By WIN GRUENING
Why have Juneau city leaders supported an extensive list of municipal sales tax exemptions over the years, but are unable to seriously consider exempting basic necessities like food or utilities?
While seniors in Juneau do benefit from such an exemption, the majority of citizens do not.
The Affordable Juneau Coalition recently filed and will be collecting signatures on two ballot initiatives and a charter amendment designed to make Juneau more affordable. One of those initiatives would exempt food and utilities from CBJ sales tax.
Taxing basic necessities like food and utilities disproportionately penalizes lower-income households as these taxes represent a larger percentage of disposable income. Not taxing these basic necessities is seen as a way to make the tax system less regressive and to provide relief to young families and low-income individuals. It is an effective way for policymakers to help constituents, especially during times of high inflation or economic stress. Most states and a majority of counties in the U. S. already exempt groceries from sales tax, reflecting broad public support for the idea.
Of the 45 states with a sales tax, 33 states and the District of Columbia exempt groceries. Only 12 states still charge sales tax on food items. Washington State, our nearest neighbor, doesn’t tax food at the state or local level and, like Alaska, has no income tax.
Of course, the reduction in tax revenue must be offset by other revenue adjustments or a reduction in expenditures. Municipal entities that have implemented food tax exemptions have employed a combination of both.
Which brings me back to the question: Why does the City and Borough of Juneau (CBJ) exempt taxes from purchasers who expect to pay sales tax and are financially capable of doing so?
There are 35 different municipal sales tax exemptions currently in place and, if some were repealed, it would increase tax revenues – with minimal impact on most residents.
These include but are not limited to, exemptions for lobbyists, medical doctors, optometrists, acupuncturists, counselors, therapists, funeral directors, and travel agents. CBJ also exempts membership dues to labor unions and fraternal organizations, long-term residential rentals, bank fees, leasing commissions, and sales to and from certain non-profit organizations and federally recognized Indian tribes (except for pull-tabs).
Some exemptions are not significant enough to warrant much consideration and some may be worthy, but one of the most striking is the one exempting sales to or from certain non-profit entities or Indian tribes. On its face, this exemption doesn’t make sense. Only a handful of states provide broad exemptions for sales by nonprofits. In Washington State, for example, nonprofits are required to collect and remit retail sales tax on their sales of goods and services.
One could argue that exempting certain non-profits from paying sales on their purchases helps them and, thereby, benefits society generally. No such argument can be made to justify exempting retail purchases by Juneau residents and visitors when they buy goods or services from non-profit retail businesses or tribal entities.
Indeed, some exempt organizations operate businesses in Juneau that sell products that often compete directly with private sector businesses that have no such advantage.
Sealaska Heritage, Discovery Southeast Glacier Gift Shop, Juneau Arts and Humanities Council, and DIPAC are examples of non-profit sellers that don’t collect sales taxes on retail sales such as art, books, jewelry, souvenirs, tours, and other tourism related activities. Tlingit-Haida Central Council, a federally recognized tribal entity, operates two cafes and a motel in Juneau and is not required to collect sales tax from customers. (They do collect hotel tax).
When cruise ship visitors spend money in these venues, why not collect CBJ sales tax? It’s the cruise ship passengers, not the non-profit, paying the 5% tax.
It shouldn’t matter who operates the retail store, or which business a customer chooses to patronize. All businesses should be collecting and remitting the 5% sales tax when selling goods and services to the public. CBJ can then use this previously uncollected 5% to help compensate for removing tax on groceries and utilities.
Citizens will have an opportunity this month to sign a petition to place a food and utility tax exemption on the ballot.
From a budgetary standpoint, exchanging unwarranted tax exemptions for socially desirable ones is a fiscally prudent policy as well as a fairer one.
After retiring as the senior vice president in charge of business banking for Key Bank in Alaska, Win Gruening became a regular opinion page columnist for the Juneau Empire. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is involved in various local and statewide organizations.
