Rep. Mia Costello spoke Thursday of a grim economic future for Alaska if the state follows the status quo. Federal funds will shrink along with reserve cash and the state will turn to taxes to maintain services.
"Alaska will be left holding the bag," Costello, R-Anchorage, said.
To avoid such a future, the state needs to plant seeds of entrepreneurial activity now, Costello told the Juneau Chamber of Commerce during a lunch-time speech.
Costello's bill, House Bill 252, exempts certain small Alaska businesses from the state corporate income tax. She is joined by over a dozen of her fellow representatives in supporting this bill. It is also supported by several organizations including the Alaska Chamber of Commerce.
"Innovation is the single most important driver of economic growth," Costello said.
She hopes that tax breaks will lure entrepreneurial corporations to Alaska now so they will mature and eventually grow large enough to pay state tax.
The tax exemption lasts "while they are small and starting, until they grow to $50 million in gross assets," Costello said.
She said Alaska's current corporate tax structure is a disincentive to new business ventures. Her bill exempts businesses while they are growing from state's 9 percent corporate income tax, Costello said. The state has the fifth highest corporate income tax in the nation.
Alaska could be the first state to enact legislation to incentivize entrepreneurial business in this way, Costello said.
Costello's constituent Tyler Arnold brought the need for tax relief to the representative's attention.
Arnold was named Young Entrepreneur of the Year by the Small Business Administration in 2011. Arnold, who started his first business in his teens, said Alaska's corporate tax is an impediment to starting businesses in the state. He is currently working on a social media software venture, according to Arnold's YouTube video. The video expresses his support for Costello's corporate tax cut bill, which can be viewed at youtu.be/6xg-v2CVkHI.
Costello said her bill is one way to help young Alaskans stay in Alaska and raise families.
Juneau's demographic drops sharply for people in their 30s. Some Southeast communities are losing population. If young Alaskans can not find opportunity at home they will leave for opportunity elsewhere.
The House Bill was assigned to the Labor and Commerce and Finance Committees. It passed Labor and Commerce with changes and is scheduled to be heard in House Finance, March 13 at 8:30 a.m. in Room 519. Alaska entrepreneurs and concerned public can weigh in through public testimony, emails, phone calls and letters.
Get involved, Costello said. She said legislators like to hear from constituents.
• Contact reporter Russell Stigall at 523-2276 or at firstname.lastname@example.org.