Governor's Compromise: Senate’s education head tax; $1,000 PFD; End oil & gas subsidies; Motor fuels tax; House’s operating budget; Governor’s capital budget
By MARY KAUFFMAN
June 05, 2017
“I will be the first to admit that this package will not please everyone,” Governor Walker said. “In fact, there are pieces I don’t like. But we must all give a little to ensure a viable plan is in place well before July 1. Otherwise, government services - like issuing fishing permits, continuing ferry runs and addressing consumer protection issues - will be shut down. Alaskans deserve to have their elected officials come together in true compromise. This session cannot be determined by whose caucus won, otherwise all Alaskans will lose. We must pull together to end the uncertainty that hangs over classrooms, families and our future.”
According to a news release from the Governor, the proposed package will stabilize the economy using bills that have already been introduced and considered and the state gets a level of fiscal stability but must continue significant spending restraint.
“Last year, we had a deficit of at least $3.7 billion, and with this compromise, we will have a $300 million shortfall,” Governor Walker said. “All of the tools necessary to address this fiscal crisis are currently on the table. This compromise averts a shutdown in government services, provides greater long-term revenue stability and creates a foundation upon which we can build our future. There is no reason the legislature cannot reach a compromise within the next 10 days.”
The Alaska Senate gets its version of SB 26, close to the house version HB 111 and is able to make larger payments to the oil and gas industry for tax credits. But the Senate has to concede a modest broad-based tax structure and adopt the Alaska House’s operating budget. Under the Governor's compromise proposal, the Alaska House is a big winner being assured a status-quo operating budget.
The Governor is also proposing the broad-based tax structure of Senate Bill 12, another form of an income tax. SB 12 would impose a limited educational facilities, maintenance, and construction tax on net earnings from self-employment and wages; relating to the administration and enforcement of the educational facilities, maintenance and construction tax.
While the $100 million in projected revenue from S.B. 12 would be directed to K-12 schools, the Alaska Constitution does not allow funds to permanently dedicate funds for a specific purpose, meaning the money generated from the tax could actually go to pay for anything if future legislatures decide that is necessary.
The Governor's compromise includes the end of cashable oil and gas credits. In return, the House must accept a smaller dividend, meaning Alaskans would see a smaller dividend of $1,000 rather than the $1,250 proposed by House Democrats (Majority Coalition). The House must also accept less revenue and progressivity, and limited oil and gas reform.
S.B. 12, another form of an income tax, will tax wages and net earnings from self-employment of every resident; and nonresident and part-year resident with income from a source in the state.
Earnings and Tax:
(1) less than $20,000, the tax is $50 a year;
An employer will deduct and withhold one half of the estimated taxes due from an employee's wages from each of the first two regular payrolls of the calendar year. If the employee's first two payrolls are insufficient to cover the estimated tax due, the employer will continue to deduct and withhold from subsequent payrolls until the tax due to the state is fully withheld.
Self-employed will be responsible for paying their own taxes.
Motor Fuels Tax: Alaska’s base excise tax rate on gasoline and diesel fuel is 8 cents per gallon, with local sales taxes and the state’s spill prevention tax bringing the statewide average rate to 12.25 cents for gasoline and 12.75 cents for diesel fuel. The proposed tax rate increase would bring that amount to 28,25 cents for gasoline and 28.75 cents for diesel fuel. The Governor's compromise proposes either version House Bill 60 or Senate Bill 25.
Under the Governor's proposal:
The Governor's budget compromise includes moving the following legislation in the order presented.
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