|
Governor's Fiscal Plan
Last week, the governor released the final piece of his fiscal plan: SB 227 / HB 284. On Thurs, Feb 5, the House Finance Committee will hear it for the first time, followed by public testimony at 5:30 PM. Then Friday, Feb 6, my colleagues and I on the Senate Resources Committee will hear this bill for the first time, primarily in the context of oil production taxes.
Here is an analysis of Governor Dunleavy’s tax bill:
Sales tax - 4% sales tax from April 1-Sept. 30, 2% for rest of year. This would raise up to $815 million per year. Food is taxed except for WIC and SNAP. Gasoline, diesel fuel and heating oil are taxed, jet fuel is exempt. The sales tax would be on goods and services - would apply to things such as Netflix, Amazon sales, services such as for accountants, plumbers, lawyers, home repairs, etc. Some municipalities already have a sales tax and under this bill the State would take charge of collections and return the local taxes back to communities. Municipalities can currently exempt things like food, utilities, but under this bill local exemptions would be banned.
Temporary Corporate Income Tax changes - The governor is proposing to require some Outside companies to pay Alaska taxes, similar to the bill he vetoed and that the Legislature just failed to override. This would raise $15 million. However, he is proposing that all corporate income taxes go to zero in 2032, costing the state $540 million per year after that.
Oil taxes - The Governor is proposing to increase the minimum oil tax from 4% to 6% until 2032. While he claims this would raise up to $171 million, we are hearing reports that due to other provisions in our oil tax code, the oil industry is able to drive down their taxes below the minimum tax already. He's also proposing a 15 cent per barrel surcharge on oil that would be used to maintain the pipeline corridor. This would raise up to $30 million.
At the peak, these measures would raise $972 million in 2030, but drop to $389 million in 2032. The projected deficits each year are roughly $2 billion. To close that gap the Governor is proposing a constitutional amendment to use 50% of the PFD for government spending.
There are other bills separately introduced that set a statutory appropriation limit and that have executive branch sunset review provisions.
The governor proposed to end these taxes based on a liquified natural gas (LNG) pipeline to bring new revenue in the early 2030s. The legislature is reviewing the details of the governor's work on this project, and it is still unclear whether this is a realistic plan. We continue to thoroughly review this project to ensure that Alaskans are not on the hook for billions of dollars for a failed project.
Last week, the legislature also heard from the UAA Institute of Economic Research (ISER), who presented data about various fiscal options. You can read more about that here, and attend a webinar on Wed, Feb 4, at 4:00 PM. My top 3 takeaways:
- ISER clearly stated the most regressive form of balancing our budget is to rely on cutting the PFD. This impacts all Alaskans, including seniors and children, regardless of their income.
-
Deep cuts to public services causes widespread impacts to the private sector. Government spending has already been cut by $2 billion in the last decade. These cuts mean billions of dollars in the economy have been lost from the construction industry to the medical community, and slowing down the ability for new businesses to open and licensed professionals to get to work.
- Fixing our oil production and corporate income taxes are the most efficient sources of increasing our revenue stream, with the least impact on Alaskans' pocketbooks and the economy at large.
I appreciate the governor finally coming forward with some proposals, even if I disagree with many aspects of them. The legislature is just beginning their review of these and other bills this week.
| 
