Legislature could restore old state tax for education

Rich with oil dollars, the Alaska Legislature in 1980 abolished the state’s annual $10-per-person tax that went to help support schools.

More 41 years later, with North Slope oil production at its lowest level since the giant Prudhoe Bay field went online, and the state facing chronic budget gaps, a House committee this week is holding hearings to bring back the tax.

The proposed tax would bring in an estimated $65 million a year, less than 10% of annual state budget deficits in recent years, but it’s a start, said Anchorage Rep. Ivy Spohnholz, chairwoman of the House Ways and Means Committee.

“The first mile of a marathon,” she said of the legislation, which was scheduled for its first hearings in the committee Tuesday and Thursday this week.

Though the constitution prohibits dedicated revenues, the intent of the legislation is that the funds go toward the state’s share of public education spending.

The tax on wage earners and self-employed people, residents and non-resident workers alike, would range from $50 to $500 per person per year, depending on their income. The $50 rate would apply to anyone earning less than $20,000 a year; the $500 annual tax would apply to anyone earning more than $500,000 a year; with different tax levels in between.

The education tax was a flat $10 per person when it was abolished in 1980, assessed on every employed person over the age of 19. The levy started at $5 per person when Alaska was a territory in 1919, “collected from every employed male aged 21-50,” Spohnholz pointed out in a chronicle of the tax.

“Alaska has a long history of supporting public education through financial contributions collected from wages earned within the state,” the representative said.

“This is not a new idea,” Rose Foley, Spohnholz’s chief of staff, testified at the bill’s introduction before the committee last Saturday.

Lawmakers face a May 19 adjournment deadline, and though a special session is possible to complete unfinished work, any tax legislation faces significant challenges in the closely Republican-Democrat-divided Legislature.

Another tax bill before lawmakers this year — to raise the state motor fuel tax for the first time since 1970 — is scheduled for a hearing in House Finance on Friday, almost 11 weeks after the bill was introduced.

Lawmakers generally acknowledge that declining oil revenues have left the state unable to cover all of the needed public services and the annual Permanent Fund dividend, but finding a lasting fiscal solution has been elusive.

Bills that don’t pass this year stay alive for consideration next year.

House members created Ways and Means as a special committee this session “to consider methods to control state spending; identify ways in which state government programs may be made more efficient; and propose new measures to raise additional state revenue.”

The legislation creating the special committee said: “It is urgent that the state government bring its spending and revenue balance to ensure that essential services are provided and to protect the economic stability of the state.”

The Department of Revenue estimates it would cost about $600,000 a year to collect the new education tax after initial setup expenses.