Dunleavy administration floats new revenue options: Statewide sales tax, Alaska casinos

The governor has repeatedly declined to back new revenue options without support from voters
Seal of the state of Alaska.
Seal of the state of Alaska.(KTUU)
Published: Aug. 11, 2021 at 5:11 PM AKDT
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JUNEAU, Alaska (KTUU) - Gov. Mike Dunleavy’s administration is floating several new revenue ideas for legislators to consider ahead of a delayed August special session dealing with the long-term future of the Permanent Fund dividend.

Some of the new revenue options include a new statewide sales tax.

“What we are looking for is something broad and low with few exemptions,” said Commissioner Lucinda Mahoney of the Department of Revenue on Tuesday.

The department estimates that a 4% sales tax would bring in between $600 million and $1.2 billion per year, depending on whether spending items like groceries are exempt. Mahoney presented several other revenue ideas with few details that the governor could support if they are passed by the Legislature:

  • Increasing state gains from oil production by reducing credits paid to producers. That’s estimated to bring in $166 million over the next fiscal year.
  • Using state land for carbon offsetting. States and other countries could pay Alaska to keep land forested as part of cap and trade programs. Alaska could make up to $20 million per year.
  • Taxing privately-owned oil and gas companies like Hilcorp at the same rate as major producers. The Department of Revenue forecasts that could bring in $61 million per year.
  • Expanding legalized gaming in Alaska from bingo and pull tabs. Alaska could have access to lotteries, internet gaming or even casinos. If all those options are approved, the state could make $152 million per year.

Mahoney said the governor is “very focused” on the idea of casinos in Alaska, particularly as a way to create jobs. Dunleavy has introduced bills to legalize Alaska lotteries, but none have been passed by the Legislature.

Brad Keithley, the head of Alaskans for Sustainable Budgets, said it is “absolutely” encouraging that Dunleavy is now talking about new statewide taxes. “Now we need to be talking about the right taxes,” he added.

Keithley is concerned a sales tax would inherently be regressive, meaning it would hit Alaskans on lower incomes the hardest. He says the Department of Revenue’s fiscal modeling is still overly optimistic.

The governor has consistently declined to support new taxes unless they first receive support from voters. Corey Young, a spokesperson for the governor’s office, sent a statement about the change of tack and Dunleavy’s new backing for these tax options:

“Governor Dunleavy stands with many in the Legislature in looking for ways to reduce the budget deficit. However, he does not support an income tax, nor will he support additional revenue measures if they are not accompanied by a resolution that gives voters the chance to say whether they want the permanent fund and the PFD made “permanent” in the Alaska Constitution and no less than 50 percent of the annual draw to ensure that the people receive the same amount as government. And that also means it is not subject to reduction by the legislature or the Governor for government spending each year. The Governor also strongly believes that there also must be a constitutional amendment to limit spending. The Governor would contemplate additional revenues other than an income tax if there was a constitutional amendment to protect the permanent fund and limit spending in order to contain the growth of government. It is up to the legislature to use its authority to enact laws to decide what mix of revenues, cuts, etc., it feels is appropriate.”

There were few details presented by Mahoney about who should pay what if a sales tax is enacted. She said the administration does have a draft sales tax bill, but that it’s “in extremely, extremely rough form” and may not be ready for the special session that starts on Monday.

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