Published on : Dec 10, 2015
Governor of Alaska, the oil-dependent U.S. state, is proposing to institutionalize a personal income tax for the very first time in the last 35 years to recover from a multimillion dollar deficit in the state budget owing to the chronically low oil prices in the global market.
While laying out the budget plan on this Wednesday, Walker also suggested that the state fund that provides most Alaskans annual checks be used for generating a stream of cash for helping the finances of the state government. If the plan gets implemented, it would change the pattern of how dividends are calculated and would translate to lower checks, at least during the initial period.
Alaska is not the only oil producing U.S. states that is experiencing a difficult time owing to the constantly declining oil prices in the global market. However, unlike other U.S. states like Louisiana or Texas, Alaska can make up the difference with the help of other industries it has.
The goal behind the proposal is to spread the burden as widely as possible, as said by the administration. Also, even with the proposed rise, the taxes levied upon individual Alaskans will remain the lowest as compared to other U.S. states.
Until now, Alaska has used its savings to balance the budget but the reserves are being blown off at a projected rate of US$10 mn every day. The state has also been warned that its bond rating could be lowered if no measures are taken to address the deficit. If the credit rating of the state gets affected due to the rising deficit, state’s cost of borrowing could rise and it will become difficult for financing a major gas project that the Governor considers critical for the financial future of Alaska.
The proposed income taxes will help the state generate nearly US$200 mn per year, according to the administration.