Sales tax

Alaska would implement a 2% state sales tax next year under a bill before lawmakers meeting in special session to address fiscal policy. Under the terms of the bill, many essential items for Alaskans would be exempted, including groceries, medication, feminine hygiene products and heating oil.

If a 2% sales tax passes the Alaska Legislature, it will be difficult to implement by July 2022, Nicole Reynolds, deputy director of the Department of Revenue, told lawmakers Thursday.

“That’s only nine months away,” Reynolds testified before the House Ways and Means Committee. “It is is not a whole lot of time. We would expect a bill like this would take 12 months at the least to implement.”

Reynolds said the tax would require “all hands on deck” to implement fully under that timeline.

Democrat Rep. Geran Tarr of Anchorage, who is sponsoring a state sales and use tax bill, had indicated the tax would be effective by July 1 next year.

Tarr answered questions Thursday posed by the House Ways and Means Committee about how a 2% sales and use tax would be implemented.

With oil and gas royalties on a long-term decline, the state is facing a structural budget deficit and seeking ways to raise revenues.

Rep. Ivy Spohnholz, who chairs the House Ways and Means Committee, said she believes that a broad-based sales tax take years to implement, as all stakeholder concerns are heard and addressed.

“In my experience, even simple legislation occasionally takes years” to implement, she said.

Among the affected parties are more than 100 local governments in Alaska that already levy sales taxes at the municipal level.

Nils Andreassen, executive director of the Alaska Municipal League, offered a presentation that looked at the tax collection activities of local governments to inform state policymaking if a statewide sales tax becomes law.

“For me, you have a wealth of resources at the local level to know what local tax collection looks like,” he said.

He said there are important questions for lawmakers to consider. Those questions include: How would tax revenues likely increase as the economy grows? How would a statewide sales tax intersect with a spending limit?

“The bill is a starting point to make good policy and produce a law to effectively capture a sales tax,” Andreassen said.

He suggested that the state should move with deliberation and through consultation with local governments and others.

“It will take time to get it to a place where it is a product of collaboration between the state and local governments and others,” he said.

Contact Linda F. Hersey at 907-459-7575 or lhersey@newsminer.com. Follow her at twitter.com/FDNMpolitics.

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