidence of cooling and warming trends in the state of Alaska in the last 75 or 80 years. She pointed out that these trends in Alaska are not necessarily related to global warming, but, instead, are cyclical. Number 2273 REPRESENTATIVE COWDERY made a motion to move HJR 33 out of committee. CHAIR BARNES asked if there were any objections. There being none, HJR 33 moved from the House Special Committee on World Trade and State/Federal Relations. Number 2318 ADJOURNMENT There being no further business before the committee, the House Special Committee on World Trade and State/Federal Relations adjourned at 5:43 p.m.