Representative Matt Claman's Alaska Matters
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Protecting Your Rights: Serving Sand Lake, Spenard, and Turnagain
June 9, 2017
In this issue:
• Putting Alaska on the Right Path
• Comparing Education Tax Proposals
• Community Events

Dear Friends and Neighbors,

The Governor recently suggested an approach to Alaska’s financial challenges that uses parts of the House and Senate budget plans. One element of his proposal is a school head tax. The main question Alaskans are asking is how to reduce the deficit in the future.

Putting Alaska on the Right Path

As the legislature continues to debate the future of our state, the most critical part of any solution to our financial challenges is eliminating the structural deficit. Alaskans recognize that a responsible action plan means we cannot ignore the structural deficit. As a state, our revenues have been insufficient for over three years and remain insufficient today. We continue to run deep deficits. We’ve been using a short-term method to address a long-term problem: we’re drawing down our total savings and putting ourselves at risk of wiping out our future savings. While we cannot close the deficit in a single year, avoiding a long-term decision will only do more harm.

“When the earnings reserve fails, so does the dividend.” If the legislature follows the status quo, we will drain the fund of all savings and eliminate the dividend all together. Commissioner Hoffbeck estimates that, following the status quo, Alaskans will not receive a PFD by 2031.

UAA Economist Gunnar Knapp recently wrote about the need to development a plan based on realistic economic and political assumptions:

When it comes to the closing the deficit, restructuring the Permanent Fund is one of the most important tools available to Alaska. But a responsible action plan requires more than that—it requires shifting from the current practice of basing our fiscal future on volatile and uncertain future oil and investment revenues to basing our plans on prudent assumptions about future revenues. With our state savings at risk, now is the time to diversify our revenue sources:

New revenue is a critical part of closing Alaska’s deficit and growing a healthy economy. Unfortunately, using the declining Permanent Fund earning’s reserve alone to fund government does not put Alaska on a sustainable path for the future.

Comparing the Education Head Tax and the School Tax Bill

In January, Senator Click Bishop (R-Fairbanks) introduced Senate Bill 12, which reinstates an education head tax on wages and net earnings from self-employment of every resident and nonresident with income from a source in Alaska. Alaska eliminated the old education head tax in 1980—the same year the legislature repealed the state income tax.

There are a number of similarities between Senator Bishop’s Education Head Tax and the School Tax bill (House Bill 146) that I introduced. First, both bills target individuals who earn income in Alaska, so Alaskans and out-of-state residents who work here will all contribute. Second, both bills would designate the revenue for education purposes, without creating a dedicated fund. Third, both bills propose a minimum tax and a cap, which ensures that everyone contributes and establishes a limit on the total amount owed.

SB 12 and HB 146 also have significant differences. First, the Education Head Tax (SB 12) designates to funds for educational facilities, maintenance, and construction fund, while the School Tax (HB 146) designates the revenue to the public education fund. Second, the Education Head Tax (SB 12) is projected to raise $70-80 million per year, while the School Tax (HB 146) is projected to raise $540 million per year. Economists have recommended that the amount needed for long-term deficit reduction is $550-850M. Third, because of differences in the proposed minimum tax, maximum tax (cap), and scale from the minimum to the maximum, the Education Head Tax is a more regressive tax than the School Tax, which proposes a more graduated approach.

The following are examples of estimated tax liabilities for various income levels under each bill:

Senate Bill 12 – The Education Head Tax

Wages and Net Earnings

Estimated Tax Liability

Less than $20,000

$50

$20,000 – $49,999

$100

$50,000 – $99,999

$200

$100,000 – $499,999

$300

$500,000 or more

$500

House Bill 146 – The School Tax

Adjusted Gross Income (AGI)

Estimated Tax Liability

Less than $20,000

$100

$20,000 – $39,999

$250

$40,000 – $49,999

$500

$50,000 – $74,999

$750

$75,000 – $99,999

$1,000

$100,000 – $149,999

$2,500

$150,000 – $199,999

$5,000

$200,000 – $249,999

$6,500

$250,000 or more

$8,500

Under the Education Head Tax, Alaskans would contribute a minimum of $50 per year. Those earning between $20,000 and $50,000 would pay $100. Those earning over $500,000 would pay $500. The School Tax starts with a $100 tax for all individuals whose adjusted gross income is less than $20,000. In the middle, those earning between $75,000 and $99,999 would pay $1,000. At the upper end, those earning $250,000 or more would pay $8,500, leaving capital available to invest in the economy.

As the special session continues, the House and Senate may consider either of the two proposed education taxes, as well as potential changes to either proposal.

Community Events

Mark your calendar for these upcoming events:

2040 Metropolitan Transportation Plan (MTP)

Community Councils

Spenard Community Council 
When: Wednesday, June 14th at 7:00 pm 
Where: Spenard Recreation Center

As always, please let us know if you have any question or concerns.

Sincerely,

signed: Matt Claman

    Rep. Matt Claman

    P.S. follow me on Facebook and Twitter

Contact Information

(907) 465-4919

Rep.Matt.Claman@akleg.gov

State Capitol Bldg. Rm 405
Juneau, Alaska 99801

www.repmattclaman.com

Contact the Governor

550 West 7th Avenue, Suite 1700
Anchorage, AK 99501
T (907) 269-7450 F (907) 269-7461
EMAIL: Governor Bill Walker

STATE of ALASKA
http://alaska.gov/

State Info (907) 269-5111

Serving the Anchorage Neighborhoods of
Sand Lake, Spenard, and Turnagain

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