With inflation rising, oil prices down and the state’s finances looking bleak, Gov. Mike Dunleavy’s administration and legislators are considering a possible statewide sales tax to add dollars to state coffers, but the odds of the tax becoming a reality are not looking good.
House Bill 142, proposed by Rep. Ben Carpenter, R-Nikiski, would add a 2% sales tax on all goods and services for sale in Alaska, but his bill had little support overall in the House. As of Monday,
HB 142 did not appear to be moving out of the House Ways & Means Committee, it’s first stop after being introduced in late March.
Carpenter had also introduced earlier legislation to cut taxes on corporations, which Carpenter said was part of a fiscal plan that could include a new formula for the Alaska Permanent Fund Dividend (PFD).
The Alaska Senate, in its most recent version of an operating budget, proposed a $1,300 PFD and a one-time $175 million contribution for Alaska public schools. The House spending plan included a $2,700 PFD.
Gov. Mike Dunleavy, who said he does not favor new taxes, said last week that he is prepared to introduce a statewide sales tax. Dunleavy was also proposing a $3,900 Alaska PFD, which reportedly would create a $917 million state deficit.
Former Anchorage legislator Harriet Drummond meanwhile wrote in a commentary (published in this issue of The Cordova Times) that a statewide sales tax may be unconstitutional.
Drummond said that in all likelihood if legislators approved a statewide sales tax it could be challenged in court. While Alaskans currently pay no sales or income tax, the state receives over $6 of government services for every dollar of tax that they pay.
Drummond noted that Article X of the Alaska Constitution includes language to prevent duplication of independent tax-levying over sales taxes by the state over those sales taxes put into law by local governing bodies.
The constitution said that local service areas may establish taxes to pay for local services, but that there could not be additional overlaps of taxing jurisdictions.
“For those local governments with a sales tax in place, the imposition of a statewide sales tax would create an unconstitutional conflict,” she said. “Article X, Section 1 is clear that there shall be no jurisdictional duplications or conflicts of taxation permitted.”
