Anchorage to explore sales tax in public forums

nherz@adn.comSeptember 17, 2013 

Anchorage Mayor Dan Sullivan is considering an attempt to institute a city sales tax, and is planning a series of public forums to test the idea.

Voters have rejected a sales tax four times in the past, and Sullivan says he's not yet sure that he wants to propose a new one. But based on complaints he's heard about property taxes, Sullivan said he thinks the idea is worth exploring -- and he says that by engaging the public early in the process, there's a better chance of building a consensus.

"My job at this stage isn't to get public support. It's to listen to the public," Sullivan said.

Past efforts, he said, were "just thrown on to the ballot with very little discussion, very little interaction with the people who were going to vote on the tax."

Sullivan announced the forums at his annual State of the City speech Monday. In an interview Tuesday, he made clear that he's not pushing the tax, but instead responding to constituents who think that property taxes are too high.

"We're not particularly promoting a sales tax," he said. "I want to hear the discussions, and see what people are thinking."

Any sales tax proposal would first have to be approved by the Anchorage assembly, then ratified by 60 percent of voters at an election, according to the city's charter.

In interviews, two members of the Assembly, Chris Birch and Ernie Hall, said they liked the concept of a sales tax. But a third, Dick Traini, said there was no way that such an initiative would get past voters, who overwhelmingly rejected the last one, in 2006, by a 70-30 margin.

"Do you know how Einstein determined what insanity is? When you try the same experiment and hope for a different result," he said. "Four times, we've gone to the public, and four times they've said no."

(Lindsey Whitt, a spokeswoman for Sullivan, responded: "I don't think that's a very professional comment to make to the news.")

The public forums come after a series of discussions that the city held over the summer with a group of budget stakeholders, including social service groups, unions, small business representatives, and Assembly members.

Those discussions generated concerns that property owners were shouldering a disproportionate share of the tax burden, while "non-profits, commuters, and tourists benefit from city services without paying into the system," according to a draft report from the consultant that conducted them.

Over the past few years, property taxes made up some 55 percent of city revenues, according to city figures. The last sales tax proposal, a 3 percent levy floated in 2006, would have cut property taxes by about 25 percent across the board.

At the forums this fall, the city will get feedback on several different sales tax permutations, like whether it should be instituted seasonally, whether there should be exemptions, and whether the city should tax the purchases of services as well as goods, said Heidi Gantwerk, the consultant who will run the discussions.

Technically, Gantwerk said, the forums will be about "property tax relief," rather than sales tax specifically, and could consider other options for raising revenue such as higher fees or fines. But she acknowledged that compared to the money generated by a sales tax, "every thing else is fairly small potatoes."

Sales taxes are sometimes criticized as being regressive, meaning that they proportionally hit lower-income individuals harder than those with higher incomes. The city could try to combat that problem by making sure the tax applies to a broad range of items, including areas like entertainment, said Annette Nellen, a professor of accounting and finance at San Jose State University.

"If you're not taxing that, it hits lower-income people even harder," she said.

However, Nellen cautioned, the wider the range of the tax, the more difficult it becomes to enforce, and to comply with.

Sullivan said that the city could provide businesses with a rebate to offset new accounting costs.

But he rejected the idea that a sales tax is any more regressive than property taxes for two reasons. First, Sullivan said, wealthier people simply purchase "a lot more stuff." And second, he cited research that he said shows that higher-end houses are often undervalued, since there are fewer sales to use as comparisons.

"Research has shown property tax can be regressive just as much as sales tax," he said.

Reach Nathaniel Herz at nherz@adn.com or 257-4311.

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