|Protecting Your Rights: Serving Sand Lake, Spenard, and Turnagain|
|March 31, 2016
Dear Friends and Neighbors,
As the legislative session continues, I am committed to keeping you updated on efforts to address Alaska’s fiscal challenges. The House Finance Committee is considering House Bill 249, which will raise motor fuel tax rates on vehicles, vessels, and aircraft. HB 249 is one of nine different revenue proposals recommended by the Walker-Mallott administration as part of its “complete solution to our fiscal situation.”
Last chance to file for your PFD!
The application deadline to file for your Permanent Fund Dividend is tonight, March 31st at 11:59pm.
Motor Fuel Tax Bill
Currently, Alaska has the lowest state motor fuel tax rate in the country. Alaska’s tax on highway fuel has remained at 8 cents per gallon since 1970, while the current national average is 25 cents per gallon. The proposed increase to 16 cents per gallon would move Alaska up to 48th place, just ahead of Wyoming and New Jersey at 14 and 14.5 cents per gallon.
HB 249, the Motor Fuel Tax bill, would bring Alaska’s tax rate on highway fuel closer to the current national average. It also increases aviation gas from $0.047 to $0.10 per gallon; marine fuel from $0.05 to $0.10 per gallon; jet fuel from $0.032 to $0.10 per gallon; and gasohol from $0.08 to $0.16 per gallon.
Members of the trucking and construction industries--groups that use considerably more fuel in their businesses than the average consumer—support HB 249. Leaders of the Associated General Contractors, Alaska Airmen Association, the Alaska Region of the Aircraft Owners and Pilots Association, and Alaska Trucking Association support the increased motor fuel tax because they recognize that we all need to work together for a responsible action plan to address Alaska’s fiscal challenges.
If HB 249 passes, it will raise an additional $49 million per year in revenue. Even at the rate of 16 cents per gallon, Alaska would still have among the lowest vehicle fuel taxes in the country. I appreciate the support of the trucking and construction industries for this bill and will support the increase to the motor fuel tax as proposed in HB 249.
What are our fiscal options?
I have written extensively about the Governor’s New Sustainable Alaska Plan, which aims to bridge Alaska’s $3.8 billion deficit through a combination of cost savings, new revenues, and a restructured Permanent Fund. Representative Paul Seaton (Republican from Homer) has proposed an partial alternative to Governor Walker’s plan.
Representative Seaton’s House Bill 365 establishes an income and long-term capital gains tax on residents and nonresidents, changes the Permanent Fund Dividend (PFD) to a Permanent Fund Refundable Tax Credit, and directs a moderate portion of the Permanent Fund Earnings Reserve account to the General Fund to support state services. The income tax will be applied to residents and nonresidents, but only qualifying residents will be eligible for the PFD Refundable Tax Credit.
The Refundable Tax Credit will first be applied to pay a resident’s state income tax. The remaining amount from the Permanent Fund will be sent to the resident as a refund. The tax credit will be taxable income on an individual’s Federal taxes, as the Permanent Fund Dividend is currently. But the state income tax payments can be claimed as an itemized deduction on Federal taxes. Residents who qualify for the Refundable Permanent Fund Tax Credit will be given the option to apply some or all of their credit to Pick Click Give and/or their child’s college fund, similar to the dividend’s current structure.
The bill will create an individual income tax on residents and nonresidents who earn income within the state. The tax is equal to 15% of the taxpayer’s total federal income tax. Long-term capital gains are taxed within the bill by multiplying the taxpayer’s long-term capital gains for the calendar year by the lesser of: 10%; or the difference between the taxpayer’s federal income tax rate on ordinary income and the taxpayer’s federal tax rate on long-term capital gains. It is estimated that HB 365 would have generated $1.3 billion to the General Fund in the year 2015.
Representative Seaton’s proposal is an important option to consider as we work to address Alaska’s fiscal challenges. Next week, we’ll review Governor Walker’s income tax proposal. I continue to believe that we need a responsible action plan for Alaska, and we need it this session.
Anchorage Municipal Election
Be sure to make your voice heard by voting on Tuesday, April 5th! Click here to check your polling location.
As always, please let us know if you have other suggestions or concerns.
Rep. Matt Claman
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