Sales tax committee recommends increasing tax cap
The sales tax ordinance committee will recommend to the borough assembly an increase of the sales tax cap from $1200 to $1500 and to limit senior exemptions to full-time Petersburg residents.
The mission of the committee is to simplify the sales tax code and collection procedures and to generate an equal or greater amount of revenue so the borough doesn’t have to decrease services or increase property taxes.
It’s been meeting since last year and its members have discussed many of the exemptions outlined in the code—including the change or elimination of the senior sales tax exemption.
The issue was brought up during Tuesday’s meeting where a motion was presented to limit the senior exemption to food and fuel.
The majority of the committee members were against the change. Member John Murgas, who is eligible for the senior exemptions, said he takes advantage of it for home maintenance and upkeep.
“If I can’t take advantage of that it would make a significant difference whether I would decide to live here,” Murgas said. “I think that holds for the majority of people who are senior exempt.”
Committee member Sue Flint said she has received feedback from several community members, including a senior who spoke during a previous meeting, that they would be comfortable limiting senior exemptions if the sales tax was lowered across the board.
“If we were to do away with some of their (senior) exemptions we could lower the tax rate on young families that actually have higher grocery bills and are paying a bigger part of the sales tax,” Flint said.
Flint also referenced Petersburg’s aging population as a reason it might be a good idea to change the senior exemption and warned that if, in the future, the borough doesn’t make enough revenue from sales tax, property taxes would inevitably rise.
According to Alaska Department of Labor data, Petersburg residents over the age of 65—the age required to be eligible for the exemption—will double by 2025 and represent around 26 percent of the population. Petersburg seniors as of 2010, according to the data, represented around 11 percent of the overall population.
Flint also said the senior exemption was instituted to assist the pioneers who built the state to stay here, but that those pioneers are now gone.
“It’s nothing against seniors,” Flint said. “It’s just about sharing this cost among all community members. I’m the granddaughter of a pioneer and I’m going to be eligible in a couple more years and I feel like I didn’t earn that.”
Last year, seniors saved $267,000 in sales tax exemptions that would have otherwise gone into borough coffers.
Borough Finance Director Jody Tow said about half that includes fuel, groceries and hardware.
If the tax rate were decreased from its current rate of 6 percent to 5.5 percent, the borough would see a loss of around $241,000.
“If you wanted to decrease the sales tax rate, you would pretty much have to get rid of the senior exemption all together or find some other way,” Tow said.
The committee voted against recommending changes to the senior exemption 3-1, with Flint voting for limiting it to food and fuel.
The committee voted unanimously to recommend raising the sales tax cap from $1,200 to $1,500.
Tow said it’s difficult to estimate how much money the borough would receive in sales tax revenue based on the tax cap increase because there's no data currently collected.
The community voted down a tax cap increase to $1,700 in 2012 by two votes and committee member Hillary Whitethorn was concerned that might happen again and questioned if it alone was enough to increase revenues.
“Are we comfortable on risking this all on the tax cap,” Whitethorn asked.
Committee member Fran Jones suggested a recommendation to eliminate exemptions on caskets and made a motion to recommend the taxing of commercial and residential rental charges.
“That’s one more thing that you’re going to tax everybody on that the seniors are exempt on,” Tow said. “That doesn’t seem quite fair.”
The committee voted against the motion 3-1.
Sue Flint will present the committee’s final recommendations—to increase the tax cap and to limit the senior exemption to full-time residents—to the borough assembly during its second meeting in March. The assembly will review the recommendations and approved changes to the code will ultimately go before the voters on October’s ballot.