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Politics

In Alaska Legislature, a second Republican proposes tax measure

  • Author: Nathaniel Herz
  • Updated: September 28, 2016
  • Published April 7, 2015

JUNEAU -- A second Republican legislator has proposed a tax on Alaskans' income as a way to start closing the state's huge gap between revenues and spending.

Fairbanks Sen. Click Bishop, a moderate Republican, on Tuesday introduced legislation to impose what he's calling an "education tax" of at least $100 for anyone who makes more than $10,000 annually. The rate jumps to $200 for people who make between $50,000 and $100,000, and is capped at $500 for anyone making $500,000 or more.

That means people who earn $10,000 would be forced to pay a tax representing 1 percent of their annual income, while those who make more than $500,000 would pay no more than 0.1 percent.

Bishop's measure, Senate Bill 97, follows last week's introduction of a conventional income tax bill by Homer Rep. Paul Seaton, another moderate Republican. Both men have said their legislation is needed to address the state's budget deficit, pegged at about $4 billion this fiscal year.

Many of the members of the Republican-dominated House and Senate majorities say they're focused on making budget cuts this year before starting conversations about new taxes or other revenue sources. But in an opinion piece published in statewide newspapers Tuesday, Bishop said legislators should start that discussion now.

"It would be irresponsible for Alaska's elected leaders to wait until our savings are drained before we put new revenue-generating programs on the books," wrote Bishop, who staff members said was unavailable for comment Tuesday afternoon.

Bishop wrote that a tax like the one he's proposing could generate $40 million to $160 million. His legislation says the money may be used for education but that's not required — and, in fact, the state's constitution bars the Legislature from earmarking taxes for a specific purpose.

Democrats and most other Republicans have reacted skeptically to the new tax proposals, with Democrats saying they'd prefer to raise taxes on the oil industry and many Republicans saying they want to keep their focus on cutting the state budget.

Senate President Kevin Meyer, R-Anchorage, said in an interview that the money that would be raised from Bishop's tax bill is "still a long way" from covering the state deficit.

Meyer predicted that the bill wouldn't come up before the end of the legislative session, currently scheduled for April 19. But he added that it could be one of many new revenue sources considered by the Legislature in the future.

"This session is the session for reduction," Meyer said. "Next session could be something else."

A spokeswoman for Gov. Bill Walker, Grace Jang, declined to comment specifically on Bishop's bill. But she said a discussion about diversifying the state's revenue is "absolutely" a priority for Walker's administration, which is planning to solicit ideas from Alaskans soon.

The Legislature's top financial analyst, David Teal, has said that taxes are unavoidable if lawmakers want to close the state's deficit.

It's unlikely that either Seaton's or Bishop's tax bill will pass before the end of the legislative session, said Gunnar Knapp, an economist who directs the University of Alaska Anchorage's Institute of Social and Economic Research.

But Knapp said he applauded the introduction of both measures for starting a conversation. Just two weeks ago, he bemoaned the Legislature's lack of a "realistic discussion" about new revenue sources.

"Only by putting something down — by putting it down on paper and saying, 'I'm tossing this idea into the ring' — only then do you begin to focus a conversation," Knapp said in a phone interview. "These are useful starts to this discussion. It's like, 'Oh my God, somebody said the t-word.'"

Bishop's bill calls for employers to withhold half of the total annual tax from employees' first two paychecks each year — which could be significant for workers who make close to $10,000 annually, or $386 weekly.

Knapp said Bishop's tax bill was both regressive and progressive. The broad income categories mean that someone earning $11,000 annually has to pay the same $100 tax as another person earning $45,000 — but the rate does bump up once income reaches $50,000.

It's not the first time a tax like Bishop's has been proposed.

The state used to have a $10 annual tax deducted from payrolls that was known as an "education tax," though it was repealed in 1980 as the state received a huge new revenue stream tied to newly flowing North Slope oil. That was the same year Alaska repealed its income tax.

Lawmakers failed in multiple efforts to reinstate an education tax a decade ago. One version in 2001 would have imposed the tax at $100 for every Alaskan 19 or older and employed.

If it passes, Bishop's bill would ultimately repeal itself in 2024.

The bill would also self-destruct if a ship full of liquefied natural gas leaves a port in the Kenai Peninsula community of Nikiski. That would signal the completion of a natural gas pipeline project from the North Slope — and that the state would be expecting a big windfall of cash.

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