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Feb. 20—Gov. Mike Dunleavy on Monday introduced a proposal that would allow Alaska’s private businesses to reduce their state income tax liability in exchange for providing their employees assistance in paying for child care, energy bills, housing and food.

The measure could eventually cost the state more than $260 million per year in lost revenue, according to an assessment by the Department of Revenue. The exact cost will depend on how many private employers choose to assist their employees with qualifying expenses, if the bill is adopted.

The Tax Division “is not able to predict the behavior of corporations in response to this bill,” according to the division’s official assessment. Kati Capozzi, president of the Alaska Chamber — which represents hundreds of businesses across the state — did not immediately respond to a request for comment on whether chamber members supported the proposal.

The bill would allow corporations, which pay an income tax rate of up to 9.4% to the state, to reduce their tax liability by up to half. If corporations take advantage of the full amount, the impact could be a loss of $237 million in state revenue during the 2025 fiscal year — the first year the tax credit would be available — and increase gradually to a loss of $266 million in state revenue by 2030, according to the assessment.

Under the bill, corporations like ConocoPhillips or Walmart could gain tax credits by spending money in four categories: employer-provided child care or qualified child care expenses paid by the employee and reimbursed by the taxpayer; residential heating or electricity utility costs; residential mortgage rates or constructing energy efficient residential housing; or “food security and affordability.”

The tax credits could equal half the amount that the corporation spends on the qualifying expenses.

As currently written, the bill does not include clear definitions of the specific kinds of expenses that would qualify. In an email, the governor’s office said the definitions “would be adopted by the Department of Revenue in regulations” — giving the governor’s administration extensive leeway in designing the specifics of the bill and how it could be used.

Dunleavy said the measure was meant to address Alaska cost of living, which is among the highest in the nation.

“The areas of child care, housing, energy and food are the greatest expenses for most families,” Dunleavy said in a statement.

“The private sector is far more equipped to solve these challenges that the government,” Dunleavy said, calling the bill “a catalyst that sets in motion voluntary development by the private sector.”

Child care availability has long been a major challenge for Alaska workers. Last year, Dunleavy said he did not support a request from child care providers to add $15 million dollars in funding to the budget, which providers said could be used to increase average wages from $13 per hour to $18 per hour. Instead, Dunleavy announced the formation of a task force.

A report prepared based on focus groups of providers found the state’s current child care system is “financially unsustainable” and recommended that the state increase its child care assistance payments to low-income families and increase child care provider salaries and benefits; among other findings.

Several lawmakers asked about the bill Monday said they had not seen it before it was first introduced in the Senate, and had yet to form an opinion about it.

In the Senate, the bill was referred to the Labor and Commerce Committee, and has not yet been scheduled for a hearing.

Dunleavy’s proposals appears to expand an idea introduced last year by Anchorage Republican Rep. Julie Coulombe, in a bill that would give corporations child care tax credits. That measure gained support from across the political spectrum.

“The devil’s in the details,” said Joelle Hall, president of the Alaska AFL-CIO, the state’s largest labor organization.

“I think this is a good faith act, and I would love to see how it’s going to work and what the accountability mechanisms are going to be,” said Hall.

But she said the bill could transfer responsibilities from the government — which already provides some assistance in all of the categories described in the bill — to corporations, which may have varying ability and interest in meeting their employees’ housing, child care and food needs. It would also require the state to establish ways to measure the success of the tax cuts and whether the funding was achieving the intended purpose.

“So why are we providing a tax credit for our corporations to do something that’s already being done, if there’s no clear measurement as to what success looks like?” said Hall.



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