Nikiski Republican Rep. Ben Carpenter introduced a bill in the Alaska House that would create a 2% state sales tax.
Carpenter’s bill, released Monday, is part of a collection of proposals he says would address the state’s long-term fiscal concerns, including a grim oil revenue forecast.
Alaska has never had a statewide sales tax, and is among just a few states that don’t. The state also does not have a personal income tax — although it did until 1980 — and is the only state to have neither. The largest proportion of Alaska’s revenue comes from oil.
In a sponsor statement for the bill, Carpenter — who co-chairs the House Ways and Means Special Committee — wrote that the plan is designed to be part of his package of financial structural reform bills, and is based on South Dakota’s sales tax system.
“Broad-based systems keep rates low, keep compliance simple, and create as few economic distortions as possible,” he wrote. “Except for the five states that have no sales tax, a two-cent statewide sales tax would maintain Alaska’s ranking as the lowest state and locally combined sales tax rate in the nation.”
Carpenter did not not respond to requests for an interview before air time.
But when asked about taxes at a candidate forum in October, he indicated he wouldn’t consider statewide sales or income taxes alone.
“The simple answer to a very simple question, which is a yes or no, is no: I’m not gonna support any new taxation without having a conversation about many other things,” he said.
But he said he didn’t want to exclude any one solution. He said the working group he was on last year recommended a mix of fixes, including reducing state spending and finding new sources of revenue.
“So to say ‘no,’ carte blanche, on that one topic — to say, ‘No new taxes,’ to put myself in a position that says I can only look at one thing at a time — and, ‘No I can’t support taxes, new taxes’ — then the next question comes up and says, ‘Do you support cutting state spending?’ Yes, I do. Well, now someone’s only for cutting spending, and not for taxes, and we pigeonhole ourselves again,” he said.
As the state has faced declining oil production revenue for decades, there have been several attempts to introduce a state sales tax.
More than 100 municipalities and boroughs around the state already have a local sales tax, between 1% and 7%. The Kenai Peninsula Borough collects a 3% sales tax, and the cities of Kenai and Soldotna have an additional 3% sales tax. The city of Homer has an additional 4.85% tax.
The 2% proposed by Carpenter would be collected on top of those local taxes. It would not make exemptions for groceries, medicine or other areas that have been exempted in previous sales tax bills, and in many other states.
This month, Carpenter also introduced a bill that would add a formula for the Permanent Fund Dividend into the state’s constitution.
He also proposed a bill to reduce corporate taxes in Alaska, which he said at a House Ways and Means committee meeting discourages companies from doing business in the state. The bill would reduce the cap on corporate taxes from about 9% to 2%, and make rates the same for all companies, regardless of size. Carpenter said this bill would reduce the state’s revenue by about $300 million for the fiscal year.