Alaska lawmakers failed Thursday to override Gov. Mike Dunleavy’s veto of a bill that backers said would have modernized Alaska’s corporate income tax system.
The override failed 35-25. It would have required a 45-vote majority to become law.
Senate Bill 113 would have expanded the state’s corporate income tax to capture revenue from so-called “highly digitized businesses” that sell to Alaskans over the internet but may not have a physical presence in the state. Some of the money raised by the tax change would have gone toward reading programs in public schools.
After the vote, House Speaker Bryce Edgmon, a Dillingham independent, said the debate over the bill illustrated how difficult it would be for lawmakers to agree on ways to raise new revenue as the state deals with a fiscal crunch.
“I'd also say it's a preview of the debate that we're going to undergo on a fiscal plan,” he said.
Some Republicans who voted against the override said they were concerned that the bill could increase costs for Alaskans, including Big Lake Republican Rep. Kevin McCabe.
“It's disingenuous to think that we are not going to pay for this tax one way or the other,” he said.
Supporters of the bill rejected McCabe’s characterization, saying that the bill would simply give Alaska a share of similar taxes companies already pay in other states.
Sen. Bill Wielechowski, an Anchorage Democrat who championed the bill last year, said the idea that the bill would raise consumer costs was “wildly inaccurate.”
“In fact, there's been research on this,” he said. “The National Bureau of Economic Research did a working paper titled Corporate Taxes and Retail Prices, and found null — zero — effects on prices for firms subject to a single sales factor.”
Gov. Mike Dunleavy said Wednesday that he planned to introduce a temporary sales tax as part of a larger fiscal plan. Wielechowski said the corporate income tax change was a better option.
“How dare we go to Alaskans and say, ‘We want to tax you. We want to take your dividend,’ before we're going to tax collect revenue from tech billionaires,” he said. “Really? Is that where we're going with this?”
Some lawmakers who voted against overriding the bill said they supported the law in concept, including Fairbanks Republican Rep. Will Stapp, who voted for the bill when it passed in May.
But he said the complexity of the tax change— and the fact that the bill would take effect immediately if the veto was overridden — gave him pause.
“(If) you vote to override this bill, Mr. Speaker, you're going to create a new type of corporate tax structure for people that there's no regulatory guidance on how to pay,” Stapp said. “I would argue we probably shouldn't do that.”
Wielechowski said he was confident the state would have been able to put out regulations before taxes would be due in 2027.
Even so, Stapp said he planned to introduce a new version of the bill this session addressing that and several more technical objections he raised on the floor.
“There are a lot of questions with the bill that we should probably know the answer to,” he said.
