Many years ago, when my son was about 8, we were driving through Soldotna and stopped to gas up. He had 50 cents, and went in to buy a 49 cent candy bar.
The cashier rang it up and said, "51 cents." He was dumbfounded. She explained the local sales tax. He confidently replied, "I don't have to pay that because I don't live here." She just smiled. I had to front him the extra penny. He fumed all the way back to Anchorage.
As residents of one of the few cities in the country that has no sales tax, we do a lot of fuming, and with good reason. When we travel, we pay sales tax to the other guys, but we don't collect it from them when they come here. Anchorage gets all its general tax revenue from property taxes. Our mill rate is relatively high. Most cities, in Alaska and elsewhere, have a lower property tax -- and a sales tax.
Local governments justify a sales tax in part because visitors use public services and facilities. I am not advocating soaking visitors, but I am advocating broadening our tax base. Just spread the tax burden around like other cities.
That does not mean increasing taxes. Anchorage has wisely enacted a tax cap. I helped draft a sales tax plan about 16 years ago, but then worked for its defeat when it became clear that half the revenue would have been added to the tax cap -- a whopping tax increase. A sales tax should be completely under the tax cap so it would offset property taxes dollar for dollar.
Renters might contend that a sales tax would be a new tax on them, since they do not pay property taxes. But the truth is that renters do pay their landlord's property taxes as part of their rent. When taxes go up, rent has to go up.
Both property taxes and sales taxes are deductible from federal income tax (the latter on a calculated formula) so people who itemize would get the deduction.
To ensure accountability, sales tax revenue could be dedicated to road maintenance and public safety -- services that visitors, renters and homeowners all clearly use.
Sales taxes are "regressive" -- they hit low-income people disproportionately. There are easy, and widely employed, remedies for this. Sales taxes generally exempt food, prescription drugs and professional services like doctors and lawyers. Most cities have a transaction cap, so they're not adding thousands of dollars of taxes to the price of a new boat or car. On the other hand, I'd also propose an exemption for the first $5,000 of a used car purchase, so that a person on a modest income would not be taxed when they buy an inexpensive vehicle to get around town.
Another good thing about a sales tax is that it is easy to collect. Retailers just program the tax rate into their registers, and it is totaled and remitted automatically.
We could anticipate opposition from retailers. But sales taxes do not depress retail sales in other American cities (what choice do people have) and it would not do so here.
A sales tax would require a 60 percent approval of the voters. Success would probably depend on how well the proposal is thought through and on civic leadership. A hastily drafted proposal -- all under the tax cap -- went on the ballot in 2006 but was soundly defeated.
At least one of this year's mayoral candidates -- Walt Monegan -- supports a sales tax that would come under the tax cap. Other current mayoral candidates have supported previous sales tax proposals. We should ask all of them if they would support it again.
Oh yes: my son, the tax protester He grew up, graduated from college and moved to New York, where he pays city property tax, city sales tax, and even city income tax.
Kirk Wickersham is an Anchorage lawyer and real estate broker. He can be reached at kirkwickersham@aol.com.
By KIRK WICKERSHAM