4th special session to look at income tax and crime bill

The Alaska Legislature heads back to Juneau for a fourth special session on Monday.

By proclamation of Gov. Bill Walker on September 22, lawmakers will have two bills to consider during their 30-day extra session.

One will be Senate Bill 54, which revises the criminal justice reform package passed back in 2016 based on recommendations by the Alaska Criminal Justice Commission. In particular, the bill would tighten up penalties for class C felonies and repeat thefts, violations of release and sex trafficking offenses.

The bill had been passed in the Senate by a 19-1 vote in April, but the version transmitted to the House was not taken up for consideration before the session’s end.

“It’s a good starting point,” commented Sen. Bert Stedman (R-Sitka), one of the Senate’s yea votes. While imperfect, he felt the bill would address a number of shortcomings with the current law as per SB 91 passed last year. That package had sought to reduce incarceration rates for less serious offenses, lifting some of the burden on corrections budgets as the state addresses its multi-billion dollar spending

deficits.

“I thought it had problems,” said Stedman, who is more inclined toward incarceration for such offenses.

His counterpart in the House, Rep. Dan Ortiz (U-Ketchikan) would also be inclined to support SB 54 in the special session, agreeing it would strengthen penalties for some crimes which are now “too lenient.” Neither legislator had voted in favor of SB 91 last year.

The second item on the special session’s agenda has drawn considerably more attention, with a proposal to enact a flat 1.5-percent tax on payrolls and self-employment earnings, for both resident and non-resident workers. This would be capped either at $2,200 or at twice the previous year’s permanent fund dividend amount, whichever is higher.

The governor’s proposal is expected to generate between $300 million and $325 million each year. The administration points out about 15 percent of that is projected to come from non-resident workers, who in 2015 earned more than $2.7 billion. Under this proposal, Alaskans would still be paying the lowest taxes on a nationwide basis.

Ortiz was supportive of Walker’s attempt at a partial solution to the budget situation, and already had an amendment in mind to propose that would give credit to property owners. Details on the amendment’s mechanisms were not available before Tuesday’s press time.

Sharing his thoughts, Stedman felt dealing with an income tax would be

premature without first dealing with the larger revenue proposal contemplated in Juneau this year, a restructuring of the Permanent Fund. Several different iterations made it to the floors of both chambers, with a percent-of-market-value draw held in common. One Senate version, SB 26, emerged as the main bill to be considered, which would propose a 5.25-percent annual draw toward the fund’s earnings reserve. This reserve would then be split between a dividend and operational spending.

Making available around $2 billion for the state’s coffers each year, of the different new revenue sources proposed SB 26 would have been the most feasible option to close up the annual deficit. The item passed the House but not the Senate during the regular session, however, and after an appearance on the agenda of the first special session held afterward no longer was put forward.

“I just think this is backwards,”

Stedman said. The more modest earnings from a state income tax would not come close to addressing the spending deficit, he explained, so it did not make much sense to adopt that first. “You may find that you don’t need some of these smaller taxes and you won’t be able to get rid of them.” He wanted to see more focus placed on encouraging business, such as expediting permit processing for new drill sites, than on additional taxes, believing the deficit should “be addressed with multiple levers.”

“We still have vast quantities of resources in the state. It’s not like we don’t have the ability to generate more revenue,” he said. Ahead of next January’s regular session, Stedman said he would be seeking out input from constituents on how to handle the problem. “We’re open to ideas, but taxing our way out of this is questionable.”