2018-01-16                     Senate Journal                      Page 1742
SB 139                                                                                                                        
SENATE BILL NO. 139 BY THE SENATE RULES COMMITTEE                                                                               
BY REQUEST OF THE GOVERNOR, entitled:                                                                                           
                                                                                                                                
               "An Act imposing a tax on net earnings from self-                                                               
             employment and wages; relating to the administration                                                              
                and enforcement of the net earnings from self-                                                                 
              employment and wages tax; establishing the Alaska                                                                
             economic recovery tax account; and providing for an                                                               
          effective date."                                                                                                      
                                                                                                                                
was read the first time and referred to the Labor and Commerce, State                                                           
Affairs and Finance Committees.                                                                                                 
                                                                                                                                
The following fiscal information was published today:                                                                           
 Fiscal Note No. 1, Department of Administration                                                                                
 Fiscal Note No. 2, Department of Revenue                                                                                       
                                                                                                                                
Governor's transmittal letter dated January 15:                                                                                 
                                                                                                                                
Dear President Kelly:                                                                                                           
                                                                                                                                
Under the authority of Article III, Section 18, Constitution of the State                                                       
of Alaska, I am transmitting a bill relating to taxation of wages and net                                                       
earnings from self-employment in the state.                                                                                     
                                                                                                                                
                                                                                                                                

2018-01-16                     Senate Journal                      Page 1743
This bill would impose a tax on net earnings from self-employment                                                               
and wages of 1.5 percent for a taxable year. The tax would be capped                                                            
in a taxable year at the greater of $2,200 as adjusted for inflation, or                                                        
two times the amount of the permanent fund dividend distributed to                                                              
eligible recipients in the previous calendar year.                                                                              
                                                                                                                                
This bill provides direction on the type of earnings that qualify as net                                                        
earnings from a source in the state. Further, wages from a source in the                                                        
state would include wages that are earned while an individual is                                                                
physically present in the state.                                                                                                
                                                                                                                                
Employers would be required to make and pay to the Department of                                                                
Revenue withholdings in a manner to approximate the amount of the                                                               
tax. Through regulation, the Department of Revenue would be                                                                     
authorized to allow withholding to stop when the statutory cap is                                                               
reached. This protects persons working at multiple jobs, as well as                                                             
high wage earners.                                                                                                              
                                                                                                                                
This bill also provides provisions for payment of taxes, determination                                                          
of a taxable year, refund of overpayments, reporting of payments to                                                             
self-employed individuals, and other provisions for efficient                                                                   
administration of the tax.                                                                                                      
                                                                                                                                
The bill would establish an Alaska economic recovery tax account in                                                             
the general fund so that tax revenues received can be accounted for in                                                          
the tax receipts account; this is in addition to amounts the legislature                                                        
may wish to appropriate to the account. The bill provides that the                                                              
legislature may appropriate to capital projects from the economic                                                               
recovery tax account; the tax account is not a dedicated fund, but a                                                            
way to better track tax receipts and spending on capital projects.                                                              
                                                                                                                                
The tax would be in effect from January 1, 2019, to July 1, 2021. This                                                          
short period would allow time for the state to receive revenues                                                                 
sufficient to meet critical state needs and avoid falling further into debt                                                     
and facility disrepair. I will continue to work with you to develop a                                                           
stable fiscal plan to carry us into the future.                                                                                 
                                                                                                                                
                                                                                                                                
                                                                                                                                

2018-01-16                     Senate Journal                      Page 1744
This tax is a simple and efficient measure to address our state's budget                                                        
shortfall. I urge your prompt and favorable action on this measure.                                                             
                                                                                                                                
Sincerely,                                                                                                                      
/s/                                                                                                                             
Bill Walker                                                                                                                     
Governor