Dunleavy’s statewide sales tax repeals local exemptions on food, utilities — but city may lose far more than it receives
- Mark Sabbatini
- 20 hours ago
- 7 min read
Updated: 17 hours ago
Juneau’s government would regain several million dollars annually, but could lose tens of millions if voters rebel by rejecting renewal of temporary sales taxes
By Mark Sabbatini
Juneau Independent
"Is there a sales tax in Juneau?" Gov. Mike Dunleavy asked during a speech Wednesday promoting his proposed fiscal plan that includes a statewide sales tax.
The answer is yes — a 5% tax as of now, which would be 7% during winter months and 9% during summer months under the governor’s plan. There’s also numerous exemptions for food, utilities, nonprofits and other categories — but the city’s exemptions would no longer apply under the governor’s proposal.
Which means city leaders could get back several million dollars a year they’re worried about losing after voters passed sales tax exemptions on food and utilities in last fall’s municipal election. But the city could lose far more — tens of millions annually — if voters this fall reject extending a 3% temporary sales tax that they have routinely renewed every five years for decades. Another temporary sales tax of 1% is up for renewal next year, while the other 1% is a permanent local tax.
“I'm definitely concerned about the governor's sales tax plan,” Christine Woll, chair of the Juneau Assembly’s Finance Committee, stated in an email to the Juneau Independent on Saturday. “If it passed, it would significantly increase the tax burden on Juneau's residents, including most significantly on our lowest income residents via a reinstatement of sales tax on food. I wouldn't doubt that this would impact voters' interest in supporting the city's temporary sales tax measures that traditionally come before the voters most years.”
The Assembly hasn’t yet taken an official stance on Dunleavy’s fiscal plan — the full details of which became known Monday — although that may occur due to its likely significant local impacts, Woll noted. City leaders are in the early stages of the annual budget process for the fiscal year that starts July 1.
Legislative leaders say there is little chance Dunleavy’s fiscal plan will pass this year, so the higher sales taxes — which as proposed would take effect July 1, 2027 — are largely a theoretical discussion for now. But they are indicative of debates that may play out as state officials consider various plans to solve its financial shortcomings — which could include income and other alternative tax proposals — and how that may affect local taxes and fees.
"The addition of a state level is definitely a burden that some communities will feel more than others, and there will be calls from those residents to lower not the state's rate, but the local (one), which will diminish revenues at the local level," Nils Andreassen, executive director of the Alaska Municipal League, said during a media briefing earlier this week when discussing numerous concerns the organization has about the governor’s proposal.
Dunleavy’s plan includes a 2% statewide sales tax between October and March, and 4% from April to September. It exempts food purchased through federal assistance such as the Alaska Supplemental Nutrition Assistance Program — although Juneau’s 5% sales tax would still apply since municipalities would not be allowed to implement any exemptions — along with certain other items such as jet fuel.
Juneau is expected to receive about $70 million in local sales tax revenue during the current fiscal year to help fund a municipal budget of roughly $200 million (excluding entities such as the Juneau School District and Bartlett Regional Hospital, which brings the total budget to about $480 million).
The local food and utilities sales tax exemptions passed last fall are projected to cost the city about $11 million during fiscal 2027, but city Finance Director Angie Flick has told Assembly members that estimate could vary significantly due to unknowns such as other factors that may affect consumer spending.
Angela Rodell, who helped lead the local sales tax exemption campaign last fall as treasurer of the Affordable Juneau Coalition, stated in an email to the Juneau Independent on Saturday there is “real value in beginning to socialize the idea of statewide tax revenues with Alaskans.” She said a long-term statewide fiscal plan is long overdue, so measures such as the statewide tax are “a necessary step if we're going to move beyond annual brinkmanship and toward something sustainable.”
“That said, I do have concerns about the proposed loss of local control over exemptions,” she wrote. “As we've discussed many times, food and utilities are non-negotiable expenses. Taxing them disproportionately impacts lower-income households, seniors, and families already stretched by high costs of living — particularly in communities like Juneau, where basic necessities are already expensive. Preserving the ability for communities to exempt essentials isn't just a policy preference; it's a practical tool for addressing affordability.”
Dunleavy, during his speech Wednesday at Centennial Hall to the Alaska Chamber of Commerce as part of its annual Legislative Fly-In, said Alaska is an outlier among other states and countries in not having a sales tax. But he said such revenue measures need to be considered since oil income is continuing a long decline — although he expects a reversal of that in about five years or so as new projects being accelerated by the Trump administration come online.
“Have any of you guys gone out to eat at any of the restaurants in Juneau since you've been here?” Dunlevy asked the audience after being told by them Juneau has a 5% sales tax. “You probably don't say ‘Geeze, gosh darn 5%.’ What I mean by that is I'm not trying to acclimate into a sales tax. What I'm trying to explain is we're the outlier — we're the outlier compared to Saudi Arabia. We're the outlier compared to Texas. And if you're trying to stabilize something, you're either looking at sales income or some other tax that we have not been able to find. But again, we don't believe it has to be permanent.”
The statewide tax proposed by Dunleavy means rates could top 10% in some communities during peak tourism months. Ketchikan, for instance, has year-round sales tax of 5.5% that increases to 8% between April and September (although residential rents are exempt from the seasonal increase).
The governor’s office did not respond to inquiries from the Juneau Independent about when the governor last made a retail purchase in Juneau and if his apparently not knowing the city has a local sales tax indicates he lacks an awareness of the "reality felt on the ground" — a phrase used by Rep. Calvin Schrage, I-Anchorage, in response to Dunleavy’s generally upbeat portrayal of Alaska’s situation in last week’s State of the State address.
Rodell stated Dunleavy’s question about whether Juneau has a sales tax was “telling,” but “I wouldn't frame it as being ‘out of touch’ so much as illustrative of the disconnect that can exist between statewide policy design and on-the-ground realities in individual communities.”
“But perception matters, and I do think there's a real risk that voters could begin to question temporary local tax renewals that have historically passed with little controversy — especially if they feel the cumulative burden is creeping up without sufficient local say not to mention if it is perceived that the bulk of revenue being generated in Juneau is headed north to fund services for Southcentral,” she wrote.
The statewide tax would generate $735 million during the first year it’s in effect and gradually increase to $815 million by fiscal 2032, after which it would be repealed, according to an Alaska Department of Revenue analysis. That makes it by far the biggest revenue portion of the governor’s plan, with the next-highest element being an oil tax increase that would peak at $171 million in fiscal 2031 before dropping sharply during the final year of the plan.
Some legislators — including Sen. Jesse Kiehl and Rep. Sara Hannan, both Juneau Democrats — have said they would prefer an income tax instead of a sales tax since its impacts would be greater on people more able to afford them. That assertion is backed by a study released Thursday by the Institute of Social and Economic Research at the University of Alaska Anchorage, which also stated raising oil and corporate taxes would have the smallest impact on income and jobs of residents compared to other options.
Dunleavy’s plan, in addition to ending the increases on oil taxes when he predicts new projects will be online, also permanently eliminates corporation income taxes beginning in 2031, which the revenue department estimates will cost the state about $540 million annually.
Another foundational element of the plan is a constitutional amendment altering management of the $89 billion Alaska Permanent Fund so that half of the spendable earnings would go toward dividends to residents and half toward state spending. The governor’s budget office states that would result in annual PFDs exceeding $3,000, while last year’s was $1,000 and legislative leaders say a similar amount is likely this year.
The amendment would require approval of two-thirds of the Legislature and then voters statewide. Among the questions raised so far by legislative leaders is how the governor’s plan as proposed would affect the size and growth of the Fund’s principal. Dunleavy is proposing 5% of annual earnings (averaged over a five-year period) would be available for PFDs and state spending, which some lawmakers have said may not allow the balance of the Fund to maintain its pace of growth.
One area of agreement among most policymakers and economists is developing a long-range fiscal plan for the state that provides stability amidst fluctuations such as oil income is complex — and necessary.
“In short, I welcome the Governor's leadership in starting this conversation, but I think the plan would be stronger — and more politically durable — if it preserved local flexibility, particularly around essentials, and more fully accounted for how layered taxes feel to voters at the cash register,” Rodell wrote.
• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306. Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.
