Sales tax plan clears hurdle in the House

Posted: Friday, March 15, 2002

JUNEAU (AP) -- A plan to impose a 3 percent statewide sales tax to help close a hole in the state budget passed a House committee on Thursday.

The bill was approved in the House State Affairs Committee by a 5-2 voice vote. It now goes the House Finance Committee.

Committee Chairman John Coghill, a Republican from North Pole and an opponent of statewide taxes, said he took action on the bill to spark debate. Coghill and Rep. Peggy Wilson, R-Wrangell, cast voice votes against the bill.

''All I wanted to do is send them up a bill that I felt should be part of the discussion,'' Coghill said.

But before the measure was approved, Coghill amended it to void the tax if the Legislature approves a fiscal 2003 budget this year that increases state spending.

Taxes and budget cuts have been constant themes in the Legislature this session as Alaska faces a projected shortfall of $865 million this year.

Declining oil revenues -- which account for about 80 percent of state revenues -- and a dwindling reserve account have prompted lawmakers to consider statewide taxes.

A bipartisan Fiscal Policy Caucus is proposing a 4 percent income tax, based on federal taxable income. However, members of that caucus admit that an income tax faces a tough battle in the House.

''Right now I think the votes are for a sales tax. I'm hoping we can reverse that,'' said Rep. John Davies, D-Fairbanks, a member of caucus.

However, the sales tax plan also has its critics. Wilson complained that it would be disastrous to Wrangell, which already has a sales tax in place.

A sales tax is also opposed by the Alaska Municipal League, which represents cities and boroughs. The group said a state sales tax impedes the ability of local governments to raise funds.

About one-third of Alaskans in 97 communities now pay a local sales tax, said Larry Persily, deputy commissioner for the Department of Revenue.

The sales tax plan is sponsored by Rep. Jim Whitaker, R-Fairbanks. It is estimated to raise more than $250 million.

The tax exempts prescription drugs, health care services, funeral costs and some utilities. It also exempts housing rent and places a $2,000 cap on taxing big-ticket items.

Coghill said the measure also has an incentive to require the state Department of Revenue to collect taxes for local governments that adopt similar tax provisions.

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