Alaska would implement a 2% state sales tax next year under a bill before lawmakers meet in special session to discuss fiscal policy.
Alaska would join 45 other states as well as the District of Columbia in collecting and collecting state sales taxes to generate revenue for operations. Only four other states besides Alaska currently have no statewide sales tax. These are Delaware, Montana, New Hampshire and Oregon.
Democratic Representative Geran Tarr from Anchorage introduced HB3006, which will be heard in the House Ways and Means Committee on Friday.
Tarr’s legislation authorizes the Alaska Department of Revenue to develop and implement a “simplified sales and use tax agreement,” which would come into effect on July 1, 2022.
Under the bill, many essential items for Alaskans would be exempt, including groceries, drugs, feminine hygiene products and heating oil.
Tarr said a statewide sales tax means “the 20% of workers who come from out of state” and the more than 2 million visitors who vacation in Alaska ” will help support the services they receive while in Alaska ”.
Tarr said she supports a statewide 2% sales tax associated with the so-called 50/50 dividend payout that Governor Dunleavy is proposing to secure in the state constitution.
Under the governor’s plan, there would be a 50/50 split between funding the Permanent Resident Fund dividend and paying for state services.
“I can support a 2% sales tax, given that it is associated with a 50/50 dividend payout and significant exemptions for essential purchases like food, medicine and heating oil. “said Tarr. “This will ensure that no Alaskan is disproportionately overburdened by these policies.”
Local sales taxes would continue
The plan for a 2% state sales tax would be in addition to local sales taxes already levied in many towns and boroughs in Alaska.
Municipalities could continue to collect local taxes. But the state would collect all taxes, local and state, then return the amounts owed to the communities.
Although Alaska does not currently have a statewide sales tax, cities and boroughs are permitted to levy a local sales and use tax on sales, rentals, or services. within communities. Local exemptions are granted by ordinance.
Anchorage and Fairbanks are among the largest municipalities in Alaska with no local sales taxes. But there are over 100 cities and boroughs that levy general sales taxes to help fund services. Communities with local sales taxes include Homer, North Pole, and Seward.
Local sales taxes in Alaska typically range from 2% to 5%, according to the National Sales Tax Institute.
Other examples of taxes in Alaska are taxes on raw fish, taxes on restaurant meals, and taxes on zipper games.
Increase in the tax on oil production?
Many American communities impose their own taxes. Local sales taxes are collected in 38 states, including Alaska, according to the nonprofit Tax Foundation. Local taxes often rival or exceed state rates, the foundation reports.
In addition to the bill for a statewide sales tax, Tarr also introduced legislation to increase the minimum tax on oil and gas production from 4% to 6%.
“I would prefer an income tax, but there have been two income tax bills introduced since the start of the session that have seen little to no movement,” Tarr said.
Representative Harriet Drummond, co-sponsor of the bill, said: in addition to paying the big dividends the governor seems to insist on.
Drummond, a Democrat, said she also believes “income tax is the best way to go. But I am ready to explore the use of a sales tax. And Representative Tarr is very aware of the needs of low-income Alaskans and has shaped this bill to meet it.