Tax break dies on first reading

WASILLA — Seniors choosing to shop here would get a tax break if it were up to one city councilwoman.

Taffina Katkus has been on the council for almost two years and is one of four candidates on the October ballot for mayor. She made a brief splash last week by proposing an ordinance that would exempt seniors age 65 and older from paying Wasilla’s 2 percent sales tax.

The plan was short-lived as it, and a proposal to raise the current sales tax cap from $500 to $1,000, died on a 5-1 vote to not move the ordinances forward. In the wake of the vote, Katkus said she’s unclear why the council torpedoed her plan.

“I was very surprised, because I just wanted it to be considered, to have some open dialogue,” Katkus said.

Although she didn’t expect a rubber-stamp approval, she said she expected the idea to remain on the table for discussion.

“I think that we can all do our homework, and the more open dialogue we have, the smarter we are,” Katkus said. “We should at least get out there and talk about it.”

There wasn’t much to talk about, however, said Dianne Woodruff, a fellow councilwoman and also a candidate for mayor. She said that while it sounds good to give seniors a break, the realities of making such a drastic change without good information made the ordinances dangerous.

Most importantly, she said, there is no way to accurately predict how much of a financial impact exempting seniors could have on the city’s budget.

“It really wasn’t well thought-out to start with,” she said. “We really didn’t have a way to know how that would impact the city, and we have a balanced budget. I don’t think we were prepared to make that cut or prepared to ship that income to anybody else. I didn’t see it as workable.”

Although the council voted to table the proposal, the city’s finance director, Troy Tankersly, was attempting to make some kind of predictions about how losing the 2 percent sales tax for seniors would affect Wasilla. Based on the city’s seniors making up about 10 percent of the population, according to the 2010 U.S. Census, a simple number to start with is that demographic could potentially pay 10 percent of the collected sales tax.

That comes out to about $1.2 million a year, he said, while stressing that is by no means a hard number.

“That’s a very rough estimate, absolutely,” he said. “It’s a guesstimate, really. There are a number of ways you can look at the numbers.”

For one thing, the city and its businesses don’t track purchases by age.

“We don’t capture age groups, so we can’t tell you an 18-year-old buy versus a 65-year-old buy,” he said.

That wouldn’t have mattered, Katkus countered. She said that 10 percent estimate is likely high, and that her other ordinance to raise the sales tax cap would make up for any revenue lost through the exemption.

She said the city of Palmer raised its tax cap in 2007, and that resulted in an increase of sales tax revenue of about 10 percent.

“I did my research,” she said. “The administration is saying (seniors) are paying 10 percent of the revenue, which is ridiculous. How can you prove that? … There’s no way that 10 percent (that make up) our seniors are paying 10 percent of the revenue coming in.”

How can Katkus prove they’re not, Woodruff asked. She said there were just too many “what ifs” associated with slashing the tax. One is how much tracking those sales, auditing the city’s books and looking out for fraudulent use of the system could cost.

“It’s just a big can of worms,” she said. “I think the cost could outweigh the benefit. I also think that with a 2 percent sales tax, I don’t know how much that would really help anybody.”

For seniors on a fixed income, any help can be significant, Katkus said.

“I would feel much better knowing that those who are on a fixed income that this (tax) wouldn’t hurt them so bad,” she said.

The problem with that, Woodruff countered, is that singling out seniors for this type of tax relief is unfair. While there are some seniors who are struggling financially, there are others who aren’t. There are also other segments of the community that are struggling just as much, like veterans and some families.

“One of my problems with this is it isn’t proposed based on need, it’s proposed based on a class of people,” Woodruff said. “Also, I think we have bigger issues to deal with. I think it would be more beneficial to look at the city’s water and sewer rates. I think finding a way to lower that would be more of a benefit to a lot of seniors and others.”

Although the council won’t be moving forward with Katkus’ proposed ordinances, she said she intends to keep talking about the issues.

“I started thinking about this earlier,” she said. “This can be significant, and I think it’s worth talking about.”

WHAT’S IN THERE?

A failed proposal by Councilwoman Taffina Katkus would have exempted seniors age 65 and older from paying Wasilla’s 2 percent sales tax. The current sales tax exemptions in the city’s code has includes a wide variety of things, many of which are federal and included as boilerplate. Some of those exemptions include:

• Contracts to transport students to and from school.

• Sales of newspapers and other periodicals that are delivered directly to consumers.

• Dues and fees for service clubs, labor unions and fraternal organizations.

• Sales related to orbital space facilities, space propulsion systems, space vehicles, or space stations or satellites.

Contact Greg Johnson at greg.johnson@frontiersman.com or 352-2269.