Lawmakers, Knowles reach agreement on tax plan

Posted: Tuesday, April 30, 2002

JUNEAU (AP) -- House Republican and Democrat leaders meeting with Gov. Tony Knowles on Monday reached a compromise in an effort to jump-start stalled talks over closing the state's budget deficit using taxes and the permanent fund.

They're proposing an income tax that raises up to $250 million along with the same amount in permanent fund revenues and a modest increase in the state's alcohol tax.

If the plan is approved, it would cut an anticipated $1 billion budget deficit in half by the first full year of collection.

''I think it's got a lot of potential and I'm very hopeful the caucus will approve it,'' said House Speaker Brian Porter, R-Anchorage.

Knowles began meeting with a group of 12 House Republicans and Democrats after it became apparent the debate over new revenues this year had stalled.

The two sides had been deeply divided on a plan to close a hole in the state's budget that the state Department of Revenue estimates will be $963 million by July 2003. The deficit is expected to top $1 billion by fiscal 2004, according to the department.

Porter said he will take the plan back to the House Majority Republican Caucus on Tuesday to determine whether it has enough support for a vote on the floor.

The income tax plan -- offered by Rep. John Davies, D-Fairbanks -- would apply to anyone who files a federal income tax return and cost individual Alaskans on a graduated scale.

The plan would equate to about the same tax paid by individual Alaskans under a sales tax proposal backed by many House Republicans.

Wealthy Alaskans would pay less of a percent of their income to the state under this tax than poor- to middle-class residents, according to information released by Davies.

It also includes a ''trigger'' mechanism that lowers the tax as the state's Constitutional Budget Reserve grows, Davies said.

House members have been at odds over several revenue-raising proposals aimed at closing a chronic budget shortfall and breaking the state's dependence on oil income for state government.

Earlier, the House rejected an income tax proposal supported by Democrats and some moderate Republicans. A GOP plan to impose a 3 percent statewide sales tax has been unable to win the necessary 15 Republicans to bring it to the floor.

There's enough support among House Republicans to bring the latest income tax plan to the floor, Porter said. But it's not clear whether the other revenue measures have caucus support, he said.

At least 10 Democrats back the income tax proposal and another 14 Republicans have expressed support for the plan, Davies said.

Leaders plan to use a more modest increase in the state's alcohol tax than the dime-a-drink increase proposed earlier this year. Under the plan, the tax would be raised 7.5 cents from its current 2.5 cents per drink, Davies said.

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