Here is a true story. The recorder was on. One day, during the reign of Anchorage Mayor Daniel Sullivan (2009 – 2015, not to be confused with current Senator Dan Sullivan), I was interviewing the mayor for a local newsletter. We were up in his eighth floor office that had a spectacular view of downtown through a number of floor-to-ceiling windows. I asked him for his comment about a University of Alaska study which found that, for several decades, the percentage of business contributions to property taxes had been steadily falling, and the percentage of residential contributions had been steadily rising.
The mayor was standing at the time in front of one of the huge windows looking over downtown. In response to my question, he gave a lengthy response, eventually raised his arm and swept it across the panorama of multi-story buildings crowding the view and said, “That’s one of the things we’ve been working on. We want to get commercial properties assessed near their full value, just like residential property is.”
Did he ever do that? I don’t think so. Has any Anchorage mayor ever seen to it that commercial properties were “assessed near their full value, just like residential property is”? There again, I don’t think so. So, before we institute a sales tax in Anchorage that will raise prices for families that are already stretched, why don’t we ensure that commercial property owners pay their fair share?
Let’s take a look at some actual facts about the proposed property tax for Anchorage. Two studies emerged out of UAA in the waning months of 2024. From a big-picture perspective, they are more or less in agreement, so I’ll focus on the one that I think is a bit more direct.
“Effects on Households of a Proposed Anchorage Municipal Sales Tax,” was sponsored by the Anchorage Economic Development Corporation but was actually researched and written by faculty and staff at The UAA Institute of Social and Economic Research.
Importantly, the researchers note that, “A coalition of Anchorage business leaders has proposed a sales tax for the Municipality of Anchorage.” In my view this helps to understand why a business-friendly regressive sales tax was chosen as the revenue-raising method of choice in the first place.
The study emphasizes this critical fact: “Sales taxes are widely regarded as regressive, meaning that tax payments represent a smaller fraction of income as income increases.” In other words, $1,000 a year, for example, of extra sales taxes will hit the minimum-wage family way harder than a doctor or commercial real estate owner.
“The Anchorage sales tax as proposed contains a number of exemptions from taxation that aim to reduce the impact on low- and middle-income households. Proposed exemptions include food at home, housing rent, childcare, medical care, motor fuels, financial transactions, and resale items.” So a sales tax is inherently unfair, but making it a little less unfair is supposed to make families with ever tighter budgets feel better?
And there’s more: “...the distribution of the projected 20% reduction in property tax offsets to owners is highly regressive for households in the lowest 30% of the income scale.” Not only will thousands of Anchorage families pay an unfairly high proportion of sales taxes, they’ll get less property tax relief from it. Moreover, “Most likely, renters would see little if any benefit.”
Is there a better, fairer way to raise revenue? A quick review of the literature does reveal some ways. Here are a few of these ideas:
- implement a system where property tax rates increase with the value of the property to ensure that wealthier property owners pay a fairer share of taxes
- “homestead exemptions” reduce the tax burden on homes in which the owner lives, while housing investors and speculators pay a higher property tax rate.
- adequate local corporate income taxes can generate revenue from businesses operating within the municipality—structured so that there are higher rates for larger, more profitable corporations
- Community Benefits Agreements (CBAs) are legally binding contracts between community organizations and developers that ensure community benefits in exchange for project support—such as agreements that include funding for affordable housing and infrastructure improvements—all without broad-based tax increases
In sum, from my point of view the question should not be, “How do we use regressive sales taxes to raise revenue?” The question should be, “How do we increase revenue and community benefits in an equitable manner?” The first approach harms families. The second builds communities.
Lawrence D. Weiss is a UAA Professor of Public Health, Emeritus, creator of the UAA Master of Public Health program, and author of several books and numerous articles.
