At the Anchorage “State of the City” address, given at the Chamber of Commerce back in September, Mayor Dan Sullivan zoomed through dozens of slides touting projects in the works: improvements to public safety, Parks and Recreation, economic development, combating homelessness, celebrating the city’s centennial, competing for the 2026 Winter Olympic Games, and getting started on the multi-billion dollar Ship Creek revitalization plan.
The presentation began with a quote from Mayor Sullivan: “We will continue to provide reliable and affordable public services so all of our residents can enjoy Anchorage’s great quality of life.”
There was an obvious piece missing from the equation: funding. However, Mayor Sullivan helpfully had a surprise announcement on the topic. He announced plans to engage in a series of community dialogues to gauge support for “diversifying” our revenue stream. The first took place this Tuesday night at the Anchorage Senior Center in Fairview.
Around 70 residents packed into the event hall, known as the Starlight Ballroom. The mix was two parts older residents, one the under-50 crowd. Attendees were given name tags and former assemblywoman Cheryl Frasca assigned seating.
To Sales Tax, or Not to Sales Tax. That is a limited question with an intended direction.
The first of two pamphlets was distributed to each of the eight tables of participants, randomly assigned seating to avoid ideological clusters. Groups would spend 20 minutes deciding whether Anchorage should “stick with the current mix” and keep property taxes as the primary source of revenue under the tax cap, or “change who pays and how” by “diversifying” the tax base – though, as I’ll get into later, that was a disingenuous label.
A clear majority felt that the information was slanted to support a sales tax, and voiced frustration that the given options were too limited. A couple dozen, oversimplified and/or overly ambiguous “yes-or-no” boxes did not satisfy the attendees.
The second pamphlet went further and skipped to the foregone conclusion that we all uniformly wanted a sales tax. The only question left was what kind of sales tax it would be. For that, they gave us more boxes.
The bulk of the pros and cons measured how heavily each proposal would offset property taxes. A lot of us wanted different metrics; how changes might impact rising crime rates, over-taxed social services, bare-bones public transportation. Those matters, however, were not to be a part of the night’s discussion. The moderators repeatedly herded the conversation back toward the importance of replacing, dollar for dollar, property taxes with a sales tax.
An older gentleman loved this idea: “As long as there are property taxes,” he said gravely, “you can never truly own your home.”
A complete, dollar-for-dollar switch, according to the presenters, would require a 16 percent sales tax. (Because that really takes the plight of hourly wage earner at Walmart into consideration.)
“We should be able to pick what services we pay for,” one gentleman yelled from the opposite corner of the room. Yeah. That’ll show ‘em. Government of the entitled, for the entitled, and by the entitled. Build those gates high.
Thankfully, there was no “Pick.Click.Give” model of taxation offered in any of the boxes. So, we’re not there yet, I suppose.
If We’re Gonna Do This…
Many groups expressed a clear hesitance towards a sales tax that would unduly burden the poor and acknowledged renters already pay indirect property taxes in their monthly rent. Individuals offered that policy shouldn’t “double tax” anyone, least of all those who can’t afford it. The general consensus was that the best proposal would be one that taxed people for what they do, not the things that they own or need.
This communitarian acknowledgment opened the door to the idea of luxury taxes; a type of sales tax that exempts essential services, like groceries and medication, and goes after high ticket items, like flashy cars and bling.
A man sitting next to me advocated a gasoline tax. Someone from across the room proposed a municipal lottery. Others still called to shore up the $16 million we annually lose to nonprofit and charitable exemptions – a notion that drew a round of applause that seemed to surprise the mayor.
Another younger man took to the mic and asked the city to look into legalizing, regulating, and taxing marijuana. The chuckles, I assume, came from people unaware that the issue is close to inclusion on this summer’s primary ballot. Getting the jump on making sure the municipality gets a cut of the eventual revenue stream makes a lot of sense.
Close to everyone in the room indicated an openness to some sort of seasonal tax that would target tourists – probably encouraged by participants’ confidence that there were no tourists in the room to readily take offense.
The most vocally supported idea was for a sin tax: raising revenue from items like tobacco (which we already tax at $2.21 per pack) and alcohol. These taxes, its proponents argued, could be dedicated for use in treating alcoholism and drug addiction.
Except, they wouldn’t be. Which was the biggest problem with the entire conversation.
The Community Dialog Changed Before It Met the Community.
When the mayor announced the series of community dialogs, he proposed three options:
“We want to find out, you know, if a sales tax was implemented and it replaced property tax dollar for dollar, who would be interested? Or, what if it was a seasonal sales tax? Or, what if it was a sales tax that was outside the tax cap and actually added to revenue?”
That third option, of revenue outside the tax cap, was an important component.
The tax cap serves as a bucket for all the taxes that can be collected in a given year. The first thing that goes in the bucket are the non-property tax revenues (tobacco, vehicle registration, aircraft registration, payments from city-owned utilities, and car rentals). This year, that totals $59 million. The remaining $231 million, of the $290 million tax capacity this year, comes exclusively from property taxes. The Office of Management and Budget cited that in 2013, property owners paid about $1,522 for every $100,000 of assessed value. The system creates the strange pluralism where Anchorage shares both the lowest tax burden in the nation and the highest property tax burden.
The mayor, so long as he acquires the assembly’s support, does not have to tax to the cap. Sullivan has not done so at any point since taking office. This restrains property tax growth, but also restricts the money that will be available the next year. The tax cap is based on the total taxes collected, not the total amount that could be collected.
Adjustments to the cap, however, can be made in light of population growth, inflation, and new construction being added to the tax base. If the Ship Creek plan becomes some sort of reality, and our population continues to surge, there could be some major adjustments – or, more concerning, it could force reforms to the cap later down the line. A shift to a sales tax could turn the tide and disproportionately affect low income residents, who would now have to pick up the tab.
But, by the time the dialogues were scheduled, the number of tax reform scenarios was reduced to two. It had become a choice between sticking with the existing property tax system and a sales tax. But, really, this was about selling a sales tax. Within the scope of the tax cap.
Gone, entirely, was the option of looking at new revenues outside of the tax cap.
That seemed to negate the obvious purpose for the discussion: how we were going to afford existing, sub-functional levels of services while taking on new, multi-billion dollar construction projects.
It also made the calls for things like sin taxes and luxury taxes (the creation of new revenues designed to combat emerging societal ills like homelessness, crime, public transportation, etc.) impossible, even as the public promoted them at mayor’s public dialogue about taxation.
So long as those revenues are coming out of that one big pot, under the tax cap, any such dedicated funds have to be pulled from something else we want funded. In other words, if we want to fight homelessness, we’ll have to cut funding for education. If we want to address crime, we’ll have to reduce funding to the library.
Our current tax policy is one of displacement, which the current assembly and administration has worsened by reducing the pot further each year.
Tuesday’s dialog was not about “diversifying” the tax base, no matter how many time the mayor repeated the term. “Diversifying” would mean adding a new element, or elements. This discussion was solely about reshuffling the deck, and figuring out who picks up the tab.
And it’s pretty clear where the mayor stands on who should do that.