To get discussion going, sales tax, 'gross receipts' tax offered as options

New tax measures proposed

Posted: Monday, April 23, 2001

We Alaskans are somewhat the victims of our own prosperity. We have seen our economy flourish and have all enjoyed the good things that came with prosperity. Despite much debate, we have been unwilling to accept the responsibility of balancing our budget without spending down our reserves.

Many people don't believe we have a problem because in balancing a budget with savings there appears to be no crisis. Unfortunately, if we don't act now we will be operating under crisis management. So, our need to consider ways to provide more state funds is very real.

In recent years, the Legislature has made considerable progress in cutting back government spending, putting our capital improvements on hold and making do with what we have. Many cuts have merely delayed the inevitable; however, deferring deferred maintenance is not a solution. We need to invest in our future, and investing takes revenue.

There are several alternatives for raising revenue -- among them is a sales tax, another is a gross receipts tax imposed only at the point of final sale.

For purposes of discussion, I have introduced House Bill 233, a sales tax bill, and am also in the process of drafting a "gross receipts" sales tax bill as another alternative. Many people, myself included, didn't know we actually had a gross receipts sales tax on the books from 1949 through 1979. It was repealed along with the income tax.

Under either of these tax scenarios, tourists and visitors would also contribute substantially to supporting our state's budget, revenue that the state would not have otherwise. The revenue generated by either tax would be deposited into the general fund to help pay for the many services state government must provide.

The sales tax I am proposing in HB 233 is a minimal one set at 2 percent and capped at $2,000. This tax may produce between $200 million to $300 million per year (using 1998 estimates of sales). HB 233, the sales tax proposal, exempts from taxes certain nonprofit organizations, churches, federal, state and local government, other federal and state required exemptions, medical services and drugs or medical supplies, casual sales, goods purchased for resale in a business or wholesale sales to those businesses, insurance premiums and freight and shipping services. The purpose is to collect a sales tax only from the final consumer of a service or good.

However, a sales tax alone would not provide sufficient funds to fill our current or future budget gaps; but, in combination with other alternatives, it could contribute considerably toward that goal.

The gross receipts tax I am proposing is also, in its most simple form, a tax on the goods at final sales collected. It has many of the exemptions mentioned in HB 233 and is also proposed at 2 percent.

Because the sales tax is added on to the price of the product at the time of sale, it is highly visible to the consumer. On the other hand, the gross receipts tax would be invisible to the consumer because it would be levied on the seller's total revenue stream as reported to the Department of Revenue. This would be much easier to calculate and verify.

In addition, there would be no cap on the amount of the sale covered by the gross receipts tax in this proposal. Because it would be a completely separate calculation, the gross receipts tax would not be confused with or interfere with municipalities' or boroughs' collection of sales taxes.

I am asking the House Community and Regional Affairs Committee to hold a teleconferenced hearing on these two bills together and to do so before the end of this legislative session. If we can fit it into the committee's schedule, I hope you will take the opportunity to express your opinion on them.

Rep. Drew Scalzi of Homer is a first-time Republican representative for House District 7.

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