Gov. Walker will propose 1.5% tax increase in fourth special session

Bill Walker announced Friday a proposed payroll tax of 1.5 percent of wages earned by residents and nonresident workers.

Companies would automatically pay the tax on behalf of employees, similar to the way Alaska employers now deduct unemployment insurance fees. According to a study, nonresident workers earned about $2.7 billion in Alaska wages in 2015.

Employers would deduct the tax on a monthly basis until the maximum is paid, much like deductions are now made for unemployment compensation insurance, the commissioner said. At an income of $150,000 the tax and the dividend are essentially a wash, with a tax of $1,100 and a dividend of $1,100.

- $200,000: an individual earning this amount in wages would owe the state $2,200 in payroll taxes and would owe the state a net of $1,100 after accounting for the $1,100 dividend.

Fisher said the capping of the dividend, protecting higher income Alaskans, will cost the treasury about $10 million compared to revenues if there were no cap.

The governor was traveling and unavailable for an interview with Channel 2 News on Friday, a spokesperson said, but he said in a news release that he remains adamant that new revenue is necessary sooner rather than later: "It's clear that we must find a new source of revenue to pay for troopers, teachers, transportation and other essential services", Walker wrote.

Under this proposal, Alaskans would pay the lowest taxes in the nation.

The commissioner said the tax would be at a flat rate of 1.5 percent up to the annual cap on wages, self-employment and partnership income but would not be levied on interest, dividends and capital gains, retirement income, S-corporation distributions or even the Permanent Fund dividend, Fisher said.

The largely Democratic House majority and the Republican-led Senate majority each voted this year to fill most of Alaska's deficit with investment earnings from the state's $61 billion Permanent Fund, which would have the effect of reducing Alaskans' annual dividends.

Still, as evidenced by Walker's many unsuccessful attempts to pass a tax, it will take an uphill battle if the payroll tax is ever to be anything more than just another idea.

The new tax would avoid the complexities of an income tax, such as apportionment, calculating business income and auditing the state's top earners, Walker added. House Speaker Edgmon, D-Dillingham, leader of a Democrat-Republican coalition controlling the state House, said, "Our Coalition's No. 1 goal is to respond to the ongoing fiscal crisis and recession by developing and passing a comprehensive fiscal plan", Edgmon said in a statement. "However, our commitment in the House is meaningless unless the Senate follows suit", he wrote. Senate leaders oppose taxes, saying Alaska has enough money in savings to rely on the Permanent Fund alone, leaving a deficit of several hundred million dollars.

The current Fiscal 2018 budget expires at the end of June. "Government has to do its part". Because it is a head tax, in a household in which both partners worked each partner would file a return.

Fisher said the bill would raise about $300 million to $325 million per year as it will be introduced in the special session, but would not entirely close the gap between revenues and spending, Fisher said.

The session is being called to address Senate Bill 54, which would provide tweaks to omnibus crime legislation passed a year ago, as well as a bill to enact a flat wage tax.

Some legislators said they are willing to work with Walker.

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