Boedeker: State needs to look at options

Posted: Wednesday, August 27, 2003

Saying there is no magic solution, Soldotna City Manager Tom Boedeker told the Soldotna Chamber of Commerce on Tuesday the state must consider all the options to solve its budgetary woes.

He listed a state income tax, sales tax, revenue from the Alaska Permanent Fund and from gaming as possible sources of aid for the state's fiscal problem.

"You need to look at all, not just one," Boedeker said.

Clearly opposed to a state sales tax that would erode Soldotna's principal source of revenue, he told the group of business people that the governor has said a state income tax and taking revenue from the permanent fund "are not on the table."

"I think that's a mistake," he said. "You have to look at all the options."

Boedeker said some surveys have reported that a state income tax would best fix Alaska's problems, others have reported a sales tax as placing more of the burden on visitors rather than residents.

"But the devil's in the detail," he said, explaining that adopting each measure impacts the other.

For instance, he said the sales tax bill that remains before the state Legislature would eliminate sales tax on gasoline. That in itself, would have a negative $400,000 impact on the city of Soldotna.

Another facet of the bill being considered removes the sales tax exemption for nonprofit organizations, he said.

Boedeker distributed printed examples of what might happen if the state approved a state sales tax compared with the potential impact of an income tax.

"Where you sit in the system varies what you pay," he said.

In his first example, he hypothesized that if the state imposed a 3 percent sales tax, the owner of a $130,000 house in Soldotna currently paying $215 in city property taxes and $3,500 in federal income tax would pay $840 in state and city sales tax, no state income tax and $397 in property tax for a total of $1,237.

If a state income tax were passed, and no state sales tax, the same homeowner would pay $600 in city sales tax, $350 in state income tax and $215 in property tax for a total of $1,165.

However, if the family owns a $200,000 house and has a federal tax bill of $15,000, under a proposed state sales tax, the family would pay $840 in state a city sales tax, no state income tax and $610 in property tax for a total of $1,450.

Under a state income tax plan, the same family would pay $600 in city sales tax, $1,500 in state income tax and $330 in property tax totaling $2,430.

Boedeker's examples assume the state income tax would amount to 10 percent of the family's federal income tax, and that under a sales tax, motor fuel would be exempt.

Also, if the city sales tax were eliminated by the passing of a state sales tax, the city would need to increase property tax to make up for lost revenue, he said.

"It's not a simple solution," he said. "We have to look at it all."

Boedeker also said some studies have shown a state income tax does a better job of putting the burden on nonresidents than does a sales tax due to the number of non-Alaska residents employed in the state.

He asked the group to communicate with their legislators adding, "You're going to pay something, or you're going to see serious changes in the services the state provides."

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