We estimate that the middle 20 percent of Alaska households, for instance, would pay an average effective rate of between 1.2 and 1.9 percent of their income, depending on the option chosen. While the statutory tax rate of each option examined in this analysis would be 2.5 percent, the exemptions and deductions available under most versions of the tax would allow all families to pay an effective tax rate below this level.And a married couple with two kids earning $200,000 per year could expect to pay between $75.19 and $94.23 per week. A married couple with two children earning the state’s median income ($75,000) could expect to pay between $19.04 and $34.13 per week. A minimum wage worker without children could expect to pay between $4.54 and $10.58 per week depending on the option chosen. All these taxes would apply to a broad swath of Alaska residents, including families at most income levels.The tax would be roughly on par with those levied in Arizona, Ohio, Louisiana, and Kansas – all states with substantial statewide general sales taxes. Depending on the option, Alaska’s personal income tax under these proposals would rank somewhere between the second and fifth lowest in the country when measured relative to personal income.A tax based on federal AGI with no standard deduction would raise the most revenue while a tax based on the federal definition of TI slated to take effect in 2026 would result in the lowest yield. These amounts include tax payments by nonresidents ranging from $38 million to $51 million per year. The income tax options analyzed in this report would have raised between $526 million and $696 million if they had been in effect during Tax Year 2019.The analysis was produced using ITEP’s Microsimulation Tax Model. That rate is applied to a variety of different tax bases, including two based on the federal government’s definition of Adjusted Gross Income (AGI) and four based on federal definitions of Taxable Income (TI). Each option examined in this report is levied at a rate of 2.5 percent. This report contains ITEP’s analysis of the distributional impact and revenue potential of a variety of flat-rate income tax options for Alaska, based on draft legislation provided by the Legislative Budget and Audit Committee.
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