No, a state sales tax would not be good for Wrangell, Ketchikan, Sitka or the 100 other cities and boroughs in Alaska that rely on their local sales tax to fund schools, roads, police and other municipal services.
Those communities have relied on sales taxes for decades, tailoring the rate, exemptions and rules to local needs, without worrying about the state coming in and taking a cut or taking control.
But that may not matter when Alaska's elected leaders finally deal with the inevitable: The state needs either a personal income tax or a sales tax to help pay for public services.
Alaska used to live the rich life of an oil state, but not any longer. North Slope oil production is off more than 75% from its peak in 1988, and even the mighty Alaska Permanent Fund cannot pay for every service, every school, every trooper and state ferry on its own.
Alaska's treasury, just like everywhere else in the country, needs a stable, broad-based source of revenue, and the leading candidates are an income tax or a sales tax.
A sales tax would collect from tourists, and an income tax would collect from non-resident workers who come to Alaska. And, yes, both would mostly collect from Alaskans. No way around that. It would violate the U.S. Constitution to try assessing either tax on non-residents only.
Much of the debate in Alaska between the two taxes comes down to political policy. Republicans, generally, oppose the income tax as an unfair burden that takes too much from the better off, would stifle the economy and discourage investment. Democrats, generally, oppose the sales tax as an unfair burden on households that spend a greater portion of their limited income on taxable goods and services, not untaxed investments, savings and vacations.
Another political factor is that most Alaskans don't pay a sales tax - Anchorage and Fairbanks - and they may find a 2% or 3% state tax a lot easier to accept than a graduated income tax. Those are the votes that control the political process.
It's not likely the Legislature will make a decision this year or even next year, which is an election year -what elected official wants to make a tax decision the same year as a campaign. Besides, all the federal pandemic relief aid makes it easier for legislators to put off a decision.
But come 2023, if not sooner, the clock will strike tax time. The Wrangell Borough Assembly is smart to object to a state sales tax, worrying that it could harm the community's revenues and local businesses. And assembly members and the administration are just as smart to realize that they need to pay attention.
If a sales tax has the votes in the Legislature, then Wrangell, the Alaska Municipal League and the tax towns need to be ready to push for as good a tax as they can get.
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