FOR IMMEDIATE RELEASE
April 3, 2017
Senator Olson Proposes Income Tax Bill
Broad-based Revenue Measure Will Help Find a Fair Solution for Filling the Fiscal Gap
JUNEAU — Today, Senator Donny Olson (D-Golovin) introduced SB101 which proposes a state income tax to help fill the state’s daunting fiscal gap.
“With the economic crisis our state is in, it is going to take a number of actions to get our head above water – there is no one magic bullet that is going to get us out of it,” said Olson who sits on the Senate Finance Committee.
Since fiscal year 2015, the operating budget has been reduced by 40.7%, and Alaskans are starting to feel the pain of cuts to services which are not only vital to the wellbeing of the state, but also constitutionally mandated.
“Many of these cuts are being felt by the people in my district. Everything from early education to community jails to the Nome Youth Center, to Revenue Sharing/Community Assistance, to the capital budget, to public broadcasting, to DMV offices, and so on. We routinely get calls from constituents who have not been able to get their SNAP benefits for months because the wait time is so long. In my opinion, we have cut enough, there is no more fat.”
Several bills in process in the legislature, if passed, would restructure the Permanent Fund and use a part of the Earnings Reserve Account (ERA) to help pay for services and narrow the fiscal gap. Financial experts agree that using the ERA in some way is a necessary part of a comprehensive fiscal plan. Both bodies have dedicated substantial time and effort to develop a plan, but whatever agreement is reached will not solve the entire problem. In most bills proposed that would restructure the Permanent Fund, the PFD is substantially reduced. Senate Bill 26, the version passed by the Senate, caps the PFD at $1,000 for three years, with little expectation of growth after that point. Any reduction to the PFD, especially one of this magnitude, disproportionately affects Alaskans in rural areas, and those Alaskans with lower income levels.
“Rural residents rely on their PFD to pay their fuel bills and get the supplies and equipment they need to live their subsistence lifestyle. There are simply not a lot of jobs in bush Alaska, and the sacrifices rural Alaskans off the road system are asked to make are far beyond what most people imagine,” said Olson. “If we expect Alaskans with the greatest need to make hard sacrifices, it’s only right that we find other methods of bringing in the basic revenue needed to run the state. Alaskans who have the most economic resources, or who work and benefit from high-paying Alaska jobs but who don’t live in the state and fly out with the money should kick in too. We cannot simply balance the budget on the backs of those with the least means.”
A copy of SB101 can be seen here. It has been referred to the Labor and Commerce, and Finance committees. Passing this bill early in the 2-year legislative cycle is critical. If the bill passes this year, there will still be a nearly two year lag before revenues are seen by the state. SB101, like the House’s income tax bill, HB115, has an effective date of January 1, 2019. During the interim between passage and implementation it will be necessary to write regulations, prepare forms, acquire and update computer systems for management of the income tax for the state and filers.
“My bill is designed to have the people and families who are on the lower levels of income pay little to no taxes. It also will not tax retirement income for our retirees, provided their income falls within the lowest tax bracket. We want our elders to stay in Alaska, and spend their money in Alaska.
“I believe that a broad based tax is needed to help diversify our economy, and with this tax and the budget reductions, and use of the ERA, we will be close to filling the hole in our budget.”