Legislature(2025 - 2026)ADAMS 519
02/05/2026 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB284 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 284 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
February 5, 2026
9:06 a.m.
9:06:43 AM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 9:06 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Andy Josephson, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Jamie Allard
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Nellie Unangiq Jimmie
Representative Elexie Moore
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
None
ALSO PRESENT
Janelle Earls, Acting Commissioner and Administrative
Services Director, Department of Revenue; Brandon Spanos,
Acting Director, Tax Division, Department of Revenue; Dan
Stickel, Chief Economist, Economic Research Group, Tax
Division, Department of Revenue; Representative Jubilee
Underwood; Representative Julie Coloumbe; Representative
Justin Ruffridge; Representative Bill Elam.
SUMMARY
HB 284 TAX COMPACT; SALES TAX; OIL & GAS TAX
HB 284 was HEARD and HELD in committee for
further consideration.
Co-Chair Foster reviewed the meeting agenda. The committee
would hear a presentation from the Department of Revenue
followed by a presentation by the Alaska Municipal League
(AML)[note: the AML presentation was heard in the 2/5/26
1:30 p.m. meeting, see separate minutes for detail].
HOUSE BILL NO. 284
"An Act relating to the Multistate Tax Compact;
relating to apportionment of income to the state;
establishing a state sales and use tax; relating to
taxes levied by cities and boroughs; relating to the
corporate income tax; authorizing the Department of
Revenue to enter into the Streamlined Sales and Use
Tax Agreement or substantially similar agreement;
relating to the oil and gas production tax;
establishing an infrastructure maintenance surcharge
on oil; establishing a pipeline corridor maintenance
fund; and providing for an effective date."
Co-Chair Foster recognized Representatives Julie Coloumbe,
Justin Ruffridge, and Bill Elam in the room. He asked the
Department of Revenue (DOR) to provide a presentation. He
asked members to hold questions to the end of each section
of the presentation.
9:09:21 AM
JANELLE EARLS, ACTING COMMISSIONER AND ADMINISTRATIVE
SERVICES DIRECTOR, DEPARTMENT OF REVENUE, introduced
herself and her colleagues. She introduced a PowerPoint
presentation titled "HB 284 Tax Compact; Sales Tax; Oil and
Gas Tax: House Finance Committee," dated February 5, 2026
(copy on file). She briefly highlighted the presentation
overview on slide 2. The presentation would address policy
goals, each component of the bill, and time permitting the
fiscal note and sectional analysis. She turned to slide 4
and reviewed the governor's fiscal plan:
Governor's Policy Goals
• Provide a plan for fiscal stability, especially during
the next five to seven years where budgetary
challenges are expected
• Limit spending to ensure a predictable PFD, ensure
fiscal restraint, and prevent greater taxes from being
implemented
• Improve Alaska's long-term appeal for families and
businesses by enshrining a 50/50 PFD and eliminating
corporate income tax to make the tax climate more
competitive for business investment
• Improve the efficacy of state agencies by requiring
reviews and reauthorization of agency operations on a
regular basis
Acting Commissioner Earls noted that slide 5 showed the
fiscal plan in more detail. She turned the presentation
over to her colleagues.
9:11:09 AM
Representative Stapp looked at slide 4 that aimed to
articulate the policy objectives of the proposal. He
thought it would be interesting when going through the bill
to determine whether or not aspects of the bill actually
did so. He referenced bullet point three to improve
Alaska's long-term appeal for families and businesses. He
failed to see how enshrining a liability that outstripped
the amount of revenue being raised in taxation would create
anything but more instability and a need for more taxes. He
looked forward to hearing the answer throughout the
process.
9:12:12 AM
BRANDON SPANOS, ACTING DIRECTOR, TAX DIVISION, DEPARTMENT
OF REVENUE, moved to slide 7 and provided the omnibus tax
legislation overview. There were three primary components
of the bill:
• Sales and Use Tax
o Seasonally adjusted tax rate
o Effective CY 2027 2033 (seven full years)
• Corporate Income Tax
o Market-based sourcing effective CY 2027
o Zero tax rate effective CY 2031+
• Oil and Gas Production Tax
o Minimum Tax Floor increased CY 2027-2031*
o Infrastructure Surcharge effective FY 2027+
Mr. Spanos elaborated that the bill would update and
eventually eliminate the corporate income tax. The bill
would raise the minimum oil and gas production tax floor
from 4 to 6 percent and would add a new fee for pipeline
corridor maintenance. He advanced to slide 9 and discussed
the sales tax, which was the largest portion of the bill
because it would require new statute. The tax rate would be
4 percent for half of the year and 2 percent for the other
half. The bill created certain exemptions, which he would
cover later in the presentation. The bill would require the
state to administer the tax, which he would cover later in
the presentation. The bill provided for a timely filing
allowance of the lesser of 1 percent of tax or $75 [per
month] for the seller for the burden of collecting and
remitting the tax to the state.
Mr. Spanos turned to slide 10 titled "Sales and Use Tax:
Who Pays?" The tax was on the consumer/purchaser and was
collected and remitted to the state by the business that
sold the product or service. He explained that state sales
taxes were deductible from federal income tax, for those
who itemize. He addressed slide 11 titled "Sales and Use
Tax: What is a Use Tax?" He detailed that a use tax was a
complementary tax to a sales tax where tax would be charged
on an item brought into Alaska that was not taxed at the
time of purchase in another state. He elaborated that when
the sales tax applied the use tax did not and vice versa.
The tax only applied to sales. He expounded that the use
tax used to be primarily for online sales, but online sales
were mostly taxed currently after the Wayfair Supreme Court
decision. In the past, states applied the use tax to online
sales, but it was on the honor system and it had been hard
to collect the taxes. At present, states primarily captured
things like vehicles, while other items were still on the
honor system. The bill would require individuals to pay the
tax when they registered their vehicle. Other major
purchases brought in through customs were reported to the
Tax Division and would be captured. Other things would have
to be self-reported.
9:15:52 AM
Mr. Spanos addressed slide 12 titled "Sales and Use Tax:
Internet Sales." He explained that historically internet
sales were not taxed by states unless the seller had a
physical presence in the state. The situation resulted in a
string of legal cases with the most recent being Quill
Corporation v. North Dakota. He elaborated that up to 1992
most cross border sales were made via mail order. In 2000,
physical presence was not as much of a concern for states
and they started to question if the standard should still
be applied given that most cross border sales had become
internet based and computers made the burden of tracking
taxes in various jurisdictions simpler. The Supreme Court's
decision on Quill stated that a taxpayer and seller should
not have to know the burden in the hundreds of
jurisdictions it sold its goods into and because of that it
was overly burdensome and they should not have to collect
the tax at all and the burden should be on the individual
resident to report and remit the tax. South Dakota
challenged the ruling because online sales were prominent
and modern computer systems allowed for simpler tracking
and reporting. South Dakota started the "kill Quill"
movement and it passed a law to challenge the physical
presence standard and applied its sales tax to internet
sales. The online seller Wayfair challenged the law. The
case went to the U.S. Supreme Court, which overturned the
precedent in the Quill case and ruled that as long as long
as a state met three criteria, it could apply the sales tax
to remote sellers with no physical presence in their state.
The first criterion was that a company had to have
substantial economic nexus with the state. He stated that
HB 284 did that by having a threshold of $100,000 sales
into the state, which the Supreme Court determined in South
Dakota was a substantial nexus.
Mr. Spanos addressed the second criterion that a state must
apply nondiscriminatory standards to all sellers. He
explained that the bill met the test by having only one
sales tax that applied to instate and out of state sellers
in the same manner. The third criterion was that a state
must not impose undue burdens on interstate commerce by
ensuring that the compliance process was reasonable and
fair. He explained that the bill proposed to do so in the
same way as South Dakota by having all sales tax
administered at the state level.
9:19:20 AM
Co-Chair Foster noted that Representative Bynum joined the
committee. He added that questions would be held until the
end of each section.
Mr. Spanos moved to slide 13 "Sales and Use Tax:
Administration." He detailed that taxes would be remitted
to the state by the seller using the revenue online system
that allowed the electronic filing of tax returns,
electronic payments, and electronic communication with the
Tax Division in a secure system. The state would administer
the tax to be compliant with the Wayfair case. In the
Wayfair case, the Supreme Court highlighted that the South
Dakota system for administering sales and use tax was
designed to minimize burdens in interstate commerce. One of
the key factors was centralized administration. He
elaborated that the court pointed out that South Dakota had
a single state level taxing authority that handled state
and local taxes, which meant the sellers had to register,
file, and remit to one system instead of hundreds of local
tax jurisdictions separately. The streamlined approach
reduced compliance complexity and supported the court's
finding that the law did not impose an undue burden on
interstate commerce. He expounded that the court contrasted
the approach with states with fragmented systems, which
could create significant administrative challenges for
remote sellers. He stated that South Dakota's centralized
system was cited as being constitutionally sound under the
Commerce Clause.
Mr. Spanos advanced to slide 14 titled "Sales and Use Tax:
Comparison to Other States." He relayed that the vast
majority of states levied a sales and use tax. He detailed
that at the 4 percent rate proposed in the bill, Alaska
would tie with five other states as the second lowest tax
rate in the nation. He noted that at the 2 percent tax
rate, Alaska would be the lowest tax rate in the nation. He
added that when combining the average local sales tax
rates, Alaska would have the sixth lowest tax rate compared
to other states. He stated that the broad base in the bill
allowed for a low rate.
Mr. Spanos turned to slide 15 titled "Sales and Use Tax:
Exemptions." The intent was to have a broad tax base that
applied to most consumer goods and services, allowing for
one of the lowest rates in the nation. He stated that the
governor deliberately excluded intermediate business
transactions that could lead to "tax pyramiding." There
could be multiple tax levels in the chain of a good as it
made its way to a consumer. He explained that the bill
structure was straightforward, beginning with the
assumption that all goods and services were taxed and
listing specific exemptions one by one. He detailed that
the approach was administratively simpler than trying to
define what was taxable from scratch.
9:22:27 AM
Mr. Spanos moved to slides 16 through 17 listing specific
sales and use tax exemptions. He detailed that most of the
exemptions applied to areas where the state did not want to
tax itself or were required by the federal government, or
were exemptions that made sense such as employee wages that
were usually taxed under an income tax rather than a sales
tax. He referenced the exemption on jet fuel listed on
slide 17 and explained that it went back to interstate and
international commerce. He explained that states could not
tax transporting goods from point A to point B for
interstate or international commerce. The only thing a
state could tax was fuel used in its airspace. The fuel
used in international or interstate flights could not be
taxed when used in interstate commerce; most of Alaska's
flights were used for that purpose. Rather than having a
complicated credit system to apply the tax only to the sale
of fuel used in Alaska's airspace, the bill excluded jet
fuel completely. He stated it was also excluded on motor
fuel tax and jet fuel was excluded for different fees for
things like the Spill Prevention and Response Fund (SPAR).
9:24:06 AM
Co-Chair Foster thanked the department for the high level
introduction of the sales tax portion of the bill.
Representative Stapp stated that the Wayfair case also had
a transactions test, which he believed was 200+ annual
transactions. He did not see it outlined in the bill.
Mr. Spanos replied that after Wayfair was decided, South
Dakota wanted to ensure it would meet the standard;
therefore, there were two tests. Most states currently only
had one test. He shared that in conversations with those
states they strongly recommended against using the
transaction test because, for example, it was possible to
sell 50 keychains into a state at a total cost of $50, and
requiring the filing and remittance of a tax on the $50 was
overly burdensome. He relayed that $100,000 was the current
standard for most states.
Representative Stapp looked at slide 11 pertaining to the
use tax. He interpreted the slide to mean that the use tax
could be applied on anything that could have been sold in
Alaska including purchases made outside and brought into
the state. He highlighted that many Alaskans purchased
vehicles in Washington and brought them into Alaska. He
asked what happened to the use fee on that type of
purchase.
Mr. Spanos replied that if a person purchased a vehicle
outside the state the tax would be applied when they
registered the vehicle in Alaska.
Representative Stapp asked for verification that if the
bill became law all of the individuals buying vehicles out
of state would have to pay the 4 percent or 2 percent tax
when they registered the vehicle [in Alaska]. He asked if
the seasonal sales tax would be applied at the point of
purchase or the point of registration. He remarked that
there was a material difference between registering at 4
percent and registering at 2 percent.
Mr. Spanos responded that the tax was paid at registration
in most states because there were numerous sales made
between unrelated purchasers that were not businesses;
therefore, the states captured the tax by point of
registration for vehicles specifically. However, he would
have to look into the situation where a person purchased a
vehicle at a dealership. He explained that some states may
have a transaction there as well, but he believed almost
all were at the Division of Motor Vehicles (DMV) level.
9:27:22 AM
Representative Stapp remarked that the bill included
exemptions for purchases made through WIC [Women, Infants
and Children] and food stamps, but it did not exempt things
that WIC was used for such as diapers and formula for
people not in the WIC program. He stated his understanding
that all of the items were currently taxed under the broad
proposal unless they were purchased through WIC, food
stamps, or another type of public assistance program.
Mr. Spanos agreed.
Representative Stapp referenced the policy goal to improve
Alaska's long-term appeal for families and asked how the
bill improved Alaskans lives when it taxed purchases of
vehicles out of state, diapers, formula, and fuel (apart
from jet fuel).
Acting Commissioner Earls replied that the bill was the
comprehensive fiscal plan the governor had put together.
She stated that the plan still allowed for the PFD and a
small share of sales tax.
Representative Stapp pointed to the language on slide 4
specifying that the bill would improve Alaska's long-term
appeal for families and businesses. He failed to see how
taxing all of the aforementioned items would achieve that
outcome. He understood there was more to the proposal.
9:29:39 AM
Representative Galvin appreciated the conversation and that
the governor put a proposal forward pertaining to revenue.
She understood the fiscal cliff the state was beginning to
face and the desire to keep Alaskans in the state safely on
roads they could travel on and in schools where families
wanted to spend their time. She looked at the sales tax on
slide 9 and asked about the decision to call it a seasonal
sales tax. She noted it was a year round tax. She remarked
that it was not what most people thought of as a seasonal
sales tax. She elaborated that typically some states used a
seasonal tax when they knew there would be a large influx
of visitors into the state and they wanted to ensure they
were paying a little extra when spending their money on
products. She asked for verification that Alaskans were
being taxed year round by the proposal.
Mr. Spanos stated he had the same concern when putting the
presentation together. He had looked it up and there were
states that had a rate that changed seasonally called
seasonal sales taxes. He wanted to call it a seasonally
adjusted rate, but there were states who referred to the
tax as seasonal when it was seasonally adjusted.
Representative Galvin thought it helped to call a tax by
whatever it was that helped people understand what it was.
She liked the suggestion of calling it a seasonally
adjusted sales tax because it was a year round sales tax
for all Alaskans.
Mr. Spanos highlighted there was a slide that showed the
70/30 split when combining the rates. He noted that having
a 4 percent rate during the tourist season reduced the tax
burden on residents. Without the 4 percent rate, the split
was 75/25.
9:32:41 AM
Co-Chair Foster recognized Representative Jubilee Underwood
in the room.
Representative Galvin asked for comment on sales tax versus
income tax. She stated that Alaska already had over 100
municipalities with local sales tax, which differed by
community. She relayed that economists reported that
historically sales tax had a larger impact on families with
less nationwide. Additionally, regional price disparities
in Alaska would disproportionately hurt rural residents if
a statewide sales tax was implemented. She highlighted that
the burden on nonresidents was substantially different,
especially nonresidents who made over $200,000 working two
weeks [and two weeks off] on the North Slope. She noted
that the individuals went home [out of state] during their
time off and paid income and sales taxes in their home
state. She warmly welcomed the workers to continue coming,
but she hoped there had been discussion about the topic.
She asked why a sales tax was a better idea than an income
tax.
9:34:48 AM
Acting Commissioner Earls replied that there was no perfect
tax regime. The sales tax would allow the state to collect
from nonresident workers and tourists as well. She
explained that the full burden would not reside on Alaska
residents.
Representative Galvin asked if there was evidence showing
that nonresident workers came to Alaska and spent time and
money in a way that would pour revenue into the state's
revenue coffers. She observed that many nonresident workers
flew straight to the North Slope and straight back from the
North Slope. She was open to hearing data that showed
otherwise. She wanted to see data showing the sales tax
would capture revenue for the state compared to an income
tax that would capture 2 or 4 percent of their income. She
highlighted that the 2 or 4 percent was less than what
nonresidents were paying back home. She pointed out that it
would not result in the loss of workers and nonresidents
would not be double taxed if there was an income tax. She
did not know that 2 or 4 percent would result in
significantly more funds under a sales tax versus an income
tax.
Acting Commissioner Earls would have to check to see if the
department had the data.
DAN STICKEL, CHIEF ECONOMIST, ECONOMIC RESEARCH GROUP, TAX
DIVISION, DEPARTMENT OF REVENUE, responded that the
department had some information about potential
contribution to sales tax from nonresident workers. Broadly
speaking, there were three groups of individuals who would
be taxed including residents, tourists, and nonresident
workers. Some of the nonresident workers were coming to
Alaska for extended periods of time. He cited the tourism,
fishing, oil and gas, and mining industries as examples.
The model specifically broke out the share of revenue
coming from nonresident workers and the department could
provide it to the committee.
Representative Galvin stated it would be helpful. She asked
for a comparison between 2 and 4 percent of income versus
sales.
9:37:54 AM
Representative Bynum thought there would be many questions
about the sales tax. He did not think the presentation
would adequately convey to the committee and the public why
the proposed tax was the desired route. He referenced the
question by Representative Stapp about when the tax would
be applied to vehicle registration. He wondered if Alaskans
would all buy vehicles in the winter because they did not
want to be subject to a 4 percent tax in the summer. He
looked forward to the answer to Representative Stapp's
question. He understood that one of the goals was to
capture revenue from visitors. He stated that one of the
things Institute of Social and Economic Research (ISER) had
talked about in a presentation on the topic was using the
sales tax mechanism to create stability because it was not
as potentially volatile as other forms of taxation. He had
asked ISER how it was being modeled and why it was modeled
that way. He noted that in Alaska if the goal was to
capture nonresident visitor revenue, that the opportunities
were tied to the economic condition of the country. He
highlighted that the volume of people coming to the state
for travel may go down when the cost of travel increased or
if there was economic instability. He reasoned that even if
the number of visitors did not decline, spending habits
changed.
Representative Bynum shared that his community had a sales
tax and the borough assembly closely monitored what was
happening in its economy, which was highly influenced by
tourism. The community had seen that a global pandemic
eliminated all revenue coming in from a sales tax. He
shared that he had asked ISER if it factored in the change
in people's spending dramatically declined during periods
of economic instability. He had been told no and that
ISER's modeling was based on the U.S. as a whole. He asked
for the department's perspective on the question. He asked
if it truly created a stable income source for Alaskans
that leveraged the visitor industries and people in Alaska
temporarily. Alternatively, he asked if funding the tax
would be placed on the backs of Alaskans.
9:41:54 AM
Acting Commissioner Earls stated her understanding that
Representative Bynum wanted to ensure the tax would not
fully fall on Alaskans. She agreed that the [ISER] study
did not take economic downturns into account. She was not
entirely sure at present.
Representative Bynum asked if those particular economic
instabilities were not considered as part of the fiscal
plan.
Acting Commissioner Earls deferred the question to Mr.
Stickel.
Mr. Stickel stated he could provide a general perspective
on the stability of state revenues. The state's current
fiscal system had a lot of reliance on the oil and gas
industry, which tended to be a very volatile revenue source
to the state. He shared that when looking at other states
with sales and income taxes, those revenue sources tended
to be more stable than oil and gas. He relayed that when
looking at other states, revenue from sales taxes was a
little less volatile than income taxes in a downturn
because income taxes tended to be heavily influenced by
things like capital gains. He elaborated that when there
was a big expansion or downturn it led to large stock
market gains or losses, which resulted in income tax
volatility. He relayed that a sales tax was generally
viewed by economists and tax professionals as one of the
most stable revenue sources.
Representative Bynum referenced slides in the current
presentation listing exemptions from the proposed tax. He
asked if it would apply to local taxes. For example, his
community had a borough and a city with borough and city
taxes, a sales tax cap, a senior sales tax exemption, and
items that were exempt and not exempt. His understanding
was that the bill told municipal governments that existing
exemptions would go out the window and the bill would
provide the framework to apply the taxes. He asked if his
understanding was accurate.
Mr. Spanos responded that centralized administration and
having the same exemptions across the board were standard
in states doing their best to comply with the Wayfair
decision. He relayed that because it was a new tax, the
administration wanted to learn best practices from other
states. He noted that if there were other exemptions the
state wanted in general, they could be added to the bill.
The governor started with a very broad base to have the
lowest rate and there was nothing preventing the
legislature from making changes. He elaborated that if
there were certain items that were exempt locally that the
committee or legislature wanted to exempt, it was an option
that could be done. He noted that the tax rate would have
to increase in order to hit the same revenue target. He
stated that the department could model the number.
9:46:31 AM
Representative Bynum asked if the administration took into
consideration the impacts on the current tax structures of
communities that were charging the taxes. There was already
a cost from the state to organized boroughs. He had heard
from presentations from the governor that if more people
came to the state there would be a big burden on the state
because services were being provided and it would not
necessarily be good for the state. He would love to see his
community grow. He pointed out that the services (e.g.,
roads, police, fire, and other services) were being
provided by local communities through local taxes. He
remarked that the sales tax provision in the bill
discounted every measure that had already been put in place
to provide services. He asked if the administration had
evaluated the impact on communities that were already
taxing their citizens to provide services.
Mr. Spanos replied that it was the governor's plan and
there was no perfect tax regime. He relayed that the
proposal was the regime that the governor thought would be
best for the state. The department modeled the impacts on
the state. He deferred to Mr. Stickel to answer whether the
models went down to the local level. The governor
considered all options and landed on a sales tax as the
best option for the state.
Representative Bynum interpreted the response to mean that
the administration did not consider or evaluate impacts to
communities that were already collecting sales taxes to
support the local communities.
Mr. Spanos responded that the governor considered all
options on the table and chose the current proposal.
Representative Hannan asked about slide 14, which stated
that the average local sales tax rate in Alaska was 1.82
percent. She asked how the calculation was done. She used
Ketchikan as an example where most consumers would say the
sales tax was 6 percent because there was a city and
borough tax. She wondered if the rates were counted as two
or combined when calculating the average. She asked
Representative Bynum if the Ketchikan rate was 6 percent.
Representative Bynum replied that the tax was 8 percent in
the summer with a proposal to go to 8.5 percent. The bill
would result in a sales tax of 12.5 percent in Ketchikan.
Representative Hannan referred to slide 14 that specified
the average sales tax in Alaska was 1.82 percent out of 100
jurisdictions exercising sales tax.
9:50:14 AM
Mr. Spanos replied that he would follow up with the
information. The 1.82 percent was from a reputable tax
website that analyzed all of the states' sales taxes
annually. The combined local rate was computed for all of
the states and the states were ranked based on the results.
Representative Hannan was interested to see whether it
counted all municipalities. She considered the 1.82 percent
average and thought it meant there had to be a lot of
jurisdictions that only had a 1 percent tax, but she did
not hear that from communities with sales tax. She
referenced communities with a city and a borough tax, which
looked like one tax to residents, but to the tax analysis
it may appear to be two jurisdictions. She also wondered
whether jurisdictions without a sales tax were included in
the analysis.
9:51:43 AM
Representative Hannan looked at slide 16 and noted that
internet access was one of the exemptions. She asked if it
meant the utility bill a person was paying to an internet
provider. She asked about the definition of internet
access.
Mr. Spanos replied that the drafters included it because
the federal government did not allow taxing individuals on
accessing the internet under the Internet Tax Freedom Act.
Representative Hannan asked if it would only apply to
individuals but not businesses. She used a café providing
internet access to its consumers as an example. She asked
if businesses would still be taxed but individuals would
have an exemption on the utility bill paid to a provider.
Mr. Spanos responded that he would have to follow up on the
question.
9:53:11 AM
Representative Allard remarked that there was already a
markup of about 20 percent in addition to a dealership
markup for vehicles purchased in Alaska. She believed Mr.
Spanos' earlier testimony to mean that if a person
purchased a vehicle in Oregon where there was no sales tax
and shipped the car to Alaska, they would have to pay sales
tax when they registered the vehicle.
Mr. Spanos nodded affirmatively.
Representative Allard asked if a person would have to pay
tax on a used vehicle they purchased out of state when it
was registered in Alaska.
Mr. Spanos clarified that it was not only out of state
sales. He stated that all purchases without an exemption
would be taxed by the local sales or use tax. He confirmed
the tax would apply to a new and used vehicle.
Representative Allard asked if she would be paying tax on
everything purchased out of state like furniture and retail
items.
Mr. Spanos replied that there was an exemption for moving
to Alaska and bringing one's household goods. However, the
use tax would apply if a person went shopping and brought
in goods, but it would be a self-reporting requirement. He
noted that states had few mechanisms to enforce it.
Representative Allard stated she was glad she was military
because she would purchase everything including cars
through the military PX [post exchange]. She referenced
Representative Galvin's mention of income tax. She stated
there were approximately 11,045 military retirees and 9,000
federal retirees. She noted that military retirees were 15
percent [of the state's population], which was the highest
per capita in the nation. She asked if the department had
researched how detrimental an income tax would be because
of the loss of military individuals. She shared that when
she came to Alaska almost 20 years back, Alaska was a high
consideration because it did not tax federal income when it
came to retirement. She wondered if the department had any
way of countering an argument in favor of an income tax.
9:56:41 AM
Mr. Spanos replied that he and Mr. Stickel had been with
the division for a long time and had presented on income
taxes, sales taxes, and other taxes over the years. He
relayed that it had been a while since he had looked at
income tax models. He deferred the question to Mr. Stickel.
Mr. Stickel replied that broadly speaking there was no
perfect tax. Any tax would have negative downsides, which
was true for a sales tax or an income tax. The impact on
population and decision to live in Alaska was one of the
impacts of a tax, which was balanced against the positive
impacts of having a sustainable fiscal plan. The impact had
been modeled by DOR "in excruciating" detail and was
covered in the ISER report as well.
Representative Allard suggested that military retirees
would likely cross Alaska off the list of places to retire
if the cost of living increased due to an income tax and
perhaps a sales tax. She stated that military and federal
retirees brought a lot of funding into the state. She
referenced the phrase "a bridge to nowhere" that was coined
many years back. She felt like the sales tax was a bridge
to income tax. She thought everyone needed to consider how
to avoid it.
Representative Bynum remarked that the bridge to nowhere
was actually a bridge to somewhere and it was in Ketchikan.
The community had a lot of hard feelings about that bridge.
9:58:42 AM
Representative Tomaszewski had the same question as
Representative Hannan about how the average sales tax had
been calculated. He looked forward to the answer. He
referenced the proposed 2 and 4 percent tax and wondered
how to be assured the tax would not increase to 4 and 6
percent in another year or 6 and 12 percent in future
years. He asked how easy it would be for the next
legislature to increase the tax amount and what the
ramifications would be on Alaskan citizens.
Mr. Spanos responded that the legislature would have the
ability to change the statutes. The governor recognized the
difficult fiscal situation and wanted to have a
conversation about how to solve it. He stated that the bill
reflected the fiscal plan put forward by the governor in
order to balance revenues with expenses. The governor
believed that not doing so was the wrong thing to do. He
agreed there would be concerns about years going forward,
but when looking at the reality of the situation, the
concerns were present already.
Representative Tomaszewski asked if there was any
consideration about how to make it more difficult for the
legislature to raise the taxes next year. He asked if there
was consideration into making it constitutional.
Acting Commissioner Earls replied that the governor felt
strongly that the state's fiscal status needed to be
scrutinized all of the time. She stated that a fiscal plan,
including a 10-year plan was hard to predict. The levers
were available to increase or decrease the tax.
10:02:06 AM
Co-Chair Josephson looked at the 1.82 percent average local
sales tax rate in Alaska on slide 14 and was concerned that
the average local sales tax rate must have considered the
larger municipalities and Anchorage and Fairbanks with
their zero rates because the mean should be closer to 5
percent or better. He stated while it could create an
opportunity to raise lots of revenue for local governments
because many had caps on purchases above $1,000 and $2,000;
however, he believed local governments would fear the
centralization of the exemptions. Additionally, the total
tax rate would get so large at some point it would act as a
deterrent for local economies. He asked if the
administration had any concerns with those issues.
Mr. Spanos confirmed that they had concerns. He stated that
the governor would like not to have a tax as well, but it
was not the situation the state was in; there was a fiscal
crisis that needed to be resolved and the governor felt the
proposal was the best solution at the time. The bill zeroed
out the tax rate after seven years so the legislature could
determine whether it was still needed. He suggested that
with such a broad base tweaks would likely be needed sooner
rather than later. The governor considered everything that
concerned him because he did not want to ask for a tax
either. He reiterated that the fiscal problem needed to be
resolved.
Co-Chair Josephson looked at the exemption shown on slide
17 on purchases in a trade or business when costs were
deductible. He was concerned that a substantial amount of
potential tax may not be captured because all of a
business's purchases would be tax exempt. He asked how the
department could assuage his concerns about the topic.
Mr. Spanos answered that the intent was to not tax business
to business transactions. He explained the intent was to
have only one sales tax applied - at the consumer level -
on business inputs that went into an item that was later
sold. Additionally, the state already taxed certain
industries on specific items such as oil, fish, and mining
and the administration did not want to overburden the
industries with additional taxes.
Co-Chair Josephson remarked on Mr. Spanos's statement that
the legislature could make exemption adjustments that make
require increases [in the tax] to achieve the goal. He
expressed that it was where he was most troubled by the
entire proposal. He had experienced that the governor would
object to changes to the legislation. He noted that Mr.
Spanos made it sound like the legislature was welcome to
engage in making adjustments, but he had not experienced
the governor being open to changes to his legislation in
the past.
10:06:51 AM
Acting Commissioner Earls responded that it was open to
some conversation. She could not speak to what the governor
would accept, but she believed it was a conversation to be
had.
Co-Chair Josephson asked how the conversations would occur.
He wondered if the conversations would occur like any other
legislation where the legislature would speak to the
department and the department would speak to the governor's
office.
Acting Commissioner Earls replied that the questions could
come through the department and the department could speak
with the governor. She offered to find out more information
and follow up with the committee.
10:07:59 AM
Representative Moore remarked that numerous members had
spoken about the fears of double taxation on cities and
boroughs that rely heavily on sales taxes already. She
asked for more detail about how existing taxes would
interact with the bill. She asked if it was a double
taxation.
Mr. Spanos answered that double taxation usually referred
to an income tax where two states were taxing the same
income twice. He explained that it was standard for local
taxes to be added on top of a state level tax. He could not
think of an example of a state that did otherwise. He
detailed that the tax was only applied once to the same
item. There was a state level tax in most states and some
states had a cap that local governments could add taxes up
to. He detailed that some of those were up to 11 percent at
the local level on top of the state tax that was sometimes
4 to 5 percent, resulting in a high tax. He explained that
it would be the case in some of Alaska's local communities
that had a higher existing tax rate. For example, if a
community had a 6 percent tax rate and a 2 percent tax rate
was added at the state level, the community's tax rate
would be 8 percent.
Representative Moore asked if the department had modeled
the household level impact of a sales tax particularly in
rural communities where the cost of goods was already high.
Mr. Stickel answered affirmatively. He noted that ISER had
also done that type of modeling. He was happy to provide
the information.
Co-Chair Foster noted there were 20 minutes left in the
meeting. He asked members to think about whether they
wanted to extend the meeting.
10:10:59 AM
Representative Galvin referenced ratings for the state. She
recalled being told that a broad base revenue measure would
likely improve the state's ratings. She stated it meant
that for any dollars owed by the state, it would likely see
a lower percentage owed on top of the amount. She asked how
the bill would look to ratings agencies such as Moody's.
She wondered if it would save the state money.
Acting Commissioner Earls replied that she would have to
follow up on the question. The state debt manager met with
the rating agencies. She offered to follow up with the
information.
Representative Galvin asked for a statement about whether
broad based revenue would look good for Alaska.
Mr. Stickel answered that broadly speaking a sustainable
fiscal plan would be viewed positively by rating agencies.
The department anticipated it would be something that would
favor positive ratings for state debt, which would save the
state money.
Representative Galvin understood the balance in the state's
revenue had changed from 90 percent oil revenue; the
revenue now fluctuated much more because of price. She
remarked that the state was needing dollars that were easy
to spend for services. She stated that the investment fund
was doing well, but the other piece of revenue was not yet
in place. She highlighted that rating agencies found favor
in states that had something in place as a safety measure
should there be a need for steady revenue. She thanked the
department for presenting the bill because a broad based
measure was important. She considered the multiplier effect
and highlighted other committee members' discussion of
their concerns about piling on taxes. She considered the
1.2 million cruise ship passengers and noted there had been
conversations about adding another head tax to generate
some revenue. She heard from cruise companies that adding
another $1 may result in a loss of many passengers. She
wondered about the possible negative multiplier effect of
adding tax that would impact tourists.
10:15:33 AM
Mr. Stickel responded that the department had looked at
macroeconomic modeling similar to modeling by ISER, which
gave the ability to look at relationships between data and
understand how a change in tax was likely to impact
variables like visitation and spending. He stated it was
one tool in the toolkit that should be viewed alongside
input from stakeholders. One of the things the models
sometimes missed and could not perfectly quantify was the
impact on the business and investment climate.
Representative Galvin clarified she understood that any
head tax on cruise ship passengers had to go directly to
something related to the cruise ship industry. She
highlighted that adding extra cost to any visitor may have
a negative effect on the number of visitors coming to
Alaska. She suggested perhaps the Alaska Travel Industry
Association (ATIA) could weigh in on how taxing visitors at
the local and state level may impact travel.
10:17:31 AM
Co-Chair Foster noted that the meeting would be extended to
11:00 a.m.
Representative Stapp referenced the policy pertaining to
planned noncompliance for failure to self-report. He
elaborated that if a person brought in goods, the state had
no mechanism for enforcement. He remarked that it would
result in Alaskans circumventing the law either knowingly
or unknowingly. He thought that the presentation made it
sound like noncompliance for payment was in the plan. He
asked if the state was planning for active noncompliance.
He asked if there would be any legal repercussions for
Alaskans or enforcement mechanisms when they would be
breaking the law.
10:19:08 AM
Mr. Spanos clarified he had been referring to what he had
heard from other states that noncompliance existed. There
was noncompliance in the current taxes and the state took
action where it could. He noted the department had talked
about [tax] related bills with the committee in the past
including the vehicle rental tax. He detailed as the tax
administrators, the division was obligated to enforce the
taxes. He stated that the division enforced the laws when
it knew about noncompliance and where it was.
Representative Stapp understood that noncompliance existed,
but the department was the enforcer and Alaskans who did
not report items they purchased and brought to Alaska would
be in violation of the law. He asked about the penalty for
noncompliance and how it was enforced. He wondered if there
would be random checks on vehicles crossing the border to
see if individuals purchased things they needed to pay tax
on.
Mr. Spanos replied that AS 43.05 included the general tax
penalties that would apply to the proposed new taxes as
well. There was a failure to file/failure to pay penalty of
5 percent per month up to 20 or 25 percent. He would have
to double check the maximum percentage.
Representative Stapp stated he was glad to know that if the
bill passed people needed to comply otherwise it would be
an extremely expensive piece of furniture if a buyer had to
pay the noncompliance tax. He referenced an earlier
statement by Mr. Spanos that the executive would like not
to have taxes as well, but that the fiscal situation
demanded it. He did not see that in the bill. He saw that
the bill created a constitutional liability that was far
greater than the revenue measures proposed. He asked why
the proposal was needed and what its purpose was when it
cost more than it raised.
Mr. Spanos responded that the governor's overall fiscal
plan wanted to maintain a 50 percent PFD to residents as
well as close the budget gap that existed on paper. The
proposed fiscal plan included taxing in order to help close
the gap.
Representative Stapp countered that the proposal did not
close the budget gap by the department's own projections.
He asked if the proposal closed the gap by
constitutionalizing the liability by the department's own
10-year projections.
Mr. Stickel referenced a handout prepared by the Office of
Management and Budget (OMB) titled "Governor Dunleavy's
Fiscal Plan: Comparative Modeling Scenarios," dated 1/26/26
(copy on file). The department prepared a comprehensive
fiscal model that used the governor's 10-year plan as a
starting point and layered on numerous levers around state
revenue and spending. The plan included an initial draw
from savings in FY 27 when the state would work to
implement the new revenues, but beyond FY 27, the plan was
roughly in balance.
10:23:32 AM
Representative Stapp stated it was the case until the
sunset of the revenues and the payment was
constitutionalized. He remarked that in 10 years when the
revenues sunset, the liability would always be there. He
asked how it would balance.
Mr. Stickel replied that DOR's fall revenue forecast had
lower revenue projections for the coming five to seven
years. Once production from the Willow and Pikka oil fields
started to come online and once the fields graduated from
being eligible for certain incentives that applied for
first several years of new oil production, the department
was expecting a higher baseline revenue outlook. The
department also had an assumption for growth in the
Permanent Fund, which led to a higher percent of market
value transition. Additionally, the administration was very
optimistic about a gas pipeline coming online and the
modeling layered on the assumption of revenue from the
AKLNG [Alaska Liquified Natural Gas] project starting in
the 2030s. The baseline revenue combined with the other
elements of the fiscal plan roughly balanced even as the
sales tax and corporate income tax expired.
Representative Stapp asked that if all of those things took
place, there would be a ~$1 billion liability in
perpetuity, the taxes would go away, and the gasline and
production would net at least another $1 billion.
Mr. Stickel replied it was the assumption. He added there
was uncertainty around any forecast and any model.
Co-Chair Foster explained that HB 284 was the tax component
of the governor's fiscal plan. The governor also had a
spending cap bill and a bill related to the split of the
Permanent Fund earnings. He planned to let the Alaska
Municipal League speak prior to going to the next section
of the bill.
10:26:39 AM
Co-Chair Schrage thanked the presenters for being present
and believed they had the unenviable position of advancing
a major fiscal policy change, which everyone admitted was
incredibly difficult. He believed the conversation was
important. He thought the challenging questions asked
during the meeting were fair. He noted there were many
concerns with the bill and he believed it would take
substantial time to work through the bill. He thought there
were many concerns with the proposal that needed to be
worked through. He considered the challenges the status quo
and remarked that the committee had not spent any time
talking about the challenges associated with the status
quo. He stated that one of the opportunities presented in
the next several years was potentially a gasline. He
believed the governor did a fairly good job of articulating
the concern that if the state had a gasline or other major
investment, it would result in a huge influx of people into
the state and an increased burden on state services. He
asked to hear how implementing a fiscal policy like the one
proposed would allow the state to restructure the way it
funded the size and scope of government and how it would
enable the state to be more flexible to major positive
developments in Alaska in the near future.
Mr. Stickel responded by looking at the status quo and the
governor's 10-year plan associated with the release of the
FY 27 budget and the DOR fall 2025 revenue forecast. He
explained that oil prices were lower and revenue forecasts
had been decreasing. There was cost pressure on various
elements of state government. He stated that if it was
assumed that the revenue forecast held and the state paid a
dividend in line with the governor's proposal and
government was funded at a fairly stable level, the
Constitutional Budget Reserve (CBR) would not last for
long. He elaborated that one of the slides the department
presented showed that the state would be able to make a CBR
draw in FY 27 and FY 28 and then it would be depleted.
There was a structural fiscal issue that needed to be
addressed. He stated that as far as the broader questions
around the issue, it created uncertainty. He expounded that
something would eventually have to happen, but people did
not know what (i.e., it was hard to make plans and
businesses did not know what would be decided). There was a
benefit to having some sort of certainty. He stressed it
was very difficult to quantify. He noted that employees at
the Department of Labor and Workforce Development and ISER
had tried to quantify it. He stated that one element was
that solving the fiscal system provided some level of
certainty to underpin long-term decisions that individuals
and businesses were making.
10:30:44 AM
Co-Chair Schrage believed the state had been facing the
fiscal cliff for quite some time. He remarked that some
would say the challenges had been evident for more than a
decade. He shared that in his experience talking with
community, businesses, and other stakeholders, the
instability had a very negative impact on investment in
Alaska and in public confidence in the state, which he
believed was witnessed in some of the outmigration
currently occurring. He recalled when Mouhcine Guettabi was
with ISER in the past and one of the challenges he
discussed was the large outflow of money generated in
Alaska and going elsewhere. He referenced another committee
member's discussion about the prospect of taxing sales
occurring outside of Alaska. He asked about the impact of
dollars spent in Alaska compared to the impact of spending
the money outside the state without any tax mechanism to
capture some of the money.
Mr. Stickel answered that Alaska tended to have a fairly
transient population and it relied heavily on outside
companies and workers in some of its industries.
Additionally, students liked to go out of state for college
to get some sun during the winter. He noted that the things
resulted in money flowing in and out of the state. The
sales tax would not apply to money that Alaskans spent
outside Alaska, but it would generate some revenue from the
sales of outsiders spending money in the state. Generally,
in the analysis DOR looked at pertaining to spending and
employment, it tended to be that outsiders were spending
more in state than in-state residents were spending out of
state and putting in a broad base tax would be a net
positive for the state in terms of the relationships of
where money was being spent.
10:33:31 AM
Co-Chair Schrage stated there were tradeoffs with any
policy choice in Alaska. He remarked that there were
numerous concerns about the bill and its structure that
would have to be worked through. He believed the economic
instability facing the state including the negative public
and business confidence, outmigration, and outflows of
money going to other states, were all challenges that could
be partially mitigated or addressed through fiscal reform.
He thought it was an important conversation to have. He
highlighted the importance of remembering there were ways
to improve the state's fiscal structure. He was not certain
the current proposal was the way to do it, but it was a
conversation that needed to continue.
Representative Bynum referenced the undertone about
affordability in the state. He relayed that the biggest
outmigration from his community was due to the cost of
living. He looked at slide 4 that specified the goal of
creating long term appeal for families and businesses by
enshrining a predictable 50/50 PFD. He observed that the
PFD was major component of the governor's proposal. He
stated that some of the arguments he had heard was that
enshrining the PFD would offset the pain of paying
additional taxes. He referenced the goal of trying to grow
the community and highlighted there was nothing in the
proposal to create stability in capital investment, build
things, have people work through the building of things, or
to make life easier for people by building and maintaining
things. He stated that the bill taxed his community to
ensure the enshrining of a PFD. He addressed the challenges
with the concept. He addressed the goal of trying to grow
his community and fill teacher, police officer, and
firefighter jobs and explained that if the community was
not growing from within it meant people were having to come
to the community. He pointed out that the proposed tax
would be immediately imposed on those individuals, yet they
did not have the privileges of receiving a PFD because they
had to wait. He stressed that individuals could be in
Alaska for two years prior to seeing any kind of relief. He
pointed out that on one hand the proposal created an
enshrined PFD that would help Alaskans and on the other
hand communities were shrinking and costs continued to
rise. He did not see how to balance the situation to make
it more affordable for his community to grow. He stated
that the proposal did nothing in that regard. He asked if
growing Alaska and keeping communities healthy had been
considered as part of the calculus in the plan. He
reiterated that the bill aimed to transfer funds from
collected taxes directly into the PFD program enshrined in
the constitution. He suggested that perhaps there would be
some members in the community that did not receive the PFD
or they would not get it for many years. He asked if it had
been considered.
Acting Commissioner Earls responded that she would have to
look into whether there was economic research done on the
impact to people leaving the state. She was not sure it was
completed. She deferred to Mr. Stickel.
10:39:11 AM
Mr. Stickel replied that broadly speaking, DOR had modeled
impacts of the PFD, taxes, and spending. He stated that the
sustainable fiscal plan would provide a stable source of
revenue for a variety of government spending to include
PFDs to Alaskans and providing government services such as
the capital budget and education. The governor had been
clear that providing a PFD was a priority and it was a core
part of his proposed fiscal plan.
Representative Bynum replied that under the proposed plan,
there was no way any capital investment would occur. He
noted that the state was not making capital investment
currently and was not maintaining operational expenses. He
remarked that nothing in the plan was actually causing that
to happen, but it would put more burden on communities to
pay taxes. He highlighted that on one hand the proposal
sought stability by imposing a sales tax because oil
revenues were volatile, but the other part of the plan
sought to return to the volatility in seven years. He
understood there were projections for additional [oil]
resources coming online in the future; however, the 10-year
projections did not show that additional revenue would be
created, they showed that a permanent liability would be
created with no investment in capital.
10:41:25 AM
Representative Galvin asked about the implementation of the
sales tax. She shared that she had done some research into
how important broad based revenue would be to Alaska given
diminishing revenue. She found it was pretty simple from an
income tax point of view because it was possible to take a
line from the federal income tax as opposed to the sales
tax that put work on all of the local businesses. She did
not see any slides on implementation and the cost to stand
up the tax and then take it away in the future. She felt it
seemed cost burdensome. She suggested that individuals
could opt to pay an income tax when they applied for the
PFD. She thought the current sales tax proposal put the
burden on businesses. She asked how much it would cost to
implement the sales tax and then shut it down.
Mr. Spanos answered that the costs were included in the
fiscal note. He did not believe there would be an
opportunity to review the fiscal note in the current
meeting, but he offered to address it at a subsequent
meeting. He stated that an income tax was not simple. He
detailed that about 10 years back the House passed an
income tax that did not pass the Senate. He shared that DOR
had done a lot of work on the bill internally. He explained
that it was a complicated mechanism that required as many
or more employees than were called for under the current
legislation. The current sales tax proposal would require
67 employees, and he believed it had been 72 for income
tax. The 67 employees would cost about $10 million per year
(including travel cost for conducting audits).
10:44:59 AM
Representative Galvin asked if the department had
considered the cost to local businesses that may or may not
have more paperwork. She understood that the state cost
would be one piece. She asked about the multiplier effect
of other components.
Mr. Spanos answered that the cost of implementing a sales
tax for a local business was miniscule, especially in a
location that already had a sales tax at the local level.
He stated that even in locations without a local sales tax,
businesses' point of sale systems had the sales tax option
built in.
Representative Galvin remarked that Mr. Spanos had
mentioned earlier that taxes like income taxes may be
volatile because they are dependent on whether the economy
was up or down. She noted there was some similar volatility
with sales tax as well. She asked if the department was
projecting some level of confidence that a sales tax was a
better instrument. She thought it was also indicating there
was a level of confidence that the oil fields and other
areas would continue to bring some positive returns. She
believed the model deescalated the corporate income tax and
because other revenue (e.g., oil revenue) was expected to
come in. She noted it factored in the projection that oil
price would be predictable. She suggested that the plan
should also factor in there would still be high revenue
earning employees working on oil fields. She asked if that
was the case.
10:48:03 AM
Mr. Spanos agreed.
Representative Galvin asked if DOR conducted any research
on what percentage of wage revenue from oil and gas came
from out of state workers.
Mr. Spanos responded that DOR did conduct the modeling, but
they were not prepared to talk about an income tax during
the current meeting.
Representative Galvin stated that when considering one tax
versus another and how to best fill a hole [in state
revenue] she believed the numbers would help the committee
make decisions. She remarked that many Alaskans thought it
was not right that nonresidents took the highest paying
jobs in Alaska and did not contribute to Alaska. She
understood they may spend money on things like fishing and
camping gear in the state. She wanted to be mindful about
what the bottom number looked like. She would appreciate
including it in the conversation because there were many
levers to pull and she wanted to ensure the right ones were
being pulled that were appropriate for the revenue needed
currently and in the long term.
10:49:34 AM
Representative Jimmie thanked the Akutan and T'aaku Kwáan
tribe for allowing state business to be conducted on their
land. She shared that she did not grow up knowing about
taxes. She relayed that taxes on goods such as groceries
and building materials in rural Alaska included freight
cost. She explained that businesses had to make money so
they added two to five times onto the cost for the goods.
She stated that rural areas paid year round tax with
seasonal income. She detailed that sometimes corporations
went into rural areas to help provide jobs to residents who
may work around six weeks of the year without any other
income the rest of the year. She stated it was now harder
for people to get assistance and individuals were found to
exceed the income level but they were struggling to make a
paycheck and to pay for fuel and food. She explained that
when they sought assistance they were denied, which put
another burden on the family. She stated her understanding
that under the tax proposal, residents would be paying more
and receiving less in her village communities.
Representative Jimmie highlighted that Typhoon Halong had
damaged many homes in her district. She relayed that there
was no insurance out in the bush. She elaborated that the
Federal Emergency Management Agency (FEMA) helped support
people in the immediate moment, but it was designed to help
repair homes, not rebuild homes. She detailed that it was
to help repair homes that families had been living in for
generations. She stated that some of the homes were built
and passed down from parents, which meant a lot. She
highlighted that many people had to pay out of pocket for
building supplies to repair homes, subsistence gear, snow
machines, four wheelers, and boats that served as lifelines
helping residents with subsistence. She relayed that goods
all came in by plane or barge. She stated that the tax
would apply to freight and the items would cost two to four
times more than in urban areas. She asked how a statewide
sales tax was meant to be equal when rural Alaskans faced
much higher costs for basic necessities especially after a
disaster.
10:53:39 AM
Acting Commissioner Earls had heard the concern from
others. She stated that the tax would spread across the
state. She recognized that rural Alaska had high costs and
stated that a lot of Alaska had high costs. She did not
know how to provide an answer related to every individual
Alaskan.
Mr. Spanos added that rural Alaska was more expensive than
urban Alaska. He stated that there was no perfect tax
regime and it was difficult to build equity into a flat tax
like a sales tax. There was an exemption for construction
and the sales tax would not apply to building and
rebuilding homes. He noted that discussion could be had
about other exemptions. The current structure was a broad
base to allow for a low rate for Alaska and the low rate
benefit rural Alaska. He reiterated that there was no
perfect tax regime. He added that they wished they were not
present talking about a tax, but it was the situation.
Representative Jimmie highlighted the scenario where a
family lost all of their clothing and everything from
memories to items purchased. She noted that it was
expensive to ship items out [to rural communities]. She
referenced a constituent who lost her home, who had no job
and no other way to pay for any of her bills and was
selling her own dry fish while her home was being repaired
just to make ends meet. She asked for verification that the
department was telling her that on top of local taxes -
which should be paid to help benefit the local community -
the individual would have to help pay a tax that would
benefit urban Alaska but not rural Alaska.
Mr. Spanos replied that it was a conversation and it would
be on the legislature to pass the tax. He confirmed that if
the tax passed, DOR as the tax administrator, would be
responsible for telling residents they had to pay the tax.
He stated that until the tax became law, it was a solution
proposed by the governor.
Representative Jimmie responded that if the tax passed she
hoped the administration would help her write what she
would need to tell constituents at home. She stated it was
not okay for her constituents who were barely surviving to
have to pay for a state sales tax.
Co-Chair Foster shared Representative Jimmie's concern. He
stated that while it sounded like a sales tax was equal
(e.g., everyone paid 4 percent), for a gallon of milk that
cost $10 in rural Alaska as opposed to $5 in other parts of
the state, 4 percent of $10 was more than 4 percent of $5.
He appreciated Representative Jimmie's concern.
10:57:38 AM
Co-Chair Foster noted the committee would hear from AML at
the 1:30 meeting.
Representative Allard followed up on the comments by
Representative Jimmie. She shared that some Eagle River
residents lost their houses in the 2018 earthquake and
still had to pay property tax. She stated that her district
was impacted. She believed most rural communities did not
pay property tax. She stated there were people in her
district who paid between $10,000 and $15,000 in property
tax. She remarked that she would forego property taxes in a
heartbeat and pick up sales taxes.
Co-Chair Foster relayed that hearing the remainder of the
bill sections would be determined later.
Representative Jimmie directed a question to Representative
Allard and asked if property taxes were local taxes, not
statewide taxes.
Representative Allard replied that the property taxes came
from the Municipality of Anchorage.
Representative Bynum wanted to ensure the committee would
have enough time to return to the point in the presentation
where it left off and review the proposal in depth.
Co-Chair Foster agreed there was a lot in terms of the
questions and analysis. He stated it would not be the last
conversation and the intent was to try to get the high
level components of the bill out there. The committee would
hear public testimony on the sales tax portion that
evening. He remarked that the committee could come back to
public testimony on the other bill sections at a later time
because the committee had not yet discussed those sections.
11:01:06 AM
Representative Bynum asked if there would be a presentation
by AML in the afternoon.
Co-Chair Foster replied that Alaska Seafood Marketing
Institute (ASMI) and Alaska Travel Industry Association
(ATIA) would also present during the meeting.
Representative Tomaszewski thanked the department for being
present with a difficult task presenting a fiscal plan. He
shared that during his time as a legislator over the past
three years, the constant drumbeat was about what the state
was doing for a fiscal plan and how the budget would
balance. He thanked the governor for bringing the difficult
subject before the committee. He recognized it took strong
leadership in the department. He stated it would be a
difficult conversation and he looked forward to digging
into all of the aspects of the proposal.
11:02:31 AM
Representative Galvin referenced her earlier questions
about out of state wages that the state did not have recent
data for. She provided data from 2024 and detailed that
there were 413,867 people working in Alaska and 22.9
percent were nonresidents. She elaborated that nonresidents
earned ~$3.8 billion or 17.3 percent of total wages. She
noted that the numbers did not include newer projects such
as Willow and Pikka or a possible gasline that would
require 10,000 workers including 5,000 from out of state.
She relayed that those positions were estimated at an
approximate annual wage of $175,000. She wanted to ensure
all of the information was on the table to discuss. She
relayed that the information came out on Monday and did not
include federal employees. She wanted to think about all of
the choices and what would impact residents, especially
rural Alaskans, less.
Co-Chair Foster asked the department for any closing
comments.
Acting Commissioner Earls thanked the committee. She stated
it was a difficult conversation and she was grateful for
the discussion.
HB 284 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster thanked the department. He reviewed the
schedule for the afternoon.
ADJOURNMENT
11:06:35 AM
The meeting was adjourned at 11:06 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 284 Governor Dunleavy’s Fiscal Plan - Comparative Modeling Scenarios - 01.26.2026.pdf |
HFIN 2/5/2026 9:00:00 AM |
HB 284 |
| HB284 Sectional Analysis version A 1.28.2026.pdf |
HFIN 2/5/2026 9:00:00 AM |
HB 284 |
| HB284 Transmittal Letter 01.26.26.pdf |
HFIN 2/5/2026 9:00:00 AM |
HB 284 |
| HB 284 AML Alaska Fiscal Policy - Sales Tax 020426.pdf |
HFIN 2/5/2026 9:00:00 AM |
HB 284 |
| HB284 DOR Intro Presentation to H.FIN 02.05.26.pdf |
HFIN 2/5/2026 9:00:00 AM |
HB 284 |
| HB 284 DOR Response to H.FIN on 02.05.26 021126.pdf |
HFIN 2/5/2026 9:00:00 AM |
HB 284 |