With a multi-million-dollar city budget deficit looming for the upcoming fiscal year, the Assembly has once again taken up contentious subject from years past — sales tax exemptions.
Some Assembly members, working as the Assembly Tax Exemption Committee, will be meeting over the next several months to decide what changes should be made to tax exemptions to aid in closing an approximately $7 million budget gap expected for fiscal year 2016.
The city’s tax exemptions — such as those for seniors and purchases over $7,500, to name a few — were reviewed by the Assembly in 2005. At the time, four were cut.
One that was recommended for elimination by the committee but remained was that for senior citizens 65 and older. The city’s sales tax is 5 percent. As it stands now, seniors can apply for a sales tax exemption card and use it for purchases in the City and Borough of Juneau. But this benefit, along with all other remaining city tax exemptions, is back on the table to be tweaked or done away with by the Assembly.
The Assembly committee recommended in 2005 the senior sales tax exemption be phased out by 2016. This caused an uproar in the senior community, Juneau Commission on Aging Chairwoman MaryAnn VandeCastle said. People “came out in droves” to speak against taking away the exemption, she said.
“It was very upsetting to seniors... so the idea was abandoned at the time,” VandeCastle said. “It does seem like (the city has) more of a budget crunch, and we are looking at any ideas ourselves. We certainly would not recommend a blanket repeal of all the tax exemptions.”
In 2013, the city lost about $2.76 million in tax dollars to the senior sales tax exemption, according to CBJ numbers. However, with seniors spending more than $55 million in Juneau stores that year, the group is no small part of the city’s economy, Juneau Commission on Aging member Mary Lou Spartz said.
“Seniors live here, they spend their money here,” she said. “They get their social security check, they get their retirement check, they spend it here. The amount of money seniors spend here is considerable, and it adds to the economy.”
The exemption especially means a lot to seniors with fixed incomes, Spartz said. According to the 2010 Census, there are 2,635 people age 65 and older living in Juneau. About 15 percent of those are low-income, or making a wage less than two times the national poverty level, according to the Alaska Department of Labor.
“The exemption is a great help to those of us who have fixed incomes,” Spartz said. “Everything else goes up but our income. We just see every month, every year, every time we turn around, something if not everything is just a few cents here and a few cents there.”
Within 10 years, one-fifth of Juneau’s population will be older than 65, according to research by the McDowell Group for the Juneau Economic Plan. Spartz said she knows the “silver tsunami,” as the national phenomenon is called, will impact the city’s bottom line if the tax exemption is not changed. But she said she hopes the boon to seniors won’t be completely eliminated.
“We know this is coming and we know it is something that is going to be quite a little chunk,” she said. “Of course, I want things to stay the same, I want to have the tax exemption. I think there will need to be some kind of compromise. I don’t know what form that will take, but I know there will be something along those lines that will be introduced, and we’ll see what happens.”
Assemblyman Jesse Kiehl, chairman of the tax exemption committee, said “it’s very important to think about” Juneau’s growing senior population while the committee makes decisions. The committee is still in the exploratory phase and hasn’t made decisions on any of the city’s exemptions, including that for seniors.
“If nothing changes in our tax structure, it may be a problem for public services,” he said. “So we need to find a balance where what’s good for the community also pays the bills that come with it.”
About $78 million was exempted from local sales in 2013 across 50 different tax exemptions, according to city numbers. Some of those exemptions are mandated by state and federal governments and cannot be changed, city finance director Bob Bartholomew said, and some of them wouldn’t be worth changing, he wrote in an issue paper for the committee’s most recent meeting. The rest of them are on the table to be altered.
The Assembly is “going to take the review seriously and know that it’s a little different environment from the deficit perspective,” Bartholomew said, comparing this tax exemption review to that of 2005.
Exemptions he identified as contributing to a “significant loss of tax dollars” but weren’t considered last time are those on medical services, counseling and assisted living services and goods and services costing more than $7,500. A total of about $10.4 million in tax dollars was forgone in those categories in 2013.
“Those are the ones they want to look closer at,” he said.
Kiehl said so far the committee is uninterested in removing the tax exemption on medical services. The committee is also looking at exempting new things, like food, he said. Sales tax on food brings in about $6 million annually, Kiehl said.
“But members have asked to look at it so we’ll dig in and see what can be done,” he said.
The tax exemption committee next meets at 5 p.m. Aug. 7 in City Hall conference room 224. The committee will take public comment at future meetings, but is currently in “education mode,” learning about the issues and tossing around ideas, Bartholomew said.
Editor's note: This story has been changed to correct the percentage of low-income seniors living in Juneau.
• Contact reporter Katie Moritz at 523-2294 or at email@example.com. Follow her on Twitter @katecmoritz.