Haines might soon join communities across Southeast Alaska that have tweaked their tax policies to shift the local tax burden off year-round residents and onto tourists.
Voters this week will consider a ballot measure that would increase sales tax during the summer, when visitors flock to town, and reduce the rate in winter. Sweetening the deal is a provision that would exempt groceries from sales tax entirely during the winter months.
“Over the course of a year the visitors and seasonal residents will pay more and year-round residents (depending on who they are and what they buy when) should pay less or the same as they do now,” Haines Borough Finance Director Jila Stuart said in an email on Thursday.
Local sales tax in Haines is currently set at 5.5%. If the measure passes, it would boost the rate to 7% between April and the end of September. The rate would fall to 4.5% for the rest of the year – excluding groceries, which would not be subject to sales tax at all in winter.
The goal is to raise funds for two key purposes: school funding and road improvements.
“I think it’s an agreeable enough deal, in so much as folks will get 5.5% off groceries all winter long, and they’ll get 1% off everything else,” Haines Mayor Tom Morphet said in an interview this week.
Morphet has been a major proponent of the provision, which is modeled after versions adopted in communities across Southeast. Among them are Craig, Pelican, Seldovia, Ketchikan, Sitka and Skagway – Haines’ closest neighbor.
Each seasonal sales tax looks slightly different. But the goal generally speaking is to take advantage of the busy summer season to generate local tax revenue.
Consumers in Skagway for instance, currently pay a 5% sales tax in the summer and 3% in the winter. But that could soon change. On the Skagway ballot this year is a measure that would boost summer sales tax by another 2%. In exchange, the borough would waive local utility fees.
Juneau voters, for their part, will soon weigh in on their own seasonal sales tax proposal, which would bump sales tax from 5% to 7.5% in the summer and drop it to 3% during winter.
Morphet has done a handful of public presentations about the tax. He said he has heard some concerns, including extra administrative costs for businesses, and that the tax could discourage people from shopping in Haines.
All told, the tax is expected to generate about $280 thousand dollars – which amounts to a 6% boost to local sales tax revenue, according to the borough.
Morphet acknowledged that 6% is an “incremental” figure. But he emphasized it’s still a crucial sum given that the borough is grappling with a $1 million budget deficit that he says has to be made up somewhere.
The deficit is due in part to federal funding cuts and a senior tax exemption passed by voters last year. But it also resulted from the borough needing to kick in more than half a million dollars more for the school this year compared to last, to make up for insufficient state funding.
That’s a challenge facing communities across Alaska.
“Communities are responding by adopting a seasonal sales tax,” Morphet said. “In Craig, the seasonal sales tax goes entirely to the school. And you know, until we have a new governor, our hands are going to be tied.”
If passed, the Haines borough expects that year-round residents would spend roughly the same amount in sales tax that they currently do.
Someone who spends $30,000 per year on taxable goods and services – $7,000 of which is groceries – would spend about $80 less on tax under the new structure, according to a borough fact sheet.
That could look different depending on the person. The math might not pencil out as well for someone who spends a lot on gasoline in the summer, for instance, as opposed to groceries.
