Legislature(2001 - 2002)
2002-02-13 House JournalFull Journal pdf
2002-02-13 House Journal Page 2236 HB 413 HOUSE BILL NO. 413 by the House Rules Committee by request of the Governor, entitled: "An Act relating to the imposition of an income tax on individuals, estates, and trusts; relating to the administration of revenue laws; relating to the Alaska Net Income Tax Act; and providing for an effective date." was read the first time and referred to the State Affairs and Finance Committees. The following fiscal note(s) apply: 1. Fiscal, Dept. of Revenue The Governor's transmittal letter dated February 11, 2002, appears below: "Dear Speaker Porter: Alaska's economy is strong -- with our 14th consecutive year of economic growth, more Alaskans working than ever before, and the lowest unemployment rates in a generation. And yet, the economic health and security of Alaska families is threatened by the growing budget gap, which is projected to reach about $1.2 billion by next year. For 20 years, Alaska governors, legislators, economists, and business and civic leaders have urged long-range budget plans recommending the same basic combination of cuts and revenues to replace dwindling oil dollars. Now the day of reckoning is upon us. 2002-02-13 House Journal Page 2237 The approach I have proposed, which calls for raising approximately $400 million in new revenues a year over the coming three years, is based on five principles: · Any plan must be fair. Everyone should contribute, including those who make money here but live elsewhere. · Permanent Fund earnings, after inflation-proofing and dividends and a vote of the people, should be used only after a broad-based tax and corporate taxes are in place. · New revenues should be phased in rather than imposed all at once. This avoids shocking the economy and helps families and businesses adjust to the change. · Any budget plan must be realistic - not based on unsubstantiated estimates or bogus promises. · Efficiencies, savings and continued cost reductions must always be part of budget considerations. This bill I am transmitting today proposes one of the new revenue measures -- a tax on income earned in Alaska. The State of Alaska relied on personal income taxes from the time of statehood until 1980. The income tax was then repealed because the tax and royalty income from North Slope oil fields provided sufficient revenue to operate state government. The income tax I propose is a simple measure based on a percentage of the income tax paid to the federal government. For most Alaskans, this will mean an easy calculation to determine their Alaska tax. It also adopts the progressive measures and incentives of the federal tax system. The target is for this tax to raise about $350 million, which would require a tax rate of 20 percent of an individual's income tax currently paid to the federal government. This level of income tax combined with other taxes I support would result in $400 million in additional annual revenue for the state. If the state adopts new revenue measures 2002-02-13 House Journal Page 2238 averaging $400 million per year for three years, we will reach the goal of $1.2 billion in new annual revenue. An important feature of this bill is a provision to reduce the tax rate when reserves are sufficient. The bill includes a trigger to lower the tax rate to 10 percent when the state's reserves in the Constitutional Budget Reserve Fund climb above $2 billion and a further reduction to 5 percent when the fund reaches $2.5 billion. Any excess general fund income from a major development, such as a natural gas pipeline or the implementation of responsible revenue measures, will increase the balance in the budget reserve fund. The state should maintain at least $1.5 billion in the reserve to avoid an emergency caused by a sudden drop in oil and gas prices. Once reserves reach $2 billion, however, we could lower the tax rate on our citizens. I urge your prompt and favorable consideration of this legislation. Sincerely, /s/ Tony Knowles Governor"