In this Dec. 9, 2015 photo, Alaska Gov. Bill Walker speaks at a news conference about his plan for the state budget in Anchorage, Alaska. Walker has proposed sweeping changes to help reduce the state's billion budget deficit, including instituting a state income tax for the first time in 35 years. (AP Photo/Mark Thiessen)

In this Dec. 9, 2015 photo, Alaska Gov. Bill Walker speaks at a news conference about his plan for the state budget in Anchorage, Alaska. Walker has proposed sweeping changes to help reduce the state's billion budget deficit, including instituting a state income tax for the first time in 35 years. (AP Photo/Mark Thiessen)

A look at Gov. Walker’s income tax, other budget proposals

  • By Becky Bohrer
  • Monday, December 14, 2015 9:56pm
  • News

JUNEAU — If Gov. Bill Walker gets his way, Alaskans will be chipping in to help reduce the state’s estimated $3.5 billion budget deficit.

Walker has proposed sweeping changes, including instituting an income tax for the first time in 35 years.

He’s suggested using the fund that provides annual checks to Alaskans to generate cash to help finance state government. His proposal would change how dividends are calculated, putting the checks at about $1,000 in the near future. The dividend over its lifetime has averaged about $1,150.

Here’s a closer look at Walker’s tax proposals:

What kind of income tax is being proposed?

The personal income tax would be 6 percent of your federal tax liability, the amount in taxes you pay the federal government. If your federal tax liability is $5,000, you would pay $300 in state taxes.

The approach is unique among states with income taxes, said Jared Walczak, an analyst with the Tax Foundation, an independent tax policy research organization.

Alaska’s tax would generate about $200 million a year.

Who would pay?

Walker has said the income tax wouldn’t apply to those at lower-income levels.

Generally, a single person under 65 would have to make at least $10,150 to file a federal return. For a married couple filing jointly, both under 65, that would be $20,300, according to Internal Revenue Service filing instructions for 2014.

The administration says the tax would capture out-of-state workers and profits of partnerships and “S corporations.” According to the IRS, S corporations allow income to flow through them without being taxed until it’s claimed by the shareholders.

If you itemize your federal income tax, the state tax would be deductible, state tax division director Ken Alper said.

How would this be implemented?

Earlier this year, following a proposal from Rep. Paul Seaton, R-Homer, the Department of Revenue estimated it would cost $14 million to add an income tax component to its tax revenue management system.

The department also figured it ultimately would need to hire 60 employees with annual operating costs at that staffing level starting around $7.2 million. Alper doesn’t expect that employee estimate to change dramatically under Walker’s proposal.

The state also anticipates needing to hire someone to help with an implementation plan, costing about $250,000, since the department doesn’t have much expertise administering personal income taxes, Alper said. Lawmakers did away with the state’s individual income tax in 1980.

“One of the inevitable controversies of the income tax is, it costs money to implement,” he said.

What about other taxes?

Walker is proposing increases in industry taxes, including mining, fishing, oil and tourism; increases in fuel for planes, boats and vehicles; and increases in alcohol and cigarette taxes. He’s also proposing changes to the oil tax credit program.

The alcohol tax equates to an increase of 10 cents per drink, and cigarettes to $1 a pack. The increase would be paid by wholesale distributors but likely will be passed on, Alper said.

What are the plan’s chances?

Legislators gave Walker credit for laying out a plan but were quick to pick at many of the ideas.

The entire package is likely to be a tough sell, with Republicans wanting to see deeper budget cuts and Democrats saying the tax and reduced dividend would hurt working-class Alaskans. Next year is also an election year.

House Finance Committee co-chair Steve Thompson, R-Fairbanks, said he doesn’t want to ask Alaskans to pay an income tax unless it’s absolutely necessary.

“We’re not sure we’re there yet; there’s room for more cuts,” he said in a release.

More in News

Samantha Springer, left, and Michelle Walker stand in the lobby of the Kenai Chamber of Commerce and Visitor Center on Wednesday, March 22, 2023, in Kenai, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Springer named new head of Kenai chamber

Springer, who was raised in Anchorage, said she’s lived on the Kenai Peninsula since 2021

Forever Dance performers rehearse “Storytellers” on Wednesday, March 22, 2023, at the Renee C. Henderson Auditorium in Kenai, Alaska. (Jake Dye/Peninsula Clarion)
‘Storytellers’ weave tales with their feet

Dance and literature intersect in latest Forever Dance showcase

Soldotna City Hall is photographed on Wednesday, June 24, 2021, in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Soldotna OKs donation of portable shower, restroom facilities to homelessness coalition

The city purchased the portable restroom and shower trailer for about $182,000 in October 2020

The Alaska Permanent Fund Corporation building is seen in Juneau, Alaska, in March 2022. The deadline for the permanent fund dividend is coming up fast, landing on March 31, 2023. (Michael S. Lockett / Juneau Empire)
PFD application deadline is next week; state revenue forecasts lower than expected

Alaska North Slope crude oil was estimated to be about $71.62 per barrel on Monday

COVID-19. (Image courtesy CDC)
COVID-19: Cases jump in Kenai Peninsula Borough

No hospitalizations were reported in the Gulf Coast region

The Challenger Learning Center is seen in Kenai, Alaska, on Sept. 10, 2020. (Peninsula Clarion file)
Transportation gaps to be the focus of community meeting

The goal is to create a task force who can regularly meet and move forward on the issue

Bob Schroeder takes an electric chainsaw to a mock credit card during a protest outside the Wells Fargo in downtown Juneau at midday Tuesday. Schroeder cut up three mock credit cards representing three banks in Juneau protesters say are leading funders of fossil fuel development projects. (Mark Sabbatini / Juneau Empire)
Protesters object to banks financing fossil fuel projects

Demonstrators used chain saw to cut up giant credit cards

The members of Sankofa Dance Theater Alaska perform for a crowd of students during an opening performance at Kaleidoscope School of Arts and Science in Kenai, Alaska on Monday, March 20, 2023. (Jake Dye/Peninsula Clarion)
Uniting through movement

Kaleidoscope students learn about western African dances and music with in-residence artists

A blizzard warning is issued for the Eastern Kenai Peninsula and beyond by the National Weather Service on Tuesday, March 21, 2023. (Screenshot)
Blizzard warning issued for Seward, Turnagain Pass

Snow accumulation is predicted to be from 7 to 20 inches

Most Read