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Alaska State Income Tax Proposed as Part of a Solution to Alaska’s Budget Deficit

Posted and Edited By MARY KAUFFMAN

March 07, 2021
Sunday PM

(SitNews) Juneau, Alaska - Friday, Senator Tom Begich (D-Anchorage) introduced legislation to establish a flat five percent income tax based on your federal tax rate. Senate Bill 100 would generate new state revenue from residents and non-residents earning an income in Alaska. Currently, nine other states have a flat broad-based income tax ranging from three to 5.25 percent.

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“The road Alaska is on has finally arrived at the edge of the fiscal cliff. Alaskans realize we need a balanced fiscal plan - a plan that relies on a balance of revenue sources and other solutions, not just on one or two major sources like oil and the Permanent Fund,” said Sen. Begich.

Begich said, “We need a plan where we all play a part - where Alaskans and those who make their profit or their living here invest directly in the services we all use. That commitment will, in turn, increase taxpayer scrutiny of the budgets we produce.” 

Quoting Begich's news release, Alaska’s budget has seen a decrease of nearly $4 billion, or 38.4 percent, over the past seven years. Since 2014, the legislature spent $18.8 billion from savings, leaving the bare minimum of $550 million in the Constitutional Budget Reserve and completely depleting the Statutory Budget Reserve.

Governor Michael Dunleavy recently proposed $1.2 billion of new revenue starting in 2023 but Begich says the governor hasn’t identified how the new revenue is generated. 

“I am not sure how the Governor intends to generate $1.2 billion without a plan on the table – I haven’t seen his proposals. But I know that Senate Bill 100 will kickstart that discussion on how we generate the new revenue his budget team cites,” concluded Sen. Begich.

The non-partisan Alaska Legislative Finance Division estimates this proposal to potentially generate $1.4 billion of new revenue for the State of Alaska, starting in 2023. 

Senate Bill 100 is referred to the Senate State Affairs Committee and the Senate Finance Committee. If approved, this act would ttake effect January 1, 2022.

Alaska’s tax system underwent major changes in the 1970s when oil was found at Prudhoe Bay. Lawmakers repealed the state’s personal income tax and began balancing the state’s budget primarily with oil tax and royalty revenue instead. 

As reported by the Institute on Taxation and Economic Policy (ITEP), over the last several years, ITEP has helped inform Alaska’s ongoing debate over new revenue sources that could replace declining oil revenues.

In March 2020, according to ITEP's analysis of revenue options for Alaska, the magnitude of the Alaska’s fiscal problems likely calls for one of the two major taxes levied by most other state governments: either reinstating a personal income tax or enacting a statewide general sales tax instead.

The Alaska Legislature reached the halfway mark Saturday for the 90-day regular session. 



On the Web:

SB 100 "An Act relating to the taxation of income of individuals; repealing tax credits applied against the tax on individuals under the Alaska Net Income Tax Act; and providing for an effective date."

Text of SB 100 by Sen. Tom Begich - March 05, 2021


Source of News:

Office of Senator Tom Begich (D-Anchorage)

Institute on Taxation and Economic Policy (ITEP)

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