Senate votes down an income tax

It’s been a disastrous week for Gov. Bill Walker. His natural gas pipeline project was gutted by the Alaska Senate, when it removed half of the funding needed to proceed through permitting.

Today the Senate also shot down Gov. Walker’s income tax, HB 115. Four members voted in favor of it — Sens. Tom Begich, Dennis Egan, Berta Gardner, and Donny Olson. Fifteen voted against it.

Even Sen. Bill Wielechowski, a diehard Democrat — voted against it taking $7 billion from Alaskans over the next decade.

House Bill 115 is a priority of the Democrat-controlled House and governor. If the governor still wants to fight for an income tax, he’ll have to introduce it in special session after the Legislature adjourns on Wednesday.

“Whatever agreement the Senate and the House come to this session, it will not include an income tax. Period,” said Senate President Pete Kelly, a Fairbanks Republican. “The Senate will not penalize Alaskans for having a job.”

“The Senate will not penalize Alaskans for having a job.” – Senate President Pete Kelly

Today’s vote ended the chatter about what senators might do on an income tax. It brought “clarity to working Alaskan families and the businesses that employ them that an income tax is off the table,” said Sen. Mia Costello, an Anchorage Republican, who chairs Senate Labor and Commerce.

The Senate Majority’s SB 26 solves Alaska’s fiscal problem – without taxing working Alaskans – through responsible reductions, a spending cap and strategic use of the state’s reserves, the Senate majority said.

“We do not support an income tax because Alaska does not need an income tax,” said Senate Majority Leader Peter Micciche. “Our Senate plan has been proven to fund Alaska’s government by closing the fiscal gap for many, many years without a burdensome income tax on Alaska’s families. It will protect the wages of working Alaskans.”

We do not support an income tax because Alaska does not need an income tax. – Senate Majority Leader Peter Micciche.

Sen. Gary Stevens, a Kodiak Republican who has often been seen as a moderate, spoke about the deceptive nature of the bill and said he could not vote for HB 115 because, for one thing, it was lying in its very title. It calls itself an “education tax,” when only a small portion of the income tax would go to education, Stevens said.

But within 30 seconds of the vote, Gov. Bill Walker issued a statement that doubled down on the phrase “Education Funding Act,” in the headline of his official statement, which explained it as a broad-based tax:

 

“Consultants advising our administration and the legislature have consistently shown that a broad-based tax is necessary for us to close our fiscal gap.  They have also advised that every other state in the nation has some form of a broad-based tax to provide a stable revenue source for funding government services,” Walker said.  “We simply cannot continue to fund public safety, education and road maintenance by drawing down on our limited savings. I’m disappointed with the Senate’s vote this afternoon, but we’ll continue working with both bodies to fix Alaska’s fiscal crisis.”

While that is factually true that other states fund government with sales taxes or income taxes, Alaska is the only “owner state,” where Alaskans own the resources and receive royalties and severance taxes to pay for government. In terms of the amount of revenue per capita, the billions of dollars in oil revenue that comes to the State puts Alaska in second highest.

North Dakota ranks first with $7,438 per capita, and Alaska is second-highest with per capita collections of $7,005.

 

During floor debate, Palmer Sen. Shelley Hughes said, “I believe sucking dollars out of the private section is absolutely the wrong action that we should be doing. It’s a bad idea when you’re in a recession…And I actualy think it would be an insane action.”

She also brought up the importance of protecting retirees in Alaska, and the importance of multi-generations that could be diminished if older Alaskans had to move away.

Sen. Berta Gardner was unmoved by that argument, saying she had little sympathy for those who would choose to move out of Alaska.

Sen. Micciche said that with SB 26 as offered by the Senate, the State would only operate in a deficit for two more years before being able to rebuild reserve funds.

He cited the stale numbers the Walker Administration had offered, and the “$200 million that magically showed up, you are looking at a significant difference,” he said, when asked by reporters why the Senate’s plan was not lining up with earlier projections.

 

“The biggest take away from today is that government has reduced very slowly over time,” said Sen. Pete Kelly. “It expanded very rapidly over the years that it was really rolling in this state. Times have changed. We didn’t want to penalize people for having a job. I think we made a pretty clear statement that the private sector is the thing that is on top of our list.”

PRO-INCOME TAX VOTES DRAW FIRE

HB 115 passed the House along caucus lines April 18, with the Democrat-controlled majority voting in favor of a complicated scheme of income taxes devised by the Department of Revenue with the help of Connecticut tax attorney Richard Pomp.

Following today’s Senate vote, Americans for Prosperity-Alaska announced its campaign of mailers and digital ads holding House lawmakers accountable for their votes on the income tax.

Mailers were sent to the districts of Rep. Matt Claman, District 21, Rep. Jason Grenn, District 22, Rep. Chris Tuck, District 23, Rep. Paul Seaton, District 31, Rep. Dan Ortiz, District 36, and Rep. Louise Stutes, District 32.

The mailer points out that while legislators voted to implement an income tax, they voted against cutting items that may be non-essential in a recession.

A recent poll conducted by Dittman Research found 58 percent of respondents opposed an income tax.

AFP-Alaska Director Jeremy Price said, “Alaskans oppose an income tax, yet the House majority and Gov. Bill Walker insist on shoving it down Alaskans’ throats.”

Whether AFP-Alaska will also target the four senators who voted in favor of the tax is a question. “We just want to thank those senators who voted against the $700 million tax on working Alaskans.”

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