Package of tax hikes on fishing, mining and fuel stalls

A bill to raise taxes on fisheries, fuel and mining remains unscheduled for a House Finance Committee hearing after public objections.

Gov. Bill Walker introduced a suite of proposals at the beginning of the session designed to hitch up taxes on state industries and individuals to help close the $4.1 billion budget gap.

Fisheries, fuel, and mining tax increases had varied levels of support. Each remained on the committee backburners after being recommended to it weeks or even months ago. Senate Bill 132 and its mirror House Bill 249 were passed to their chambers’ finance committees on Feb. 29 and Feb. 24, respectively. The fisheries tax moved out of a lengthy House Fisheries Committee holding pattern on April 5. Mining taxes moved to the committee on April 1.

To keep legislators from having to muster individual votes, the House Finance Committee folded the three industry tax increases into a three-part minibus on April 14.

The adjusted tax minibus did not provide new estimates for the state’s likely revenue. Previous estimates for the three taxes indicated $80 million for the state.

The bills’ complexities brought mixed receptions. Industry leaders acknowledged the need to pay for state services, but contested portions of the package they found inequitable.  

At an April 16 hearing, the House Finance Committee responded to concerns by postponing a discussion scheduled for the next day.

“After hearing public testimony last night,” said committee co-chair Rep. Steve Thompson, R-Fairbanks, “We’ve realized there are a lot of problems with the tax bill HB 249, and we’re going to set it aside for the time being.”

In an April 15 committee hearing, the Alaska Chamber testified against the newly bundled tax increases. Chamber President and Chief Executive Officer Curtis Thayer said the state needs to look to its own finances before raiding the private sector. 

“The public won’t support a host of new taxes,” Thayer said. “Not while the state is handing out double-digit raises. How can they when their friends and family members are losing their jobs?”

Thayer said public employee contracts promise too much. He said that pay raises between 3.25 percent and 10.5 percent over three years are still being considered.

 “They’re trying to fill a $4 billion dollar budget gap by hammering fishing and mining with $49 million in new taxes,” Thayer said. “Meanwhile, another $70 million in pay raises just widens the gap.”

Fisheries tax increases in the omnibus received much of the same treatment as the standalone bill. Industry representatives repeated many of the same concerns they had voiced in the House Fisheries Committee.

Objections were widespread concerning the various fishing sectors that would each be impacted by tax increases differently: canned salmon simply cannot handle a tax increase, floating processors and inshore processors need different treatment, developing fisheries cannot handle a tax increase, the state’s reputed fiscal loss on fisheries management is a red herring, and tax increases will make it harder for young fishermen to enter the industry.

Fishermen previously wanted to make sure they would not be alone in tax increases. Committee chair Rep. Louise Stutes, R-Kodiak, held the bill earlier in session, saying she needed assurances that other industries would be taxed as well and that the existing fisheries taxes would be reexamined to maximize revenue to the state.

With a modified bill and promises from the Department of Revenue to maximize existing fisheries taxes, the bill moved on to the House Finance Committee without opposition.

Though the inclusion of the fisheries bill into an omnibus is a “step in the right direction,” said United Fishermen of Alaska, the states largest fishing industry group, they still do not support the package.

Walker’s original bill would impose a 1 percent increase on both landings taxes and fisheries taxes on each fishery sector. The amended bill keeps the 1 percent increase for every fishery sector except the shore-based salmon cannery sector and the developing fisheries sector.

A negative market outlook for Alaska fisheries caused many fishermen to reject the bill outright, saying they have little room to have more revenue scraped from their decks. Certain bill changes address two of the larger concerns for salmon canneries and developing fisheries.

In previous testimony, representatives from the Pacific Seafood Processors Association spoke of the tax’s tone-deafness regarding the 2016 salmon market and how a tax increase could cripple canneries.

Back-to-back years of large sockeye runs in the state’s largest salmon fishery, Bristol Bay, left salmon processors with a price-lowering glut of product. The U.S. dollar’s strength against key export market currencies added to the overstock to create a tough market outlook for salmon in 2016.

Walker’s bill to increase state fuel taxes had support from some industry groups it would directly impact.

The Senate Transportation Committee passed the bill onto the Finance Committee with lukewarm support on a 3-2 vote.

Senate Bill 132, and its mirror House Bill 249, would raise the per gallon state fuel taxes as follows: highway fuel tax from 8 cents to 16 cents; marine fuel tax from 5 cents to 10 cents; aviation gasoline from 4.7 cents to 10 cents; and jet fuel from 3.2 cents to 10 cents.

The legislation would correspondingly increase the per gallon highway fuel tax rebate for off-road use from 6 cents to 12 cents.

In all, the tax hikes are projected to raise $49 million per year, according to the Revenue Department.

The mining tax increase, originally HB 253, was badly received when introduced. It would raise the tax rate for mines with a net income of $100,000 or greater from 7 percent to 9 percent. This includes 14 mines statewide.

The bill would eliminate a 3½-year tax exemption for new mines and implement a fee for mining licenses.

Mining taxes collected $38.6 million in 2015 according to state records. The increase would collect another $6 million per year.

DJ Summers can be reached at daniel.summers@alaskajournal.com.

Updated: 
04/20/2016 - 4:19pm