Juneau legislator introduces income tax bill

Posted: Tuesday, March 20, 2001

JUNEAU (AP) -- Rep. Bill Hudson has introduced a state income tax bill that he says would raise $250 million to help plug Alaska's long-term fiscal gap.

Under the measure, those making money in Alaska would pay the state 15 percent of their federal income tax liability. That means a person paying $5,000 in federal taxes would also owe the state $750. State income taxes are deductible for federal tax purposes, though.

Hudson, R-Juneau, doesn't expect the bill to pass this year. But he said he wanted to spur debate about the need for a long-range fiscal plan.

''I believe we can't just keep burying our heads in the sand,'' Hudson said.

The state is currently filling the gap between spending and revenues by drawing money from the Constitutional Budget Reserve, a state savings account. This year, the gap is expected to be about $500 million. At that rate, the reserve will be drained by around the 2005 fiscal year, Hudson said.

The $250 million from the proposed income tax wouldn't plug the gap alone,, but it could be a piece of the solution, Hudson said.

He has also introduced a bill that would use part of the Permanent Fund's earnings to replenish the Constitutional Budget Reserve once the reserve dropped below $1.5 billion.

''We are not without opportunities, but we are without opportunities if we wait until we use up our two essential savings accounts,'' Hudson said.

Hudson said he believes some legislators, both Republican and Democratic, will support the proposal.

It's likely to face a hurdle, though, in the House Finance Committee where Co-chairman Eldon Mulder adamantly opposes an income tax.

''It makes very little sense to me that we're going to tax people on one hand and give out free money on the other hand,'' Mulder said. ''The only people who get assessed then are the working people.''

Senate Majority Leader Loren Leman, R-Anchorage, said he hadn't seen the bill and didn't want to comment on it.

''The odds of getting a major tax initiative through this year is really a long shot,'' Hudson acknowledged. ''This might take a couple of years. In fact, I suspect it will.''

Hudson said legislators need to talk with their constituents over the interim about the state's financial problems and the need for a plan.

''You've got to build the grass roots,'' Hudson said.

Hudson was part of a group of six Republicans and one Democrat who proposed a long-term fiscal plan last year that included using earnings from the Permanent Fund and an unidentified broad-based tax.

Rep. Carl Moses, D-Unalaska, also introduced an income tax bill this year, as he has done in past years. His previous income tax bills have died in committee.

Minority Leader Ethan Berkowitz, D-Anchorage, was pleased a member of the Republican-led majority introduced the bill.

''I commend him for having the courage to throw something in the hopper,'' Berkowitz said. ''Now I would call on the majority leadership to start moving some of these bills and allowing us some substantive discussion on them.''

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