Politics

Alaska income tax delayed until 2019 under new House proposal

JUNEAU -- House Republicans on Sunday unveiled tweaks to two of the revenue-raising bills in Gov. Bill Walker's deficit-reduction package -- the proposals to levy a personal income tax and restructure the Permanent Fund to help pay for government.

The Republican-led House Finance Committee's replacement for Walker's income tax legislation, House Bill 250, makes the tax -- 6 percent of a person's federal income tax -- apply to income earned after Jan. 1, 2019.

That's two years after Walker's original version, which applies to income earned after Jan. 1, 2017.

The new version allows the state to set up a system to collect an income tax without lawmakers having to face immediate political consequences for taxing their constituents.

Rep. Steve Thompson, R-Fairbanks, said the new version of the bill would allow lawmakers to "pull the trigger" on the tax in the future if it ends up being necessary. He said he didn't know whether it had support to pass the House, where -- like in the Senate -- most GOP members greeted Walker's tax proposals with skepticism.

"We're not sure where a lot of people are with that right now," Thompson said in an interview. "So it's going to be interesting."

The income tax proposal is projected to raise about $200 million a year, a fraction of the state's $4 billion deficit.

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Walker's administration proposed it as a progressive measure that would take more money from high-earning Alaskans, since federal tax rates increase with income.

So far, the new, delayed version of the legislation is still in a draft form, which was released by Thompson's office late Saturday. Thompson said he expected to officially introduce it to the committee later Sunday, if time allows.

Meanwhile, the committee stopped its work on a separate bill to raise taxes on mining, commercial fishing and gas.

House Bill 249 drew sharp industry opposition during public testimony Friday, and the measure is not on the committee's schedule for Sunday -- the last day of the Legislature's scheduled 90-day session, which is now certain to be extended.

The running joke at the Capitol was that the measure had done the impossible in uniting the commercial fishing and mining industries on an issue, since the two are often at odds.

Thompson said the bill was set aside while lawmakers work on other legislation, adding that it could be revived. He denied lawmakers had succumbed to industry pressure, saying that they simply had "a lot of questions" about the legislation.

The finance committee Sunday also attached what it's calling a "volatility provision" to House Bill 245, which would restructure the $52 billion Permanent Fund to help pay for state government.

The provision acts as a throttle on the way that revenue from both oil and the Permanent Fund is transferred to state government. When oil revenue is more than $1.2 billion -- adjusted for inflation -- each additional dollar of oil money is offset by a dollar less that comes from the Permanent Fund.

That means state government won't get extra money from annual oil revenue above $1.2 billion until it completely offsets the money coming from the Permanent Fund, projected at $2.2 billion next year. Oil revenue above $1.2 billion would have to exceed $3.4 billion before it starts adding to the amount available for government spending.

Thompson said the provision was added at the request of Walker's administration, which initially pushed for a fixed, $3.3 billion withdrawal from a restructured Permanent Fund to eliminate the impact of oil revenue volatility on government spending.

"All in all, we're darned please with the bill," Attorney General Craig Richards, who has led Walker's legislative push on the Permanent Fund legislation, said in an interview Sunday.

He added that the Walker administration wants to make sure that the volatility provision, plus another element to ensure that the Permanent Fund's value keeps up with inflation, remains in the bill.

Nathaniel Herz

Anchorage-based independent journalist Nathaniel Herz has been a reporter in Alaska for nearly a decade, with stints at the Anchorage Daily News and Alaska Public Media. Read his newsletter, Northern Journal, at natherz.substack.com

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