Committee OKs $100 tax on the employed

Senate panel also passes plan to cut Longevity Bonus Program for seniors

Posted: Friday, April 04, 2003

A plan to impose a $100 tax on almost every person in the state who has a job was given approval Thursday by the Senate State Affairs Committee.

The committee also approved a bill that would eliminate the Longevity Bonus Program, which provides some 18,000 seniors with monthly checks ranging between $100 and $250.

Senate Bill 137 by Sen. Gary Stevens, a Kodiak Republican, would allow the state to deduct $50 from an employee's first two paychecks, once the employee makes over $1,000. Rep. Peggy Wilson, a Wrangell Republican, has introduced a similar bill in the House.

Employees who are 19 or older would have to pay the employment tax. The law would take effect in July.

The state Department of Revenue projects the tax will raise about $39 million a year for the state.

Stevens said 10 new state employees would be needed to operate the tax program. Operating costs would run about $1.2 million the first year and about $820,000 each additional year.

He said the tax is intended to be used for education and to reduce the draw on the Constitutional Budget Reserve, a state savings account used to balance the state budget in recent years.

Committee member Gretchen Guess, an Anchorage Democrat who voted against the measure, objected to Stevens' intent that it be an education tax.

Guess noted that money the state raises through taxes cannot be dedicated to any particular area of state government such as schools.

"... Basically it's just a worker tax, it's not a tax for education," Guess said. "It's confusing people because it's called an education tax or school tax, so people truly believe that there's going to be additional money to schools, and unfortunately because of the way our constitution works we're not able to do that."

The bill was introduced as part of Gov. Frank Murkowski's plan to increase revenues to the state by $110 million. In a March 5 address to the Legislature, Murkowski called on lawmakers to choose between the employment tax and a seasonal statewide sales tax. Either plan would raise about $35 million a year for the state, Murkowski said.

The state Department of Revenue said Murkowski's plan would have raised less than Stevens' proposed $39 million plan because it did not include minimum-wage workers.

Larry Persily, deputy commissioner for the Department of Revenue, said the tax would not apply to individuals living on a trust fund, retirement or Social Security.

Jim Sykes, a Palmer resident who ran for U.S. Senate on the Green Party ticket last year, said he would prefer a package of taxes so that businesses and workers share the tax burden fairly.

"I don't see any tax legislation being proposed to get some extra windfall profits from the high price of oil, for example, which I think could raise much, much more money than this bill could every year the price of oil is higher than $18 a barrel," he said.

After 20 minutes of committee discussion, the measure was passed on a 3-1 vote, with Guess voting no and Stevens, Anchorage Republican Sen. John Cowdery and Eagle River Republican Sen. Fred Dyson voting yes.

The Longevity Bonus Program bill, filed at Murkowski's request, also was passed on a 3-1 vote, with Guess as the only dissenting vote. Cutting the bonus is expected to raise about $47.5 million a year in revenues to the state.

Both bills now head to the Senate Finance Committee.

Timothy Inklebarger can be reached at

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