Walker introduces tax on Alaska wages
Gov. Bill Walker called a fourth special session Friday afternoon, on the topic of new revenue.
Walker wants lawmakers to consider what the state Department of Revenue calls a "Capped Hybrid Head Tax."
The tax would be deducted by Alaskan employers from their employees' wages at a flat rate of 1.5 percent of earnings. But there's a cap on how much the state can take.
The administration proposes a maximum deduction of two times the previous year's Permanent Fund dividend. For example, if the dividend was $1,100, the maximum tax per working individual would be $2,200.
Some non-wage income, including capital gains, interest, dividends (including the PFD) and S-corporation distributions would be exempt from taxation.
Revenue Commissioner Sheldon Fisher highlighted that the proposal captures new revenue from out-of-state workers whose wages aren't currently taxed in Alaska.
According to the latest data available from the Department of Labor and Workforce Development, non-resident workers earned 16 percent of total wages in the state in 2015.
Fisher estimates the measure would generate between $300 million and $325 million, a fraction of the $2.7 billion budget gap the administration projects the state will need to fill next year.
The Department of Revenue estimates it would need 50 additional staff, and $10-$12 million to implement the new tax. It estimates annual operating costs between $5 million and $6 million.
So far, the proposal hasn't garnered enthusiasm from either end of the political spectrum.
“You're not going to try to pull a fast one on anyone here. It's still a tax, during a recession, and that's not acceptable,” said Rep. Lance Pruitt (R), Finance Leader for the House Minority Caucus. “You can wrap it up in a bow, you can hold a puppy while you announce it. It doesn't matter, it's still a tax on income in a time when Alaska's in a recession. You're trying to give it a fancy name, it does not change anything.”
“I'd have to take a look at the full details of the bill, but on the surface, it doesn't sound like something that is going to be fair for all Alaskans, and that's, I think, the bottom line,” said House Majority Leader, Chris Tuck (D). “Being a payroll tax means that people that live off trust funds probably won't be required to pay any tax at all.”
In a statement Friday, Senate President Pete Kelly (R) said his caucus wants to see Walker cut the budget first.
"We want to make it clear that any 'complete plan' to address our fiscal problem cannot solely reach into Alaskans' pockets for more government money," Kelly said.
Walker will convene lawmakers in Juneau on Monday, October 23rd to take up the measure. The special session call also includes Senate Bill 54, a bill to modify the state's criminal justice overhaul law, SB 91.
The upcoming special session marks a new record for the number of special sessions held in a single year.