The Kenai Peninsula Borough Assembly last week narrowly came out against proposed legislation in Juneau that would institute a statewide sales tax.
The measure, House Bill 4005, would add a two-percent state sales tax on top of both borough and local sales taxes. Finance Director Brandi Harbaugh explained the impact on peninsula communities in response to a question from Soldotna Assemblyman Brent Hibbert.
“So two percent, and if we're inside the city limits, that would make eight percent that we'd be paying, is that correct, right?” Hibbert asked.
“Yeah, you're looking at, you know, it's currently 9 and a half percent in the summer in Seldovia, and this would be 2 percent on top of that. It's currently 7.85 in Homer year-round, with a 4.85 city rate, at 3%, And so, they'd be 2% stacked on top of that, yes sir,” Harbaugh said.
Currently, the borough collects both its and the city’s sales tax together, and then remits the full amount owed to the cities back to them without taking out any administrative fees. Harbaugh says the state will likely take a cut when it starts collecting for all three levels of government.
“The cities do not pay anything per statute, we’re required to provide the, the entire levy to them, without reduction. And it, the streamline sales tax would be collected at the state level if there is a state sales tax, they would then collect the boroughs tax, they would then collect the city's tax, and the fee is yet to be determined. The only indicator we have thus far, are current rates in place. Currently, Here's an 8% rate for DMV, however, we pay a 17 percent for the commission sales tax collection. And so, it's difficult to tell what that, that rate would be, but we would likely pay an administrative fee to have that sales tax collected,” Harbaugh said.
Nikiski Assemblyman Jesse Bjorkman said the Kenai Peninsula’s delegation to Juneau was not consulted on the resolution, and in fact, they oppose it.
“This resolution is very very broad. And it takes away a tool that our legislative delegation, from this borough, has said they support. And I certainly want to be in support of our delegation in Juneau,” Bjorkman said.
Anchor Point Assemblyman Mike Tupper agreed.
“My initial knee-jerk reaction, when I read this, was why are we going to take away tools that, you know, the legislators of the state have. If, if I'm hearing that our state legislatures have said that's something that they might want to consider then that kind of changes where I'm at with that, and maybe it is something that we shouldn't expressly say that we oppose,” Tupper said.
Mayor Charlie Pierce reminded the assembly that cities in the borough have long opposed additional sales tax, and the borough should send a preemptive message to the legislature.
“Oftentimes you want to get out ahead of it, and just send a message, friendly message, say hey, we're not in favor of this, find another option. Alright, I agree with some of the conversation too, that we should have solutions, as well,” Pierce said.
Assembly President Brent Johnson of Clam Gulch expressed his support for the resolution.
“I hear what Mr. Bjorkman says loud and clear, that if all of our delegates are in favor of a sales tax, then that's all the more reason I need to raise my voice, because I'm certainly not in favor of it. I'm, I paid a sales tax when I was young, didn't kill me, and I would rather do that than hurt the school district and the cities. And so, that's where I'm at, I'm gonna support it,” Johnson said.
The measure to oppose a state sales tax passed on a 5-to-4 vote. The dissenting votes came from Assemblymembers Bjorkman, Cox, Derkervorkian and Eklund.
