Maybe Alaskans just needed more time to get used to the idea of paying taxes, or maybe the risk of losing their Permanent Fund dividend woke them up to the state's dire fiscal situation. Whatever the reason, several legislators say their colleagues and constituents are now more willing to talk about, consider and maybe even accept taxes.
"I think that when you're bent over the cliff, hanging by your ankles, it brings reality into sharper focus," said Fairbanks Sen. Click Bishop, co-chair of the Senate Finance Committee.
Bishop has advocated for years for an increase in the state motor fuel tax, which is the lowest in the nation by far, and for a per-person tax to help pay for schools.
"The world is changing," he said, and Alaska needs to look at how it can support itself in a "post-oil economy." To get there, more lawmakers are willing to consider taxes, said Bishop, who lived in Wrangell in 1968 when he was 11 years old.
Based on current oil revenues and the budget for public services, the state is unlikely to be able to afford a dividend beyond a few hundred dollars this fall, unless legislators dig deeper into Permanent Fund earnings.
Gov. Mike Dunleavy's fiscal plan for the budget year that starts July 1, 2022, shows a $1.2 billion budget hole, which he proposes to fill with "other revenue sources," though he has offered no specific proposals.
Alaska has reached "the edge of impossibility" when it comes to providing public services, paying dividends and maintaining a tax-free life, said Juneau Sen. Jesse Kiehl. That has led to more talk among legislators of the reality of state taxes.
Whether a majority of the 20 senators and 40 House members are willing to vote to impose taxes, Kiehl said he is not sure. But maybe, said Senate President Peter Micciche. "The concept that many of us are looking at is an all-in approach, where everyone pays a little," he said. The public appears willing to accept a smaller PFD "if they're not the only ones giving."
That includes the oil industry, the Soldotna Republican said. Though voters in November rejected a citizen's initiative to boost oil production taxes by as much as $1 billion a year, legislators may consider a smaller increase this session, Micciche said, following the belief that the best chance of political success is a plan where everyone pays something toward a comprehensive solution to Alaska's long-term fiscal gap.
That includes individual Alaskans, he said. "In this caucus," he said of his Republican colleagues, the chances for a state personal income tax "are non-existent."
That leaves a state sales tax. "We hope that the communities that are resistant to a sales tax" will talk with legislators to make a state tax work for municipalities, Micciche said.
The senator said he favors a "low and broad," sales tax, with a low statewide rate and broad application - few exemptions or limits.
Legislators and municipalities would need to resolve how to blend a state sales tax with the local taxes that exist in more than 100 cities and boroughs statewide.
Making decisions this year would be preferable, Micciche said. "Folks who are feeling very brave right now may lose some of that bravery" next year, an election year.
He acknowledged that many lawmakers and many Alaskans have been talking about taxes for years. "It's not a new concept."
Alaska has never had a state sales tax, and the Legislature abolished the personal income tax in 1980 as oil money was making the state rich. It's just taken Alaskans awhile to confront the fiscal situation.
"I'm glad to see more legislators talking about it (taxes)," Kiehl said.
The risk of no dividend and the fact that the state has mostly emptied out its more accessible reserve funds over the years leaves no realistic options other than taking more from Permanent Fund earnings and/or implementing a tax, he said. That combination of stark financial reality is "the brick that hit people in the head," Kiehl said.
"The full PFD is not going to happen," Micciche said of the governor's call for a $3,000 dividend for every eligible Alaskan. "Math is math," and the state does not have the money, the senator said. The state has not paid the so-called full-size dividend since 2015 due to dwindling state reserves.
The Legislature has relied on the Constitutional Budget Reserve Fund to balance the budget about half of the years since the fund was created 30 years ago. State projections estimate that the fund will have shrunk to below $1 billion as of the end of the fiscal year on June 30.
"Walker popped the cork and tried to pour it too soon," Micciche said of then-Gov. Bill Walker's proposals for a state tax a few years ago.
"We've been frozen in time for five years because everyone wanted exactly what they wanted," the senator said. "I think we're ready" for a compromise that involves everyone paying something, he said. "We need to lean on the most stodgy."
Reader Comments(0)