The end-game is afoot in Juneau. Hang onto your wallet, as Gov. Bill Walker and the Democrats are gunning hard for an income tax with just one week to go.
The governor made a hard pitch for income taxes to the Anchorage School Board and the Anchorage Chamber of Commerce on Monday, while Democrats continued looking for tax weaklings to compromise in the Republican-led Senate.
Senate President Pete Kelly said last week, “The only thing standing between Alaskans and an income tax is the Senate majority.” So far, the caucus is holding.
But Democrats believed they had some brand new pixie dust to get an income tax out of the Senate Republican majority and started pushing what they are now calling a “school tax,” like the one offered by Rep. Matt Claman, D-Anchorage.
The School Tax is “An Act imposing a school tax on certain income of residents, part-year residents, and nonresidents; relating to a payment against the school tax from the permanent fund dividend disbursement; and providing for an effective date.”
Democrats were hoping that would sound more appealing than the governor’s widely mocked “Pomp Income Tax,” designed by Walker’s Connecticut consultant Richard Pomp.
But their hopes may have been dashed today when, in Senate majority caucus, Republicans weren’t fooled by the “school tax.” After all, the Democrats had tried to call HB 115 an education tax, when it was simply an income tax.
Today’s caucus came after the Senate and House majorities met yesterday to hammer out a way forward on paying for an enormous government.
Senate Finance began running various fiscal models to try to determine if there was any reasonable way to work with to the latest House income tax proposal. By running the models, rumors started swirling that the Senate was caving.
This is the fog of war, when rumors take the truth hostage.
Our sources tell Must Read Alaska that the Senate is holding firm: There will be no income tax, even it it’s called an education tax or a school tax. Or a spotted cat.
The Senate majority wants cuts to the budget and to use the power of the Permanent Fund restructuring plan they have advanced through SB 26.
That approach says taxes aren’t even needed. Those close to the Senate Finance Committee say that next year, they could be looking at a balanced budget, because the Governor has purposefully projected low oil production in order to make his case for income redistribution through taxes.
But SB 26 had a poison pill added to it by the House Democrats. The House version can’t pass unless the Democrats get their income tax and their higher oil taxes. That is the governor’s position as well: He must have all three — half of the Permanent Fund dividend, a massive income tax and higher oil taxes.
The Department of Law has not given a definitive answer on whether House Democrats can actually tie the passage of SB 26 to the passage of an income tax and a higher oil taxes. According to the department, there are conflicting legal opinions on the matter.
Ray Kreig, who is associated with the Alaska Policy Forum and the conservative group “Mission Critical,” said the peril for an income tax remains:
“This is inevitable because they went down the road with SB 26,” he said. “It was an accommodation that allowed taking half of the dividend and muddled the clear line that should not have been crossed. If you cross that line with sb 26, you have lost your leverage to fight off income tax and the real task, which is to bring this budget down.”
But Senate Finance Co-chair Peter Micciche said, “The Senate is standing tough on not imposing an income tax on Alaskans who are suffering through a receding economy and a retracting population. ”
The Senate majority published a calculator Alaskans can use to determine how much they will pay under the Governor and House earlier tax proposal. Give it a try.