The Alaska House is expected to vote as early as today on increases to the state’s taxes on gasoline, fish and mining.
The House Finance Committee passed bills containing all three tax increases out of committee in 8-3 votes on Thursday afternoon, but committee members said they did so only reluctantly.
“We’ve been told that if we don’t move these bills out of committee … the governor will keep calling us back, and calling us back, and calling us back,” said Rep. Lance Pruitt, R-Anchorage. “That is the only reason that I’m going to say OK. I will not support them, I will not be voting for them.”
Pruitt was referring to an implied threat from Gov. Bill Walker to keep calling legislators into special session until they vote on revenue measures. His thoughts were echoed by several other members of the committee.
None of the tax increases under consideration will make a significant dent in the state’s deficit, estimated at $3.2 billion by legislators and $3.8 billion by the governor, but they are considered key parts of his proposal to erase the deficit in a way that spreads cost increases across as many Alaskans as possible. Doing so would ensure an equitable share of the burden, he has argued.
Doubling the gas tax
House Bill 4003, the “motor fuel tax” increase, will raise the cost of a gallon of car gasoline by 8 cents. For marine fuel used in boats, the cost will rise by 5 cents. The cost of jet fuel will rise by 3.3 cents per gallon. The price of aviation gas will rise by 2.3 cents.
Alaska has the lowest highway gasoline taxes in the nation. The increase will give Alaska the second-lowest highway gasoline taxes in the country, according to figures provided by the Alaska Department of Revenue.
The bill will net the state about $40 million per year. Gov. Bill Walker proposed a version that would have raised $3 million more, but Rep. Tammie Wilson, R-North Pole, successfully passed an amendment to the bill that exempts the Fairbanks and Anchorage international airports from the jet fuel hike.
At the urging of Rep. Les Gara, D-Anchorage, the bill was also amended so that if oil prices rise above $100 per barrel, the tax increase is halved to 4 cents. At prices above $120 per barrel, the tax increase disappears; the state would collect only 8 cents per gallon of highway gasoline instead of 16 cents per gallon.
Multiple members of the finance committee said they need more analysis of the impact of the tax increase before voting for it on the floor.
“When we’re trying to close the fiscal gap … this is about the lowest one on my priority list,” said Rep. David Guttenberg, D-Fairbanks. “This one hits the single parent trying to get to work, it hits industry all across the board, and I’m concerned.”
Rep. Wilson voted against moving the bill out of committee, saying that her vote wasn’t about trying to block it, it was “about making sure we have the best bill go forward.”
“I’m not going to be bullied by the governor or by anybody else,” she said.
Mines pay more
House Bill 4005 would raise $7 million more per year by raising the tax on the state’s 10 most profitable mines. Taxpayer information is confidential, but those mines are believed to include Greens Creek and Kensington, both in the City and Borough of Juneau.
The state’s current mining tax system — last changed in 1955 — separates mines into different tax brackets based on their net profits. Mines with no profit or a profit of up to $40,000 pay no taxes. Mines earning profits of $40,000 to $100,000 pay a marginal rate of 3 percent or 5 percent. Mines with profits of over $100,000 pay a marginal rate of 7 percent.
HB 4005 raises the rate on that top tax bracket by 2 percentage points, to 9 percent.
According to figures from state economist Will Bishop, 10 mines were in that top tax bracket, and according to assertions by Gara, five of those mines earn more than $1 million in profit each year.
Rep. Scott Kawasaki, D-Fairbanks, and Gara each suggested splitting the upper bracket to ensure the million-dollar mines pay a higher rate, but those amendments were defeated 3-8.
The bill was amended in the committee by a 6-5 vote to restore a 3 ½-year tax exemption for new mines. That exemption exists in current law but had been reduced to two years under the governor’s version of HB 4005.
Bigger bite from fisheries
The fish tax increase, House Bill 4006, calls for a 1 percentage point increase in the state’s fisheries business tax and fisheries landing tax. It also calls for removing the $3,000 cap on the annual fishery entry permit fees charged by the Commercial Fisheries Entry Commission.
Combined, the changes are expected to raise $20 million in additional revenue for the state.
The House committee failed to pass any amendments to the bill, though an amendment that would have kept the $3,000 cap failed by a single vote, 5-6.
In written testimony, United Fishermen of Alaska said it opposes the bill because “any new or increased taxes on the fishing industry must be part of a comprehensive fiscal solution,” and because the Legislature is not considering a comprehensive solution, it feels that fisheries are being singled out.
What the Juneau
Rep. Cathy Muñoz, R-Juneau, is the sole member of Juneau’s three-person delegation on the House Finance Committee. While she voted to move some of the bills out of committee, “I’m not in favor of the mining tax,” she said.
With mineral prices so low, she worries about the effect of increased taxes on area mines. The tax will raise only $7 million, and she questions whether that’s worth disrupting a big local employer.
“For the impact that $7 million would have, you have to ask if it’s worth it,” she said. “There’s a lot of ways to find $7 million savings and new revenue.”
Muñoz said she does support the gas tax increase, but is uncertain about the fisheries tax increase. “It’ll have to depend on how amendments go on the floor,” she said. “We really have to be careful when we add additional burdens onto families that are barely making it at this point.”
Rep. Sam Kito III, D-Juneau, said he wants to see action on oil and gas drilling subsidies before thinking about any tax increases. It doesn’t make sense, he said, to be talking about new revenue if that new revenue is going to go directly to the oil and gas industry.
He said he hopes “that we do get serious about addressing a fiscal plan,” and he’ll have to “look and see where we’re at on Friday or Saturday” when it comes to a vote on the tax increases.
As a member of the Senate, Dennis Egan, D-Juneau, will have a little more time to think about his votes on the tax measures.
“I think there ought to be an increase in motor fuel at least. We have the lowest motor fuel tax in the nation,” he said.
With regard to the mining tax, he said he supports an increase to 8 percent, but not to the 9 percent in HB 4005. That’s a compromise supported by Muñoz as well.
“I agree with her. There has to be some increase in everything. Everyone has to step up to the plate, but at the same time, we have to get serious about tax credits.”
Income tax gets hearing
After passing the three tax increases to the House floor for consideration, the finance committee began considering House Bill 4004, which would revive the state’s individual income tax.
That measure did not pass the finance committee on Thursday and has very little support in either the House or Senate.