Alaska governor proposes first income tax in 35 years amid low oil prices

JUNEAU, Alaska -- Alaska Gov. Bill Walker is proposing instituting a personal income tax for the first time in 35 years as the oil-dependent state looks to plug a multibillion-dollar budget deficit amid chronically low prices.

See Full Article

In laying out his budget plan Wednesday, Walker also proposed using the fund that provides annual checks to most Alaskans to generate a stream of cash to help finance state government. The plan would change how dividends are calculated and mean lower checks, at least initially -- with 2016 payouts about $1,000 less than this year's.

Alaska isn't alone among oil-producing states to experience hard times as oil prices stay low. But unlike states like Texas or Louisiana, Alaska has few other industries to make up the difference.

Walker's proposal also includes:

  • Adding a dime to every drink of alcohol and $1 per pack of cigarettes.
  • Additional budget cuts.
  • Changes to the oil tax credit system, a big budget item.
  • Increases to industry taxes including mining, fishing and oil.

The administration says the goal was to spread the burden as widely as possible and that even with the proposed increases, the tax burden on individual Alaskans would be among the lowest nationally.

Alaska has been using savings to balance its budget but is blowing through its reserves at an estimated rate of $10 million a day. The state has been warned its bond rating could be lowered if it doesn't do more to address the deficit. A hit to the credit rating could increase the state's cost of borrowing and make it harder to finance a major gas project that Walker sees as critical to the state's financial future.

Alaska has long relied heavily on oil revenue. In recent years, it provided about 90 per cent of the money available for lawmakers to spend. That's down to about 75 per cent, the state Revenue department says.

Oil flow through the trans-Alaska pipeline peaked at about 2 million barrels a day in the late 1980s but is averaging close to 505,000 barrels per day this year.

Alaska is one of seven states without an individual income tax, and it's the only state to have repealed an existing income tax, according to the Tax Foundation, an independent tax policy research organization. In 1980, after oil began coursing through the pipeline, the Legislature voted to repeal the income tax. Two years later, the first dividends were paid.

The income tax, as proposed, would generate about $200 million a year, according to the Walker administration.

The governor's plan focuses on harnessing the state's financial assets -- including the $52 billion Alaska Permanent Fund -- and moving away from the year-to-year volatility of budgeting based on oil revenue.

The permanent fund is a nest egg seeded with money from Alaska's oil wealth and grown through investments. It is constitutionally protected and can be used only for income-producing investments.

Earnings generated from the fund are used for inflation-proofing and paying the annual dividends. This year's check was $2,072 -- paid to about 645,000 people -- and was the largest ever. Over the past decade, which included the Great Recession, the check has been as low as $845.

While permanent fund earnings can be used for the state budget, legislators have been loath to go there for fear of being accused of "raiding" the fund.



Advertisements

Latest Economic News

  • Asian stocks flat as support grows for U.S. interest rate hike

    Economic CTV News
    SEOUL, Korea, Republic Of - Asian stock markets were largely flat on Thursday with investors in the U.S. markets going on a Thanksgiving holiday and the Fed minutes largely in line with investor expectations that the Fed will soon raise interest rates for a third time next month. Source
  • First LNG shipment leaves B.C. for China as industry looks to expand exports

    Economic CTV News
    SURREY, B.C. -- FortisBC says it has shipped 950 gigajoules of liquefied natural gas from Vancouver to China, marking the industry's first shipment to the Asian country. The move is part of a pilot project aimed to determine long-term feasibility of B.C. Source
  • U.S. commission alerted to review allegations against TripAdvisor

    Economic CTV News
    BOSTON -- The U.S. Federal Trade Commission could take action against TripAdvisor after the Massachusetts-based travel company was accused of deleting hotel reviews that contained allegations of rape and other crimes. Several people told the Milwaukee Journal Sentinel this month they were sexually assaulted at Mexican hotels and resorts but the online reviews that mentioned the crimes were taken down. Source
  • Trump SoHo to shed 'Trump' amid reports of sagging business

    Economic CTV News
    NEW YORK -- The Trump SoHo hotel is dropping the name it shares with the U.S. president. The Trump Organization said Wednesday that it is ending its licensing deal with the New York hotel amid reports that the property has struggled to attract business. Source
  • Wellsite pipeline leak spills 560 barrels of oil into northern Alberta swamp

    Economic CTV News
    CALGARY - The Alberta Energy Regulator says a pipeline owned by Calgary-based Mount Bastion Oil & Gas Corp. has leaked about 560 barrels of an oil and water mixture at a northern Alberta wellsite. AER spokesman Jordan Fitzgerald says the regulator has staff supervising cleanup by the company at the site about 65 kilometres northwest of Red Earth Creek, which is about 420 kilometres north of Edmonton. Source
  • Wellsite pipeline leak spills 560 barrels of oil emulsion into Alberta swamp

    Economic CTV News
    CALGARY - The Alberta Energy Regulator says a pipeline owned by Calgary-based Mount Bastion Oil & Gas Corp. has leaked about 560 barrels of an oil and water mixture at a northern Alberta wellsite. AER spokesman Jordan Fitzgerald says the regulator has staff supervising cleanup by the company at the site about 65 kilometres northwest of Red Earth Creek, which is about 420 kilometres north of Edmonton. Source
  • Uber customers torn between scandals and service

    Economic CTV News
    DETROIT -- Uber has managed to hold the title of world's largest ride-hailing service despite its seemingly endless string of scandals. Its latest misbehaviour involving a data breach coverup revealed this week could be the impetus for people to ride elsewhere -- or keep looking the other way. Source
  • Freedom Mobile announces iPhone X dates, provides update on network rollout

    Economic CBC News
    Freedom Mobile will begin taking orders for the Apple iPhone X and iPhone 8 models starting Friday, with the smartphones in its stores on Dec. 8. While that's more than a month after Canada's three national wireless carriers began selling the iPhone X, it will be the first time Freedom Mobile has a full roster of Apple smartphones to offer its customers. Source
  • Highlights of sweeping new Ontario labour laws, including a minimum wage boost

    Economic CTV News
    TORONTO -- Ontario's Liberal government passed a host of changes to labour laws Wednesday. Here are some highlights of the legislation, including the centrepiece minimum wage increase: -- Minimum wage rises from $11.60 an hour to $14 on Jan. Source
  • Canadian grocers expand online services after Amazon acquires Whole Foods chain

    Economic CTV News
    VANCOUVER -- Metro Inc. is looking to expand its online grocery offerings to Ontario next year, making it the latest Canadian retailer to ramp up its e-commerce options in the face of potential competition from Amazon. Source