The Alaska House narrowly passed a bill Wednesday that would update the state’s corporate income tax to capture more revenue from companies that sell to Alaskans over the internet.
The heart of House Bill 280 is a change to what’s known as market-based sourcing. That’s a method of calculating corporate income taxes that’s based on the location of the customer, rather than the company.
Rep. Calvin Schrage, an Anchorage independent, said the bill takes taxes companies are already paying to their home states and reallocates them to Alaska.
“That business is taking place here. We should recognize that the business activity is taking place here, and we should get our fair share of that corporate income tax,” Schrage said.
Backers say the tax change would have virtually no impact on Alaska businesses. The revenue raised by the bill would come from out-of-state companies organized as C corporations. Exactly how much it would raise is unclear, though the Department of Revenue estimated a similar proposal would bring in $15 million a year.
The bill is essentially a redo of a bill Gov. Mike Dunleavy vetoed last year, minus a provision that would have raised more revenue from so-called “highly digitized businesses.” Lawmakers failed to override Dunleavy’s veto at the beginning of this year’s legislative session.
Dunleavy’s spokesperson, Jeff Turner, said the governor’s position on the bill hasn’t changed.
“Alaska needs a complete and durable fiscal plan. Not just additional taxes,” Turner said in an email.
But Wednesday’s tax bill did not pass with enough support to constitute a veto-proof majority. That would require a three-quarters supermajority, and Wednesday’s House vote was just one vote more than a simple majority at 22 to 17.
House Minority Leader DeLena Johnson, a Palmer Republican, said her caucus is largely on board with Dunleavy’s position.
“The idea is, if we're going to implement a tax … we need to have a fiscal plan,” she said. “We don't want to just start passing tax bills without any other kind of piece of the fiscal plan.”
Dunleavy proposed a fiscal plan that included a similar tax change in a series of bills earlier this year, headlined by a statewide sales tax and a large Permanent Fund dividend. Legislators on all sides panned the proposal.
The tax bill now heads to the Senate, which supported it last year. Schrage said it’s still early — he said he hoped the bill would pick up more bipartisan support as it works its way back towards the governor’s desk.
