Taxes — more than $1 billion worth — are now a game of chicken between the Democrat-controlled House and Republican-controlled Senate.
And the Democrat-controlled governor.
Senate Bill 26 came out of the House of Representatives today on a 22-18 vote — and its new tax language found immediate approval from Gov. Bill Walker.
The legislation lined up House lawmakers on one side or the other of a proposed income tax that would generate between $650 million and $700 million from Alaskans’ paychecks.
Another several million would be generated by new oil taxes.
Although Senate Bill 26 doesn’t deal with the income tax except as a condition, it was laden down with what senators called a “poison pill.”
“The House continues to attempt to find ways to pass an income tax and change our oil and gas tax structure, and their latest version of Senate Bill 26 is a poor attempt to do so,” said Sen. Anna MacKinnon. “We are part of a bicameral Legislature that should work independent of each other, properly vetting and improving ideas and concepts as we work through the processes laid out in our respective bodies.”
The bill says that either senators agreed to pass House’s Democrats’ $650 million in income taxes (HB 115), and $350-$900 million or more in brand new oil taxes (HB 111), or SB 26 dies. SB 26 restructures the Permanent Fund so earnings can be used more effectively to pay dividends to Alaskans, and pay for state services.
Democrats said: It’s all or nothing.
Gov. Bill Walker sat in the House Gallery while the bill was being debated this afternoon and smiled broadly, visibly pleased when it passed. His office issued a press release stating his satisfaction at the House’s “courage.”
The courage was that the majority caucus, with help from five non-Democrats, is holding the Senate’s feet to the fire on taxes. Walker has sent word to legislators that it’s all or nothing for him too — he wants an income tax and higher oil taxes. And that means using SB 26 as a high-stakes bludgeoning tool.
Except that this Republican-led Senate is as hard against an income tax as the Democrat-led House is in favor of one.
The $650 million in income taxes, which is the government take currently outlined in a bill that has not yet passed the House, averages to $2,600 per actual Alaska worker.
House members that voted in favor of the SB 26 income tax are now on the record. That includes some for whom such a vote will factor into their next election in 2018: Rep. Jason Grenn, an undeclared freshman from Anchorage, and Rep. Daniel Ortiz, an undeclared representative from Ketchikan. Also voting for income taxes were Rep. Louise Stutes of Kodiak, Rep. Gabrielle LeDoux of Anchorage, and Rep. Paul Seaton.
“You don’t wash down a glass of medicine by chasing it with two glasses of poison. That’s what Democrats did by linking passage of SB 26 to income tax and oil tax hikes,” – Rep. Dan Saddler.
It was a case of vote trading, said Lance Pruitt.
“I don’t trade votes,” he said. “This bill asks me to tie my support for Senate Bill 26 to two legally unrelated bills. That feels unethical and is not how I evaluate policy.”
“Topics of this magnitude should stand on their own merits and be considered and vetted independent of the others,” Sen. MacKinnon said. “The Senate believes a spending limit is necessary and we will evaluate the best course of action for that concept. We remain committed to cutting the budget, reforming government to operate more efficiently, and restructuring the Permanent Fund to help solve the majority of our fiscal challenge.”
The Senate has proposed $250 million in cuts to help offset the impacts of SB 26, which sets the Permanent Fund dividend at a level rate of about $1,200 per year.