Sales Tax to Close Alaska Budget Gap?

In an effort to close the budget gap, it is speculated that Governor Dunleavy will introduce a sales tax bill. There are several tax proposals, including a tax on oil and gas production, an income tax, and a higher corporate tax.

The budget shortfall in the spending plan that the Alaska House passed last week is about $600 million.

Tax proposals introduced by lawmakers include an income tax bill by Rep. Alyse Galvin, oil tax measures by Rep. Cliff Groh and Sen. Bill Wielechowski, and a 2% sales tax by Rep. Ben Carpenter. These proposals are still in the early stages of development.

Proponents of the oil and gas production tax argue that the state should capitalize on its natural resources to boost revenue. The income tax proposal, on the other hand, aims to spread the tax burden more equitably, since it is a progressive tax, that is, it takes a larger proportion of high-income earners, who have benefited most from the Alaska economy.

A sales tax would generate additional revenue to address the budget deficit and reduce reliance on the state's savings. It would create a more stable revenue stream, lessen our dependence on volatile oil and gas prices, and reduce the need to dip into the state's savings accounts.

Critics of the sales tax bill argue a statewide sales tax would result in rural Alaska paying a higher sales tax due to the higher prices in the region. Sales taxes, in general, are a cause for concern as they result in low-income Alaskans paying a higher proportion of their income in sales taxes compared to their wealthier counterparts.

While cutting the Permanent Fund Dividends would decrease the budget gap, it is also a regressive measure since it would affect affluent and impoverished Alaskans equally. A progressive income tax that would tax higher-income earners a higher proportion of their income, and would offset a payout of a higher Dividend without creating more pressure on the budget and without penalizing lower-income Alaskans.

You can contact the House Ways and Means Committee and tell them your thoughts on how to close the budget gap.

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