By Margaret Bauman
Alaska Journal of Commerce

A proposed sales tax/property tax cap measure on its way to the ballot box in the Matanuska-Susitna Valley's October election looks very basic on the surface, offering to tax relief to property owners along with a borough-wide sales tax not to exceed 3 percent.

A "yes" vote on the sales tax would simultaneously enact an area wide real property tax limit of 7.3 mills, down from 9.98 mills, plus an area wide residential real property tax exemption of $20,000 of assessed value on primary residences.

Property owners would still be subject to fire and road service taxes, which do not fall under the tax cap.

Wasilla, Palmer and Houston already have city sales taxes of 2.5 percent, 3 percent and 2 percent respectively.

According to Borough finance officer Cheyenne Heindah, the total borough revenue would remain neutral, with $23 million in savings to property owners offset by collection of some $23 million in sales taxes.

Heindah noted that seniors among property owners, as well as disabled veterans, already get a $150,000 exemption on the value of primary residences. After that deduction, those whose property value is still over $150,000 would get another $20,000 exemption, she said.

Mat-Su Borough Mayor Talis Colberg, whose veto of the ordinance was overridden by the borough assembly, maintains that the issue is not simply about revenue diversification.

"It is an increase in taxes as evidenced by the amendments and accompanying assembly discussion," Colberg said. "The effort to make the tax 'revenue neutral' essentially ends after the first year if it happens at all." Colberg also said that the benefit would go to large property owners and that if the measure was revenue neutral then someone else would have to make up the difference, presumably people with less property.

Mat-Su Assemblywoman Cindy Bettine, who sponsored the measure, said passage would benefit property owners and make the Mat-Su borough a leader in Southcentral Alaska in revenue diversification. She sees the measure as tax relief for property owners, a way of sharing the cost of operating the area's borough government.

Bettine said lower property taxes, plus a cap on the mill rate, would also help the borough attract larger corporations, which in turn would create more sales for retail merchants.

Wasilla businessman Leny Cullip, a partner with his wife Shannon, and educator Rex Weltz, in Pandemonium Booksellers and Caf, said he figures his business is going to have to pay taxes anyhow, but he would prefer not to have a sales tax.

Cullip, a veteran of the real estate and mortgage businesses, said a first step in lowering property taxes would be to get up to date on where the value is in borough properties.

"If you lower the values on those that need to be lowered and raise the ones that need to be raised, you probably wouldn't need (to have) property taxes," he said.

Cullip said his business is computerized and that several hours of programming would resolve the issue of how to calculate taxes on all sales, but that for small to medium sized businesses that are not computerized, such calculations could be difficult. He also expressed some concern that while the measure could lower the mill rate, the borough still had the option to raise property values.

Former assemblywoman Betty Vehrs said that revenue from the property taxes has not proven to meet the needs and services that people expect of the borough, whose population is growing.

"You have to give people something for their money," she said. "If we are paying property taxes and that's the only thing that is supporting us, I don't think that is sustainable. When you pay sales taxes, everybody determines for themselves if their budget will allow them to buy steak or hamburger. But property taxes are a flat rate that you pay without a choice," Vehrs said.

"I don't believe the sales tax is going to tax people out of the borough. The property tax has the potential to do that eventually because that is the main source of funding all the services of the borough. You don't have a choice of having to pay it," she said.

Among the skeptics on what a sales tax may or may not accomplish is Dan Michaud, owner of Alaska Fireplace and Accessories.

"It's a bogus claim that sales taxes will reduce property taxes," Michaud said. "You can try to justify robbery any way you want to, but it is robbery. I don't believe the sales tax will reduce the property tax. Try (later) to take away the sales tax. It never happens because the government is a glutinous pig that keeps on growing and growing.

Michaud said current property taxes are way too high, that he doesn't know what's he's getting in return for those taxes. He said 97 percent of his customers feel the same way.

Still, Bettine is optimistic that the sales tax will pass. She points to a recent Ivan Moore Research survey in which 62 percent of respondents supported a sales tax as a way to offset property taxes. People are telling her "if you can guarantee me my property taxes will go down, I will gladly pay a sales tax," she said.

Margaret Bauman can be reached at

margie.bauman@alaskajournal.com.