Effects on Households of a Proposed Anchorage Municipal Sales Tax

Abstract

Executive Summary A coalition of Anchorage business leaders has proposed a sales tax for the Municipality of Anchorage. The tax would be levied at 3% of taxable expenditures. The proposal would allocate 2/3 of the revenues from the tax (2% of taxable expenditures) allocated to property tax relief, and the remaining one third (one percent of taxable expenditures) set aside to fund a capital improvements program. The tax would be temporary, set to expire after about 8 years. A study led by Nolan Klouda at the University of Alaska Anchorage Center for Economic Development (CED) estimated that the proposed sales tax would generate $180 million annually, with 16% of the total paid by non-Anchorage residents. A subsequent update sponsored by Project Anchorage initiative proponents also estimated that the tax would collect $180 million in total but projected 21% would be contributed by non-residents. The current study revisited the assumptions and data used by the previous reports, and after making minor accounting adjustments, confirmed the total revenue estimate of about $180 million, but with 20.5% ($37 million) derived from non-residents. It took a closer look at the $143 million estimated to be collected from residents and the property tax offsets these households might expect, focusing on the distribution of impacts across Anchorage households with different incomes.