House approves income tax

It was tax day.

 

On April 15, the Alaska House of Representatives voted 22-17 to impose Alaska’s first income tax in 37 years.

Rep. Paul Seaton, R-Homer, voted yes, while representatives Mike Chenault, R-Nikiski, and Gary Knopp, R-Kenai, voted no.

House Bill 115 heads to a reluctant Senate, and its legislative future is uncertain. Nevertheless, lawmakers on Saturday acknowledged their action was unprecedented in Alaska’s modern history.

Speaker of the House Bryce Edgmon, D-Dillingham, called it “a very extraordinary day in Alaska’s history.”

“I think this is one of the most important votes that I or the other members will ever cast,” said Rep. Jonathan Kreiss-Tomkins, D-Sitka.

Seventeen Democrats, three Republicans and two independents voted yes. Seventeen Republicans voted no, and Rep. Mark Neuman, R-Big Lake was excused absent.

After the vote, Senate President Pete Kelly, R-Fairbanks, released a prepared statement calling the tax “absurd on its face” and added, “As I’ve said many times, the only thing standing between Alaskans and an income tax is the Senate.”

If HB 115 is approved by the Senate and signed by Gov. Bill Walker, single Alaskans making between $14,300 and $50,000 per year will pay 2.5 percent of their adjusted gross income to the state. Alaskans making more money will pay a higher rate.

A single Alaskan making $50,000 per year will pay $992.50. Someone making $100,000 per year will pay $2,992.50.

A couple earning $100,000 per year will pay $1,985. A couple earning $200,000 per year will pay $5,985.

Since 2012, lawmakers have cut more than 44 percent from the state’s overall budget, according to figures from the nonpartisan Legislative Finance Division. Despite those cuts, the state still faces a $2.8 billion annual deficit, brought about by depressed oil prices.

The coalition majority in the House has introduced a four-part plan to erase that deficit by 2020. The parts (or “pillars,” to use the majority’s jargon) include cuts to the operating budget, cuts to state subsidies for oil and gas drilling, spending from the earnings of the Alaska Permanent Fund, and some kind of “broad-based tax,” jargon that this year means an income tax.

The tax is expected to generate only $687 million to pay down the deficit — and that not until fiscal year 2020 — but supporters said it is necessary to balance the burden of fixing the problem.

“HB 115 will balance and spread the impact equitably,” said Rep. Paul Seaton, R-Homer and a coalition member of the Alaska House Finance Committee. “This will complete the comprehensive, sustainable fiscal plan that so many Alaskans have asked us to do.”

Speaking on the floor, Rep. Andy Josephson, D-Anchorage, said passing the tax is necessary to pass other components of the deficit-fighting plan.

“A number of my colleagues are not going to support a dividend-only cut. They want a balanced plan. A balanced plan. And I can’t blame them,” he said.

Rep. Justin Parish, D-Juneau, said no one likes the idea of a tax, but he’s willing to support one to avoid greater budget cuts that will harm Alaskans. One in three Juneau jobs are funded directly by state or local government, according to figures from the Juneau Economic Development Council.

Parish’s voice broke as he spoke about how some students in the Juneau School District don’t get enough to eat.

“At this point, cuts are our most damaging option economically and — oh my goodness, there’s no comparison — morally,” Parish said.

Members of the House Republican Minority constituted all 17 “no” votes Saturday, and most said they had no interest in raising taxes when Alaska is in a recession.

That recession, like the state’s deficit, has been driven by falling oil prices.

“I think ultimately this is going to lead to a smaller economy for the state of Alaska, and I don’t think a smaller economy is good for anybody,” said Rep. Dan Saddler, R-Eagle River.

Rep. David Eastman, R-Wasilla, said he was wearing black in honor of the day.

Rep. Lora Reinbold, R-Eagle River, added that she does not feel that state government has been sufficiently cut.

“We have not cut to the bone. … There is so much to still cut,” she said.

Rep. Lance Pruitt, R-Anchorage, was among those who pointed to the irony of passing the tax bill on federal tax day (the deadline is officially Monday, because tax day falls on a weekend this year).

“I find it also ironic that it’s the same day the Titanic went down,” Pruitt said.

According to a statewide poll conducted by the Alaska Chamber of Commerce at the end of February and start of March, a majority of Alaskans remain opposed to an income tax.

The sole region of the state to support the tax is Southeast Alaska, where the poll found 51 percent of residents support the idea.

Outside the Capitol on Saturday morning, as legislators prepared to vote, a small group of protesters had gathered to request President Donald Trump release copies of his income tax statement.

Among them was Marian Call of Juneau, who said she wished she’d organized a “please tax me” rally instead.

Call pointed out that Alaska’s state government is still majority-funded by oil revenue, and she feels that an income tax would force state government to become more accountable to ordinary Alaskans.

“Whoever pays the bills owns the house, and I want to own the House,” she said as she aimed a thumb at the Capitol.

Contact reporter James Brooks at james.k.brooks@juneauempire.com or call 419-7732.

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