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By NICK BOWMAN
Daily News Staff Writer
With the state budget crisis creeping into local municipal budgets, more attention is being put on the millions of dollars in tax exemptions enjoyed by senior citizens statewide.
In Ketchikan, Alaska elders 65 and older have both property tax exemptions and sales tax exemptions.
Senior property tax exemptions are mandated by state law, but local sales tax exemptions are not — which has led the Ketchikan Gateway Borough to consider a proposal limiting the sales tax exemption for seniors when buying alcohol, tobacco and marijuana.
The local branch of AARP decided on Friday that they would express wary support for the idea, but were clear that they didn’t want the effort to expand into other areas.
Alaska statute requires municipalities exempt the first $150,000 of value in one property owned by Alaskans 65 and older. It’s the largest exemption for seniors and, because it’s built into state law, the most entrenched of tax breaks offered to elders.
As of 2016, 906 properties were covered by the mandatory exemption in Ketchikan — adding up to $121,693,500 in property value exempt from taxes levied by the Ketchikan Gateway Borough, which generated the figures, and the City of Ketchikan.
But as the state’s fiscal crisis has deepened, lawmakers have renewed efforts to revisit the mandatory exemption and let municipalities decide whether to offer seniors the tax break.
The Alaska Municipal League, the lobbying group representing Alaska’s local governments, supports proposals to shift the senior citizen exemption from a mandatory exemption to an optional one.
A 2016 effort to repeal the mandatory exemption died in the last weeks of the legislative session. House Bill 338 was sponsored by Paul Seaton, R-Homer, who is now a co-chair of the House Finance Committee. Similar bills have been introduced this session, but haven’t gained the traction seen with other deficit-reduction proposals like the restructuring of the Alaska Permanent Fund.
However, more likely in the short term are changes to Ketchikan’s local sales tax exemptions.
Elders are exempt from the city’s 4 percent sales tax and the borough’s 2.5 percent sales tax. Momentum has been building in the borough to repeal the exemption when seniors are buying alcohol, tobacco and marijuana, and the Borough Assembly is on track to consider that very proposal in early April.
The city-borough Cooperative Relations Committee met on Friday, when members of both the Assembly and the Ketchikan City Council expressed support for changing local code.
“If somebody over 65 can afford to be buying liquor, tobacco and marijuana, then I think we all should be anteing up,” said Assembly Member Judith McQuerry.
Other members of the committee said the Assembly has the first move on the issue because it’s the taxing authority for the area. The borough is responsible for collecting all of the taxes levied in Ketchikan and Saxman.
Borough Finance Director Cynna Gubatayao said the senior sales tax exemption on alcohol amounts to $18,000 in borough tax revenue — not including the city sales tax — that isn’t collected each year. She said the borough is still working to calculate how much revenue is lost from the exemption on tobacco sales.
Changing the exemptions on specific items might create complications for grocers and restaurants. If they buy cigarettes at a grocery store, seniors would find themselves paying taxes on one or two items but not their entire purchase.
The same is true for restaurants, where seniors wouldn’t pay tax on their meals but would for any alcohol they order.
At a meeting of the Ketchikan AARP chapter shortly after the committee meeting, local seniors weren’t strongly opposed to the proposal, but debated how far the group should go when discussing it before the Assembly.
Their fear was that supporting the sales tax proposal because of the dire situation of the state budget and the worsening borough budget might be misunderstood as support for broader reforms to senior exemptions.
Local AARP leader Ed Zastrow summarized the group’s position this way during the meeting: “We’ll do our part, and this is one way of doing our part, but hopefully this is where it stops.”