Alaska governor calls for income tax

Melanie Eversley | USA TODAY

As oil prices remain low, Alaska Gov. Bill Walker on Wednesday called for the state's first income tax in 35 years.

In a speech and in a series of tweets, Walker announced the proposal that is part of what is called the New Sustainable Alaska Plan. The plan, paired with a budget proposal, is geared toward closing a $3.5-billion-dollar deficit the state is carrying.

Right now, Alaska is the only state that does not have a state sales tax or personal income tax. For decades, Alaska has been dependent on income from oil. Crude oil prices have been hovering at seven-year lows, and earlier this week, they dipped to $37 a barrel.

"This is the time when Alaskans need to pull together," Walker said via Twitter. "There is no perfect budget plan other than the plan that gets done."

A small income tax and a reduction in the state's Permanent Fund dividends that benefit residents were part of Wednesday's rollout.

In announcing his proposals, the governor touted Alaska's strengths and said the moves need to happen. The state's tax burden is the lowest in the nation and the U.S. Chamber of Commerce has ranked the state second in the nation in terms of positive business climate, the governor said.

"We have the tools to solve our budget challenge and create a bright future for Alaska," Walker said via his Facebook page. "We just need the wisdom and the will to act."

Majority leaders in Alaska's Republican-controlled state Senate said they applauded Walker's effort to close the state's deficit, but his efforts would not completely accomplish this and they said they preferred limiting government before taxing residents.

"I see this as a starting point for the Legislature to build on and craft a fiscal plan that takes a more balanced approach," said state Sen. Anna McKinnon, a Republican and co-chair of the Alaska Senate Finance Committee.

A representative for the Republican leadership on the House side of the Legislature said he'd like time to study the proposal in depth.

"I personally do not feel there are enough reductions in our operating budget, but let's evaluate the proposals, listen to the public and then put together a budget," said state Rep. Mark Neuman, a Republican and co-chair of the Alaska House Finance Committee.

In an opinion piece published Monday in the Alaska Dispatch News, Walker appeared to defend the proposals. This year, he wrote, the sharp drop in the price of oil blew a "gaping hole" in the state's budget. Revenues will cover only 40% of the state's costs, he wrote.

"When your family's income suddenly drops by more than half, you cut spending," Walker said in the opinion piece.

The state already is making an effort to cut costs, the governor said. Several departments are consolidating divisions, the state is working with the Pew Foundation on a project to cut crime and save money, and looking at purchasing supplies. Snow clearing and ferry schedules have been cut.

Reaction from the public was mixed, based on comments posted to Walker's Facebook page.

"Alaska government is lazy," wrote Alex Rivera. "How could they not have seen this coming? How incompetent can you be?"

"Do what is best for Alaska," wrote Alexandria Miles. "We support you."

States with no income tax:

Alaska

Florida

Nevada

South Dakota

Texas

Washington

Wyoming

States with nearly no income tax: