PALMER -- The Matanuska-Susitna Borough is weighing its third sales tax proposal in a decade, this time to offset property taxes expected to rise amid Alaska’s as-yet unresolved budget impasse.
The 2% sales tax would go before voters in November under legislation sponsored by Mat-Su assembly member Jim Sykes. The tax would apply to sales, services and rentals. Amendments from other members include an effective date in July instead of January, dropping property tax levies to match tax revenue, and eliminating all but legally required exemptions.
The proposal reflects the “current uncertainty regarding the fiscal condition of the State of Alaska,” according to a memo filed with the tax-vote ordinance. “(I)t is prudent to diversify the sources of tax revenue to the Matanuska-Susitna Borough so that real property taxpayers do not continue to shoulder the tax burden.”
Any tax revenue would offset property taxes, not raise overall borough revenues, the memo states.
The state’s operating budget remains unresolved following $444 million in operating budget vetoes from Gov. Mike Dunleavy and a debate over the amount of this year’s Permanent Fund Dividend. Legislation that hit the governor’s desk Wednesday morning, House Bill 2001, would reverse most vetoes and pay a $1,600 dividend. The governor favors a $3,000 check.
There’s some indication there are “some things that might survive the governor’s veto pen as he looks at this operating budget,” Dunleavy’s Mat-Su director, Todd Smoldon, testified Tuesday night at the assembly hearing. He specifically referenced vetoes to Division of Agriculture programs based in Mat-Su, including seed inspections and local produce sales at grocery stores.
“But there isn’t any indication that the governor won’t just veto everything that was added back in,” Smoldon said.
Not a single member of the public spoke in favor of a sales tax during Tuesday’s hearing.
Critics called it poorly timed, given continued questions about the budget. Many also said they didn’t trust the borough to keep property taxes lower, calling the proposal a way to justify a sales tax without a sunset date.
“Because of the budget crisis at the state level, everybody is kind of looking at the borough - what are you going to do to us?" said Carol Carman, a Palmer resident who serves as a district chair for the Alaska Republican Party. “John Q. Public is going to look at that sales tax and they’re not going to believe for one minute that money is going to come off their property tax.“
The mayors of Wasilla and Houston also expressed disapproval given existing sales taxes there. Wasilla and Palmer already levy 3% sales taxes, Houston a 2% sales tax.
The borough will hold a second public hearing on the sales tax proposal Aug. 20.
The assembly on Tuesday night did pass a tax credit or rebate if state school debt reimbursements come in over $9.2 million. The borough budget was crafted to reflect a larger loss.