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State income tax proposed in Alaska Legislature

By KTVA CBS 11 News 3:46 PM April 3, 2015

A bill proposing a state income tax was introduced on the House floor Friday.

Rep. Paul Seaton introduced House Bill 182, which would require Alaskan residents and non-residents alike to pay a tax “equal to the sum of 15 percent of the taxpayer’s total federal income tax” from wages earned within the state of Alaska.

The tax would also be applicable to income earned from property in Alaska, certain types of investments, royalties, trust funds based in Alaska and more.

Gunnar Knapp, a professor of economics and the director of the Institute of Social and Economic Research and University of Alaska, said he’s not surprised about the proposal, considering Alaska’s budget woes.

“The problem is, there is such a huge gap with what we are taking in and what we are spending and we have to do something about it, it just cant go on that way,” Knapp explained.

Lawmakers in Juneau have been focusing on making cuts to the budget, but Knapp said it’s “perfectly reasonable” to consider a tax.

“They’ve gone through a session and they are discovering it’s really politically difficult to cut and some of the cuts they have been talking about are pretty upsetting to a number of people,” Knapp said.

Knapp said the majority of other states have an income tax, and it’s something Alaskans should talk about. He said there are pros and cons to the idea that need to be considered. One of the pros is an income tax would collect money from workers who live out of state.

“We have a lot of people working in Alaska in pretty high paid jobs, for example on the North Slope, and live in some other state and if you had a tax like this, this would collect income from them,” Knapp said. “It’s a way to get money out of people that are working in this state and benefiting from the opportunities we provide that are not contributing to this state, not spending their money here.”

A con, said Knapp, is the tax would target higher paid Alaskans.

“An income tax would certainly disproportionality take from the higher income people in the state which is why a lot of them will be unhappy with this proposal,” he said. “On the other hand, poor people or young people who aren’t earning a lot of income this tax, this is not going to be a burden to them, or it will be pretty small.”

Knapp said he doesn’t believe the bill has a chance of passing this session, or in it’s current form.

Seaton’s bill includes an effective date of Jan. 1, 2016.

HB 182 was forwarded to the House Finance Committee.

Editor’s note: a previous version of this story incorrectly noted the bill’s introduction as Thursday, April 2. This has been corrected. 

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