The coalition leading the Alaska House of Representatives has a plan to erase Alaska’s $2.7 billion annual deficit in three years.
You’ll pay for part of it.
On Thursday, the Alaska House Finance Committee received a new version of House Bill 115, the core of the coalition House majority’s proposal.
“Basically, we can get to a balanced budget,” said Rep. Paul Seaton, R-Homer, on Friday. “It’s going to be three years before the deficit is gone.”
HB 115 proposes to use the investment earnings of the Permanent Fund to generate about $1.9 billion per year for the deficit. In the process, dividends would be cut to $1,250 per person. If no change was made and Gov. Bill Walker did not veto any of it, the dividend would be above $2,000 this year.
Another $660 million per year would come from a state income tax, Alaska’s first in a quarter-century. The remaining $160 million or so would come from higher taxes on oil and gas producers.
That proposal is designed to spread the burden, its backers say. Seasonal workers would be covered by the income tax, and the oil industry would have to pay more.
Compare HB 115 to the plan proposed by the Republican-led majority in the Senate. There, lawmakers have proposed a similar Permanent Fund draw with Senate Bill 26, which passed the Senate earlier this month.
SB 26 keeps less of the dividend: Alaskans would be limited to a $1,000 dividend for this year and the next two. Instead of an income tax and higher oil tax, the Senate has proposed cutting state spending by $750 million, a reduction spread over three years.
Seaton and others in the House majority say the Senate hasn’t pointed out what it would cut, and that the Senate’s proposal would cause uncertainty.
“There’s still deficits under their plan,” Seaton said Friday.
On Friday, his office released the financial implications of HB 115’s income tax, which has been revised from earlier versions.
The new version contains a progressive tax rate that increases as a person earns more money. The previous version was based on the federal tax system, but with Congress considering changes to the federal tax rate, Seaton said that approach no longer makes sense.
Under HB 115, a single person making $50,000 per year would pay $992.50 in state income tax, or 1.54 percent of the person’s income.
A married couple with two children and a combined income of $100,000 per year would pay $1,483, or 1.48 percent of their combined income.
Anyone earning less than $14,300 per year would pay no income tax; the previous version of HB 115 had a minimum tax of $25 for all Alaskans.
Alaskans earning more money would pay a higher percentage of their income. An individual making $100,000 per year would pay $2,992.50 per year. Someone earning $200,000 per year would pay $7,992.50. Anyone making $250,000 per year would pay $10,992.50 per year.
“We set the tax brackets so they’re progressive,” Seaton said.
The House Finance Committee will spend Monday and Tuesday hearing analysis of the bill from financial experts. On Wednesday and Thursday, the committee will take public testimony, and on Friday, the committee is expected to consider amendments from finance members.
The bill could face a vote of the full House as early as the first week of April.
Speaking Friday, Speaker of the House Bryce Edgmon said that in addition to the majority’s desire to spread the burden of the deficit, members want to avoid exacerbating the state’s recession.
The University of Alaska Anchorage’s Institute for Social and Economic Research has found that fixing the deficit through budget cuts alone will result in the greatest number of job losses for the state.
Tax increases, while painful, are expected to result in fewer job losses.
“Winds of recession are blowing through the state,” Edgmon said. “They are blowing more fiercely by the month here in Alaska, it seems.”
• Contact reporter James Brooks at james.k.brooks@juneauempire.com or call 419-7732.
