Today was a big day for the Alaska Legislature. After months of hints, speculation, and discussion regarding legislation to create a statewide sales tax for the first time in Alaska, the first sales tax bill of the year got introduced today, during the year’s third special session.
For eight months, the sales tax existed so much as a talking point around the Capitol in the absence of any legislation that would actually establish it that I told people it reminded me of the old story of a teenage boy at summer camp bragging constantly about his great girlfriend. When asked where this wonder was, the boy’s response is “Oh, she lives in Canada.”
Now that we have dispensed with my joke, I know what you’re thinking: “Cliff, sales taxes tend to be more popular than income taxes with Republicans if a tax is needed, so which Republican who has been talking up a sales tax for months put in the bill?”
Well, no, it was not a Republican like Senate President Peter Micciche of Soldotna or Sen. Mike Shower of Wasilla who dropped the bill in the hopper today, despite their floating the sales tax concept repeatedly. Nor was it the administration of Republican Gov. Mike Dunleavy, whose rumored quiet advocacy of a sales tax bill two years ago has grown into more public support in recent weeks.
No, it was Rep. Geran Tarr, a solidly progressive Anchorage Democrat who today introduced the first and only sales tax bill of the year. Rep. Tarr knows the facts well. A study by the Institute of Social and Economic Research (ISER) shows that a sales tax leaves 60 percent of Alaskans worse off than an income tax would, and a sales tax is known to hit low-income and middle-income people much harder proportionally than those with high incomes. Rep. Tarr represents the lowest-income urban House district in Alaska and the one with the highest rate of child poverty of any Alaska House district, whether urban or rural.
It is cold-eyed political calculation—not a policy preference—that leads Rep. Tarr to take the lead on introducing a sales tax bill. Rep. Tarr has concluded that resolving the State of Alaska’s structural deficit requires substantial additional revenues (which in large amounts means taxes, particularly broad-based taxes like a statewide sales tax or a personal income tax). She has clearly determined that a sales tax is more likely to pass than an income tax, so she has taken the first step necessary to get a sales tax bill enacted. Rep. Tarr has also voiced support for higher oil taxes in addition to a statewide sales tax, and it does appear that those two revenue measures are the most likely to pass during this Legislature if any do.
What is odd is that despite being less objectionable than an income tax to the majority of legislators, the sales tax does not seem to have true enthusiasts in the Capitol and may in fact get only a couple more votes on the floor than an income tax bill would. There have been four income tax bills introduced this year, in contrast to the one sales tax bill that Rep. Tarr introduced only today.
I have made clear my own support for an income tax over a sales tax, and there will be plenty of time later to review the details of Rep. Tarr’s bill and go over the pros and cons of these tax types. I frequently say, however, that Alaska has the most complicated fiscal politics in the country, and today’s news shows how much it can continue to surprise you.