Walker pitches 1.5 percent income tax with a limit

Gov. Bill Walker is proposing a new tax to close part of the gap between what the state government spends and what it brings in.

The tax would be a flat 1.5 percent of wages and self-employment income. But there would be a limit in how much anyone pays.

No one would pay more than twice what they receive in an Alaska Permanent Fund dividend.

Alaska Gov. Bill Walker appointed Sheldon Fisher to commissioner of the Department of Revenue.

Sheldon Fisher

State Commissioner of Revenue Sheldon Fisher said the administration decided against asking for more new revenue bills.

“We feel like we are most successful – and when I say we, I mean the administration and the Legislature working together – are most successful when there’s a single item of focus,” Fisher said.

Both state residents and non-Alaskans working in the state would pay the tax.

Administration officials have a mouthful of a name for the tax: the “capped hybrid head tax.” It’s not a true head tax, in which every person pays the same amount.

But it’s also different than most of the tax proposals the House considered this year, since everyone whose pay is above a certain ceiling would pay the same amount. This year, that amount would have been $147,000.

Fisher said the tax wouldn’t be applied to all forms of income.

“It does not tax capital and, therefore, it should encourage … investments in the state,” he said. “It also does not tax retirement income, so we know that’s a matter that’s sensitive to many of our retirees that are on a fixed income.”

The tax would raise about $320 million. That would still leave a significant budget gap, even if the Legislature passes a bill that draws money from permanent fund earnings. State officials said the gap next year would be between $200 million and $500 million.

Administration officials said the Legislature should decide how to close the gap. Options include spending from state savings, other new revenue or additional cuts.

If the Legislature passes the tax, it would start in January 2019. It would require as many as 50 new state workers to administer.

Walker plans to call the Legislature into a special session on Oct. 23 to consider the tax and a bill that would increase sentences for some crimes.

Cash Money

(Creative Commons image by Moritz Wickendorf)

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