Anchorage independent Rep. Alyse Galvin on Monday introduced a new bill to reimpose a state income tax, part of a broader proposal to address persistent state deficits.
House Bill 156 would tax Alaskans 2% of any annual income above $200,000. If someone makes less than that amount, they’d pay $20. Any income tax could be automatically deducted from that year’s Permanent Fund dividend.
Galvin said she’s still waiting on the results of a full fiscal analysis, but she expects the proposal to generate between $125 million and $150 million per year for the state treasury.
“This is a revenue measure that’s part of a bigger picture,” she said.
On Monday, members of the House deferred action on a draft state budget until at least Wednesday.
If the Senate and Gov. Mike Dunleavy were to adopt the draft without significant changes, the budget would have a deficit of almost $600 million, an amount that would have to be paid from savings if oil prices stay as projected over the 12 months beginning July 1.
Alaska hasn’t had an income tax since 1980. A proposal to reinstate the income tax passed the Alaska House in 2017, but the state Senate rejected it.
Income tax proposals have been occasionally revived since then but haven’t garnered significant attention. Dunleavy has previously said he is uninterested in a broad-based statewide tax without a statewide referendum.
This year, multiple lawmakers have proposed a variety of revenue-generating ideas, including a statewide sales tax and several oil and gas tax bills, all in hopes of resolving the state’s anticipated deficit.
Galvin said her income tax bill shouldn’t be considered the one item that will kill the deficit.
“This is not going to be the silver bullet. I don’t think there is a silver bullet,” she said.
Under Galvin’s proposal, someone earning $250,000 per year would be taxed 2% of $50,000, which equals a $1,000 tax, as well as the $20 tax everyone with income would pay.
Someone earning less than $200,000 would only be taxed $20. Nonresidents would be taxed.
She said the idea behind the tax is to create a “shared responsibility” among Alaskans for the budget choices that need to be made. In other places, she said, income taxes have created an incentive for residents to participate in politics and government.
“Alaskans have to make a choice, and given our fiscal situation and all the talk about long-term fiscal planning … we’re going to need revenue,” she said.
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