Alaska’s Current Tax Debate

Alaska Tax Debate

State of Alaska

The decline in oil tax revenue has sparked an important debate among Alaskan policymakers. Historically, Alaska’s oil supply has resulted in surpluses for its state government; now, with oil production on the decrease, state legislators are seeking measures in order to confront the newly created deficit. At this point, the debate has narrowed down to whether Alaska should adopt a state personal income tax or a sales tax. Alaska has been without a state personal income tax for 35 years and it has never collected sales taxes in its entire history.

The Institute for Taxation and Economic Policy (ITEP) released a report back in mid-July which addressed the issue of Alaska’s revenue woes. The report – which was entitled “Income Tax Offers Alaska a Brighter Fiscal Future” – makes the case that implementing personal income taxes for Alaskan residents is the better option. Essentially, the report propounds that adopting a personal income tax is more equitable, more sustainable in the long-term and also more financially beneficial to the bulk of Alaskans.

Though the debate is alive and well, several actions have already been taken. Governor Bill Walker has already made cuts to state spending and substantially curtailed tax breaks available to the oil industry. What’s more, Walker also reduced the maximum amount Alaskans may receive through the Permanent Fund; each person may now receive a maximum of $1,000 rather than the previous maximum of $2,072. The Permanent Fund is a statewide fund established to help ensure that a greater share of the Alaskan population benefits from the state’s oil stock.

Bringing balance to Alaska’s fiscal quandary will be no easy matter. Whatever option is selected, there will be a sizeable bite taken out of Alaskan pocketbooks. The hope is that the settling of Alaska’s revenue problems won’t disproportionately affect lower to middle level income families. So far, with all available evidence taken into consideration, it appears that reinstituting a personal income tax in conjunction with a few other measures is the surest means to provide both an equitable and sustainable financial future. Only time will tell if this is indeed the means which will be adopted.

Image credit: davecito

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Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

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