2017-10-23                     Senate Journal                      Page 1605
SB 4001                                                                                                                       
SENATE BILL NO. 4001 BY THE SENATE RULES COMMITTEE                                                                              
BY REQUEST OF THE GOVERNOR, entitled:                                                                                           
                                                                                                                                
          "An Act imposing a tax on wages and net earnings                                                                      
          from self-employment; relating to the administration                                                                  
          and enforcement of the wages and net earnings from                                                                    
          self-employment tax; and providing for an effective                                                                   
          date."                                                                                                                
                                                                                                                                
was read the first time and referred to the Finance Committee.                                                                  
                                                                                                                                
The following fiscal information was published today:                                                                           
Fiscal Note No. 1, Department of Revenue                                                                                        
                                                                                                                                
Governor's transmittal letter dated September 22:                                                                               
                                                                                                                                
Dear President Kelly:                                                                                                           
                                                                                                                                
Under the authority of art. III, sec. 18, Constitution of the State of                                                          
Alaska, I am transmitting a bill relating to taxation of wages and                                                              
earnings in the state.                                                                                                          
                                                                                                                                
The bill would impose a tax on wages and net self-employment                                                                    
income earned in Alaska by resident and nonresident individuals. The                                                            
tax rate would be 1.5 percent annually, and would be capped at the                                                              
greater of $2,200 (adjusted for inflation) or two times the amount of                                                           
the permanent fund dividend distributed in the previous calendar year.                                                          
The tax would take effect in calendar year 2019 and is expected to                                                              
raise $300-325 million by FY2020.                                                                                               
                                                                                                                                
Under this bill, employers would be required to pay to the Department                                                           
of Revenue withholdings that approximate the amount of the tax.                                                                 
Through regulation, the withholding would stop when the statutory                                                               
cap is reached. This protects individuals working multiple jobs and                                                             
insulates vulnerable populations, such as single parents, by limiting                                                           
each Alaskan's tax burden, and keeps us the lowest-taxed state in the                                                           
nation.                                                                                                                         
                                                                                                                                

2017-10-23                     Senate Journal                      Page 1606
This tax is a simple and efficient measure to address our state's budget                                                        
shortfall. Over the past six years, state budgets have been reduced by                                                          
44 percent, but state revenues have fallen faster. To cover the gap, key                                                        
state savings accounts have been drawn down by $14 billion, and are                                                             
expected to be depleted by the end of FY 2019. It is vital that these                                                           
savings accounts not go any lower and in accordance with the                                                                    
constitution must be replenished over time. New revenues are needed                                                             
to support critical public services such as education, public safety, and                                                       
reliable transportation.                                                                                                        
                                                                                                                                
We need a fiscal plan that includes prudent operating and capital                                                               
budgets, the judicious use of investment earnings, and revenues                                                                 
necessary to balance the budget. This tax will get us closer to                                                                 
balancing the state's budget and enable Alaska's economy to grow.                                                               
                                                                                                                                
Sincerely,                                                                                                                      
/s/                                                                                                                             
Bill Walker                                                                                                                     
Governor