Taxes: maybe there is something you can do.

• Author: Swagel, Will

Sometimes it seems you just pay and pay and pay. How you pay, as well as how much you pay, can often make a big difference.

We all know the story of the big fish eating the little fish, then being eaten by a bigger fish, which is in turn eaten by a yet bigger fish. Well there is news on the horizon for Alaska businesses and consumers. The big fish are spitting all the little fish out. And you thought this was good news.

Wrong. The biggest fish in the local pond has been the Alaska state government and by extension, the Feds. And the little fish being spat out are governments on the municipal level in the sparsest, most expensive-to-operate state in the union. Alaska cities are being asked to provide more and more support for themselves to cover services being cut by the state. So look for municipal taxes and fees to continue to increase.

"Since 1986, municipalities have been singled out for the state budget ax at a rate of 6 to 15 percent each year," the Alaska Municipal League complained in a recent editorial. "Over the past ten years, the state has sliced (revenue sharing and municipal assistance) programs by over $85 million, or 60 percent. These funds must be made up somewhere."

In some districts local taxes have doubled already. In the Mat-Su Valley, property taxes have more than tripled in the past 10 years, with cutbacks in state support being given as the most likely reason.

For most Alaska towns and cities, making it up means either raising the property tax or instituting or raising a sales tax. It also may mean higher user fees, utility fees, severance taxes or hotel bed taxes.

Throughout Alaska, municipalities have been concocting different combinations of the above. But nearly all have bellied up to the tax bar and are likely to continue to do so.

Which Tax is Better for Business?

There is no black and white answer to the question of whether businesses would do better with a higher property tax or a higher sales tax. Economists and business people alike cite pros and cons of both regimes.

"There's two perspectives a business is going to look at," says Jim Calvin of the Juneau-based research firm, the McDowell Group. "The first, what sort of administrative headaches are there if I have customers coming into the store. And then the other issue is how much the business is going to pay."

Property tax, for instance, has to be built into the price of the goods or services a business provides, whereas sales tax is paid directly by the consumer at the point of sales. For that reason, businesses have traditionally supported sales tax increases over hikes in the property tax. But is that the best decision? Have the administrative costs of sales tax, for instance, been taken into account?

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