House Fish holds tax increase proposal
The governor's proposal to increase fish taxes as part of the effort to generate more revenue for the state is on hold.
To help fill the state’s budget gap, Alaska Governor Bill Walker has asked legislators to consider a variety of tax increases – including raising fisheries taxes by one percent. The bill to do so is now on hold in the House Fisheries Committee.
At the end of a hearing Feb. 23, committee chair Louise Stutes, R-Kodiak, said she didn't want the bill to move out of committee until issues raised during public testimony were given more consideration - and efforts to increase taxes for other natural resources also moved along.
“I don’t want to see the fishing industry be the only one subject to a tax increase," she said. "Consequently this bill is gonna be held in committee until an undetermined time. Until I feel comfortable that the fishing industry is not being singled out.”
The February 23 hearing was one of multiple held by the fish committee, which has mostly heard from fishermen and industry representatives who have said they understand the state's need to raise more revenue, but had questions about the plan put forward by the administration.
The plan raises the state's various fisheries taxes by one percent each. During a Feb. 18 hearing, state tax director Ken Alper explained that the increases, estimated to bring in $18.4 million, essentially would make fish revenue match the cost of fisheries management, without overhauling the current structure of fisheries taxes.
“There are embedded features in existing statute that the governor did not want to look to upend," he said. "For example, the percentage shares of municipal revenue sharing, or the different existing tax rates between an onshore vs a floating vs a cannery. Those are fully within the legislature’s discretion to move those around. It’s not that 1 percent was a dartboard solution, it was the most rational solution to try to come up with the desired amount of additional funding.”
But at the Feb. 23 hearing, Alper gave the public and the committee a tool to look at changes to those rates: a spreadsheet.
“It creates a framework to sort of plug in different tax rates for the different categories of the fishery," Alper said. "The three percent rate that is more or less all the onshore fisheries, the four and a half percent rate that one person testified might be very high is really the canned fishery, the five percent offshore floater rate and the one percent developing. So that’s an excel spreadsheet, it’s very user friendly, it’s on the internet, individuals and the public can look at it now, if you wanted to plug in different tax rates to plug in different tax rates to try and create a desired level of revenue for alternative versions of the bill you now have that available to you.”
That was largely in response to testimony about the increases, which has noted that the flat one percent increase has a different impact on different parts of the industry.
Pacific Seafood Processors Association Vice President Vince O’Shea explained to the committee Feb. 18 that the one percent increase is actually about a 25 to 33 percent increase in the amount that will have to be paid.
And Bob Krueger, from the Kodiak-based Alaska Whitefish Trawlers Association, noted that such an increase is sizable in comparison to the slim margins that some low-value fisheries operate on.
O’Shea also said that the industry is facing other challenges right now, including the rising minimum wage and the strong dollar. And he noted that for products like canned salmon, a higher tariff may result in lower sales.
Icicle Seafoods’ Kris Norosz echoed that in her testimony Feb. 23, saying that a higher tax on canned salmon would be bad news for places like Bristol Bay that produce canned salmon.
“It’s not an increase that we can likely pass on to the consumer,” she told the committee.
Norosz explained that canned salmon is one of the highest priced canned foods there is, and in the retail market, cost is critical.
“It’s really price sensitive, it’s the backbone of the industry, and it’s what bails us out when we have large runs,” she said.
But O’Shea and others said the industry is willing to work on ways to help raise revenue for the state, and wanted to collaborate on a plan. Seward fisherman and direct marketer Rhonda Hubbard said that effort just needed time.
“Fisheries tax is very complex," Hubbard said. "It’s probably one of the most complex tax components within the department of revenue. Those taxes do need to be updated. And while it’s admirable that the administration, departments are coming together providing you the information, everything. I think we, as an industry, need to be a part of that meeting, or also come together with them, in creating some more equitable ways of taxing our industry.”
Despite all of the concerns, one person spoke adamantly in support of the proposal Feb. 23. Nancy Hillstrand from Pioneer Alaskan Fisheries said her company supports the tax, but wants the state to use the money fairly.
"Fish are a public trust, it belongs to all Alaskans, so we totally do agree with this one percent tax, we do agree with a flat tax across the board for all," she said.
In response to all that testimony, Stutes said at the end of the Feb. 23 hearing that the committee will work to pass along the comments it has heard, draft some of it's own recommendations on the bill, and provide additional opportunities for public comment before the bill moves forward.