Senate hashes taxes, permafund

Democratic lawmaker proposes hike in oil production taxes

Posted: Thursday, March 18, 2004

The Senate Finance Committee on Wednesday took up two competing measures to raise money for state coffers, each offering something for both sides to hate.

A Democratic lawmaker proposed a hike in production taxes on smaller and new oil fields on the North Slope, while a top GOP lawmaker floated a sales tax.

The competing proposals surfaced as lawmakers search for a way to close the state's chronic budget shortfall.

Gov. Frank Murkowski has asked lawmakers to consider seeking voter permission to use a portion of the Alaska Permanent Fund.

Senate Majority Leader Ben Stevens, R-Anchorage, proposed a 4 percent statewide sales tax, saying such a measure had "fallen off the table" amid talk of other revenue.

"There's some large hurdles to overcome in the state of Alaska," said Rep. Mike Hawker, R-Anchorage, who chaired the committee that proposed a sales tax last session.

Many municipal governments rely on sales and property taxes to fund local budgets, and Hawker said crafting a measure that accommodates both state and local government is tough.

The House Ways and Means Committee sales tax proposal would have imposed a 3 percent state sales tax and capped total state and local sales taxes at 8 percent.

A lack of support and the complexity of the sales tax doomed the measure last session, and it never went to the floor for a vote.

Stevens proposed a 4 percent state sales and use tax that would give some revenue to municipalities with their own tax.

Under the proposal, the state would collect the tax and return an additional 1 percent to those municipalities with rates higher than 3 percent.

Medical and welfare services such as food stamps and vouchers would be exempt along with utilities and other goods and services already exempt in other areas of state law.

Stevens said he also intends to cap the sales tax on major purchases at $60.

Minority Democrats have been opposed to a sales tax and, in past sessions, they have argued an income tax is more fair and supported by more Alaskans.

House Bill 470, sponsored by Democrat Rep. Carl Moses of Unalaska, would reinstitute the income tax repealed in 1980.

Senate Finance Co-Chairman Gary Wilken, R-Fairbanks, said the measure would get future hearings including a work session later this week to consider details of the bill.

"I think it has possibilities for us to discuss, compared to an income tax," Wilken said. "An income tax is dead on arrival, a sales tax is worthy of discussion."

This session, Democrats have called for a revamp of the "economic limit factor" on new and smaller oil fields.

Democrat Sen. Hollis French, D-Anchorage, said his bill would raise at least $110 million at $22 per barrel.

Currently the rate on most fields is 15 percent, but no fields are taxed at that rate because of the economic limit factor, or ELF.

Currently, there are 20 fields producing oil on the North Slope and about a dozen of them pay no production tax, French said.



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