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Sales tax not way to go

Posted: Tuesday, May 11, 2004

The Alaska Conference of Mayors has taken a long and steadfast stand on the issue of Alaska's fiscal problem. The mayors strongly support the percent of market value or endowment solution that balances the budget, continues permanent fund dividends and better protects the permanent fund.

We remain eager and willing to discuss with the Legislature and the administration ways to come up with a fiscal plan that would help to realize a healthy state with strong communities. It is imperative that the Legislature take this issue seriously and come up with a plan for new revenue this year. It's true that oil prices are the highest we've seen in a very long time, and while this is great, it's also true that the oil won't last forever.

While some would tout a sales tax as a good way to raise new revenue, local elected officials and many community leaders remain very concerned about the ramifications of a statewide sales tax on their communities.

Sales tax has long been the purview of Alaska's municipalities. Cities and boroughs in Alaska have the option of imposing a sales tax to help pay for local government services in their communities. The Alaska Constitution was explicit in this permission, and this ability was granted long before the state had any idea what the oil boom would mean for state coffers. Adding an additional state sales tax to the already established local sales taxes will have a detrimental impact on Alaskans who are already paying at the local level.

A statewide sales tax would have a huge impact on rural and coastal Alaska. Residents in these areas already pay more for goods and services due to the expenses related to delivery and shipping.

For example, the average gallon of milk costs $4.39 in Anchorage but $7.19 in Kotzebue. It's the same gallon of milk, but the tax on it would be based on its cost, which obviously varies widely between urban and rural areas.

Through the years, the state of Alaska has made an effort to make all of Alaska's communities successful. Programs such as the Revenue Sharing program (dating back to 1969) and the Capital Matching Grants program have allowed small and rural municipalities to enjoy the same level of services and amenities that larger communities enjoy.

Last year, the Revenue Sharing program was cut. Funds for other community enrichment programs are being cut every year. A statewide sales tax would be another nail in the coffin for Alaska's communities.

Even without a statewide sales tax, communities have adjusted the rate of tax, the exemptions allowed and have instituted caps and limits to ensure that local business can remain competitive throughout the state.

Several communities have decided not to institute a sales tax and instead have instituted higher property taxes to cover government expenses. Local officials are very aware of what the local residents can bear financially.

As Alaskans, we must look out for our neighbors. Sales taxes in our communities are already as high as 7 percent. A state sales tax of 3 to 4 percent would give many communities the highest sales tax rates in the United States. While a state sales tax could be feasible in one community, it may damage the economy and cause financial hardship to another.

The Alaska Conference of Mayors remains committed to working with the Legislature and Gov. Frank Murkowski to come up with a plan for revenue and spending this year for all Alaskans. Alaskans have worked hard to make our state a place we can all be proud of. We need to continue to work hard to ensure the positive future of this great state.

Kathie Wasserman is the mayor of Pelican and the president of the Alaska Conference of Mayors.



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