Municipal League backs state income tax

Posted: Sunday, July 27, 2003

JUNEAU (AP) Despite repeated statements by Gov. Frank Murkowski that he opposes a state income tax, Alaska cities are planning to push for one as part of a long-range fiscal plan next year in the Legislature.

Meeting this week in Girdwood, the Alaska Municipal League overwhelmingly supported an income tax, said executive director Kevin Ritchie.

The municipal league represents more than 100 Alaska cities and boroughs.

Ritchie said the conference explored income taxes, sales taxes, and a variety of smaller taxes such as the gasoline tax and cruise-ship head tax.

But there was overwhelming support for an income tax, largely because as much of a quarter would be paid by someone other than Alaskans, Ritchie said.

''With a sales tax, far more of that would be paid by Alaskans than if there was a state income tax because of the federal IRS deduction and the out-of-state workers,'' Ritchie said.

About 125 league members and community leaders attended the conference. The group also discussed establishing municipal fiscal notes for bills in the Legislature. Fiscal notes would establish the financial impact of legislation to cities.

Members also discussed using a portion of Alaska Permanent Fund earnings to pay for municipal government.

The league opposed the statewide sales tax that died in the Legislature last session but the organization made little effort to push for an income tax.

Alaska eliminated the state income tax in 1980, when the state was awash in money from North Slope oil.

A decline in oil production in the late 1980s and through the 1990s, led to smaller budget increases and a search for new revenue. Following the legislative session this year, Murkowski cut $138 million from the state budget.

Those cuts included $22 million in municipal revenue sharing and Safe Communities. That program helps fund police, public safety, fire protection, emergency medical services, water and sewer services not offset by user fees, solid waste management and other services.

The cuts also slashed $15 million in community matching grants for public works projects.

Ritchie said the league identified the state income tax as a top priority next year.

Ritchie said he is unsure if Murkowski will budge on the income tax issue. However, he noted, ''The purpose of government is to help people make choices. I think there was a lot of discussion on communities actively taking part in laying out the options, because this is not just a state issue.''

He said the league will work with other organizations to educate the state on the pros and cons of an income tax.

Murkowski spokesman John Manly said the governor has made it clear that he will not support an income tax.

''You are taking away money that one person earned to provide services that another person thinks they need,'' Manly said.

''It's an old debate that centers around class warfare,'' Manly said. ''They think rich people shouldn't be able to get rich. ... If they think that's progressive, I guess I don't.''

Jim Powell, a Juneau Assembly member, supports an income tax because of the federal deductions and out-of-state employees that would reduce the impact.

''If the saying is the best tax is the one that somebody else pays, then this is the best tax,'' Powell said.

Scott Goldsmith, a University of Alaska Anchorage economics professor, told conference attendees that the state would capture about 7 to 10 percent of a sales tax from those living outside of the state, mainly from tourists and independent travelers.

About 22 to 25 percent of an income tax, however, would be paid by non-Alaskans. About 8 percent would be paid by seasonal workers, and the rest would be paid by the federal government through tax deductions, Goldsmith said.

''That still begs the question: Why should we tax ourselves 75 percent of this tax,'' Manly said.

Goldsmith also noted that implementing the sales tax would be harder because it would have to be reconciled with varying local sales tax exemptions.

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