Senate votes down state income tax

The Senate voted against a state income tax Friday.

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Bethel Sen. Lyman Hoffman was one of 15 who voted no. He said he believes the state will eventually require an income tax. But he said it shouldn’t happen this year.

“We need to work on the things we can work on, the things that we can agree upon,” Hoffman said, adding that senators should “take reassessment next year and see what needs to be done – and what level of income tax may be needed, if (any).”

Hoffman is a Democrat who caucuses with the Senate’s Republican majority.

Anchorage Republican Sen. Mia Costello said the vote allows the Legislature to move on. She said she’s concerned about the effect the tax would have on the economy while the state is in a recession.

“What we saw today was a strong vote that says that this is off the table,” Costello said. “We will be moving forward, as Sen. Hoffman mentioned, in a spirit of ‘Where can we agree?’”

Juneau Democrat Dennis Egan was one of four senators in the minority caucus who voted for the tax.

“Many in my community and district support it because they’re willing … to make a contribution,” Egan said. “We’ll contribute to schools, troopers, fish biologists and transportation. The state has stuff it has to do, but doing it costs something.”

The income tax would have closed a little more than a quarter of the state’s $2.5 billion dollar spending gap. Senators say rising oil production and budget cuts can close the part of the gap that’s not covered by the Permanent Fund draw. The House budget plan would keep PFDs at a higher level than the Senate, $1,250 compared to $1,000. A conference committee has been formed to work out the differences between the Senate and House Permanent Fund bills.

Anchorage Democrat Bill Wielechowski was the only senator to cross caucus lines. He opposed the tax, saying the state should first overhaul the taxes paid by oil and gas companies.