House Considers Resurrecting State Income Tax

Feb 13, 2017

House Finance Committee co-chair Rep. Paul Seaton helped write House Bill 115.
Credit Skip Gray/360 North

The Alaska State House held the first of several hearings today on a new bill designed to change how the state generates revenue.

House Bill 115 would institute an income tax rate of 15 percent of federal liability. If the bill becomes law, it would be first time since 1980 Alaskans have paid a state income tax.

House Finance Committee co-chair Rep. Paul Seaton helped write the legislation. He says the state’s reliance on unpredictable oil revenues is bad for the economy.

“The problem with getting such a huge proportion of your tax from one industry is when that’s volatile or when it has a downturn, all of the sudden the income coming to the state is tremendously affected,” said Seaton.

Based on current estimates, a 15 percent income tax would generate about $655 million dollars annually.

The bill also proposes drawing just under 5 percent each year from the Permanent Fund earnings account, with a third of the money used to pay out the dividend. That means dividends would increase to about $1100 this year.

Seaton says combining an income tax with a reduced Permanent Fund dividend compared to years past would help distribute the burden among Alaskans.

“A flat amount taken from everybody impacts [a] lower income household more than it does a wealthy household and an income impacts a wealthy household more than it does a lower income household,” he said. So in essence, you have all Alaskans contributing about an equal percentage.”

The House Finance Committee will hold hearings on the bill for the rest of the week, with public testimony scheduled for Friday.