3 percent sales tax set for committee OK

Posted: Thursday, March 07, 2002

A state sales tax of 3 percent appears headed for approval by a House panel next week.

The tax, which would raise an estimated $250-300 million annually, was discussed this morning by the House State Affairs Committee and seems to have the necessary votes to pass, although it is a bitter pill to swallow for Chairman John Coghill and House Majority Leader Jeannette James, both North Pole Republicans.

Coghill said he will take a vote in a week and he expects his colleagues to move the bill on to the House Finance Committee, where other tax measures are pending.

He said he achieved some comfort through adding an amendment to the bill tying the proposed tax to a freeze on state general fund spending in the next fiscal year. If the budget increases, the tax won't go into effect.

"I need to have that bar before I go along with this," Coghill told the committee.

"The next time anybody looks at this bill, it'll probably evaporate," cracked James, who also supports a no-growth budget.

The bill, by Rep. Jim Whitaker, a Fairbanks Republican, started out as a 6 percent seasonal sales tax. The idea was to get the maximum contribution from tourists and seasonal workers.

But a revenue analysis showed that the take from nonresidents would be relatively slight, and some legislators expressed concerns about the effect on businesses if residents deferred big purchases to avoid paying the summertime tax.

The most vigorous debate today concerned a provision in the bill that would exempt any portion of the purchase price that exceeds $2,000. The committee deadlocked 3-3 on deleting that provision, so it remains in the bill.

"I don't believe a Mercedes should be exempt when a used Chevy isn't," said Rep. Harry Crawford, an Anchorage Democrat.

But Rep. Gary Stevens, a Kodiak Republican, said that removing the limit would encourage the purchase of cars out of state. The committee then briefly discussed a "use tax" to pick up that revenue when vehicles are registered in Alaska. But aside from vehicles, enforcement would be difficult, said Larry Persily, deputy revenue commissioner.

Rep. Peggy Wilson, a Republican from Wrangell, which has a

local 7 percent sales tax, sought to exempt communities that have a 3 percent sales tax or greater. But Stevens said that would guarantee that every municipality in the state would be levying at least a 3 percent sales tax, so that they would get the revenue, not the state.

The sales tax debate is part of the overall movement toward a long-range fiscal plan. If the current state expenditures and recurring revenues are left in place, there is a projected $1 billion-plus shortfall in 2004.

The bipartisan Fiscal Policy Caucus has decided that only one broad-based tax should be imposed, and tentatively the caucus has selected a 4 percent personal income tax. Along with the tax measures pending in the House Finance Committee, there also are proposals to use permanent fund earnings to help balance the budget.

The fiscal caucus suffered a setback in the past week as House leaders said they would take up the 2003 annual budget before a long-range budget-balancing plan. Finance Co-Chairman Eldon Mulder of Anchorage characterized the reversed sequence as a delay of merely a week in order to show the public that budget restraint would be part of the plan.

But Mulder also said that a majority of the House Republican caucus - 15 of 28 members - would have to agree to put a revenue package on the House floor.

"We don't have 15 votes for anything," said Rep. Andrew Halcro, an Anchorage Republican who is a gadfly in his party caucus and a stalwart member of the fiscal caucus.

Halcro contends that nine House Republicans who have been members of the fiscal caucus are under pressure from partisan colleagues to drop out. Right now, he says only five of the nine clearly are standing firm. But with nine added to the 12-member Democratic minority, the fiscal caucus would have a majority of the House and the potential clout to schedule and pass legislation.

"I'm not in favor of replacing the leadership, but I am in favor of them keeping their word," Halcro said.

Bill McAllister can be reached at billm@juneauempire.com.



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