Alaska will need new taxes, but the plan is to delay discussion for ‘many, many years,’ Revenue Commissioner Tangeman tells Alaska Senate

Commissioner-appointee Bruce Tangeman answers questions in front of the Senate Finance Committee on Jan. 22, 2019. (Screenshot from GavelAlaska coverage.)

The future of new taxes in Alaska isn’t a matter of “if,” but a matter of “when,” Department of Revenue Commissioner Bruce Tangeman told the Senate Finance Committee during his confirmation hearing today.

Tangeman, who’s Gov. Michael J. Dunleavy’s pick to oversee the state’s tax system and finances, told the committee that it’d be “naïve” to assume Alaska can go indefinitely without some sort of additional revenues beyond what it’s currently collecting. He also said there’s zero interest in the administration to re-open a discussion on oil and gas taxes.

“Alaska is going to have a tax some day,” he said, “but I think we can push that out for many, many years if we’re responsible now in how we use our revenues and how we set our baseline budget at.”

The answer came during questions about Tangeman’s thoughts on the state’s current financial situation and the use of some portion of the Alaska Permanent Fund to pay for government.

Though the Republican governor has yet to submit his budget to the Legislature, his administration has pledged to “match expenditures to revenues,” which has translated into the expectation that $1.6 billion will be cut from the $4.8 billion of undesignated general funds spent on the state’s agency operating budget. So far, any new revenues for this year have been off the table.

Tangeman said the cuts made this year are critical to delaying the day additional revenue will be needed.

“We believe if you can get expenditures down to a certain level there is room for the permanent fund dividend itself and a revenue stream from that $60-plus billion (Alaska Permanent Fund) to assist in funding the government as well,” he said. “By doing that, if you do it in a responsible manner, I still think you can push the discussion of taxes off for a while.”

The cost of the full-sized dividend proposed by Dunleavy, a core pledge of his campaign, is $1.9 billion for the 2019 PFD (amounting to about $3,000 for every eligible Alaskan). He’s also proposed supplemental payments for the PFD to make up for reductions in recent years, meaning he’s seeking an additional estimated $683 million to this year’s budget (and $800-plus million asks in the next two).

Tangeman added that he’s particularly concerned about the kind of behaviors would change in Alaska with new taxes. He said models can accurately estimate how much revenue a certain tax proposal will bring into the state, but not how it’ll change the fundamental behaviors of the Alaska economy.

Asked if the administration would be considering any hikes to fees to bolster revenue, Tangeman said he anticipates that there’ll be such discussion this year.

Sen. Donny Olsen, D-Golovin, also asked if there had been any consideration to altering oil taxes. Last week, the committee heard a presentation that new production on the North Slope is many years away.

“Your statement is that Alaska is going to have a tax some day—and I assuming you’re talking about an income tax—is there a discussion within the administration about restructuring the petroleum-related taxes that are out there to see if that’s also a revenue stream that could be out there for the state of Alaska?” he asked.

Tangeman first responded to the comment about the income tax to say that he wasn’t specifically referring to an income tax, but “any sort of tax that may be coming down the road.”

“I’m not naïve,” he said, “and I don’t think any of us are where we’re going to bury our heads in the sand and we’re never going to see some sort of income tax or sales tax. I think it can be pushed out quite some time.”

As for reopening a discussion on oil and gas taxes, he said it’s a non-starter with the Dunleavy administration.

“This administration is not interested in adjusting the oil and gas tax whatsoever,” he said. “We’ve been stable, we’ve been competitive and there’s no discussion of changing the oil tax structure.”

The question and response

Talk about taxes starts about four minutes into this clip at the timecode 1:26:37.

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