Wednesday, February 3, 2016

New Year, New Withholding Tax in Alaska?

PNN: Alaska Tax Increase

In December, Alaska Governor Bill Walker announced the New Sustainable Alaska Plan, which includes a proposed state income tax of 6% of federal tax liability. Currently, Alaska is one of nine states that does not have a personal income tax and thus has no employer withholding requirements. The state needs the projected $200 million in revenue the income tax would generate because it is facing a large budget deficit caused, in part, by low oil prices. Withholding would not be required until 2017.

The following timeline takes a look at how the proposed legislation has evolved so far in 2016:

  1. On January 15, Governor Walker sent a letter to the state Speaker of the House to introduce legislation to propose a state income tax.
  2. On January 19, two bills - H.B. 250 and S.B. 134 - were introduced in the Alaska legislature. If enacted, the tax would apply to income earned on or after January 1, 2017. Employers would be required to withhold the tax from employee wages, salaries, and crew shares (fishing industry workers).
  3. On January 21, the governor repeated his call for a personal income tax during his State of the State address. A personal income tax was proposed instead of a sales tax because the governor “wanted out-of-state workers who commute back and forth to Alaska to contribute to the solution.”

Read more in PayState Update, Issue No. 3, Vol. 18, and check back with Pay News Now for more information as we continue to track this legislation.