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Economist: Proposed state income tax will raise millions, but take away jobs

By Lauren Maxwell 8:08 PM February 17, 2017

Alaskans got a chance to weigh in on a statewide income tax proposal Friday. Members of the House Finance Committee held a public hearing in Juneau on House Bill 115.

Alaskans The bill would do several things, including restructuring the Permanent Fund in an effort to balance the state budget. But most of the talk has centered on a proposal to tax Alaskans and their income.

House bill 115 proposes a 15 percent tax on an individual’s federal tax liability. In other words, if you owe Uncle Sam $20,000 in taxes, your bill to the state would be $3,000.

Mouhcine Guettabi, an economics professor with the University of Alaska Anchorage’s Institute for Economic Research, has studied a variety of proposals to deal with the state’s $3 billion deficit. He said the income tax would generate about $655 million a year. As he explained, the proposal considered is a progressive tax, meaning everyone would pay, but the wealthy would pay more.

“Just because they have more income, and therefore, it would take a larger share of income out of their pockets,” Guettabi said. “It affects the poorest Alaskans the least and middle-class Alaskans are somewhere in the middle.”

Guettabi said any proposal that takes money out of people’s pockets will have an effect on the larger economy, whether it’s an income tax, a sales tax or a reduction in Permanent Fund dividends, and all of them will cost Alaskans jobs.

“The reduction of income is going to show up in you going out to dinner less often, buying less clothes or going to fewer hotels,” said Guettabi. “An income tax that raises 700 million to 650 million dollars takes away 3,500 to 5,000 [jobs] in the short run.”

The proposed tax would apply to anyone who works in the state of Alaska, even if they don’t live here. Guettabi said about 20 percent of the wage earners in Alaska aren’t residents, but they’d still have to pay the tax.

KTVA 11’s Lauren Maxwell can be reached via email or on Twitter.

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