State of Alaska
Fiscal Note
Bill Version: CSHB 189(W&M)
2021 Legislative Session
Fiscal Note Number: 1
(H) Publish Date: 5/6/2021
Identifier: HB189-DOR-TAX-04-30-21 Department: Department of Revenue
Title: EMPLOYMENT TAX FOR EDUCATION Appropriation: Taxation and Treasury
Sponsor: WAYS & MEANS Allocation: Tax Division
Requester: (H) Ways & Means OMB Component Number: 2476
Expenditures/Revenues
Note: Amounts do not include inflation unless otherwise noted below. (Thousands of Dollars)
Included in
FY2022 Governor's
Appropriation FY2022 Out-Year Cost Estimates
Requested Request
OPERATING EXPENDITURES FY 2022 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Personal Services 502.6 502.6 502.6 502.6 502.6 502.6
Travel 5.0
Services 69.5 69.5 69.5 69.5 69.5 69.5
Commodities 55.5 0.5 0.5 0.5 0.5 0.5
Capital Outlay
Grants & Benefits
Miscellaneous
Total Operating 632.6 0.0 572.6 572.6 572.6 572.6 572.6
Fund Source (Operating Only)
1004 Gen Fund (UGF) 632.6 572.6 572.6 572.6 572.6 572.6
Total 632.6 0.0 572.6 572.6 572.6 572.6 572.6
Positions
Full-time 5.0 5.0 5.0 5.0 5.0 5.0
Part-time
Temporary
Change in Revenues
1004 Gen Fund (UGF) 48,000.0 65,000.0 65,000.0 66,000.0 66,000.0 66,000.0
Total 48,000.0 0.0 65,000.0 65,000.0 66,000.0 66,000.0 66,000.0
Estimated SUPPLEMENTAL (FY2021) cost: 0.0 (separate supplemental appropriation required)
Estimated CAPITAL (FY2022) cost: 6,000.0 (separate capital appropriation required)
Does the bill create or modify a new fund or account? No
(Supplemental/Capital/New Fund - discuss reasons and fund source(s) in analysis section)
ASSOCIATED REGULATIONS
Does the bill direct, or will the bill result in, regulation changes adopted by your agency? Yes
If yes, by what date are the regulations to be adopted, amended or repealed? 12/31/21
Why this fiscal note differs from previous version/comments:
Not applicable, initial version.
Prepared By: Colleen Glover, Director and Dan Stickel, Chief Economist Phone: (907)269-1033
Division: Tax Division Date: 04/30/2021 01:00 PM
Approved By: Brian Fechter, Administrative Services Director Date: 04/30/2021
Agency: Department of Revenue
Printed 5/5/2021 Page 1 of 3 Control Code: PEzvw
 CSHB 189(W&M) - Fiscal Note 1
FISCAL NOTE ANALYSIS
STATE OF ALASKA BILL NO. HB 189
2021 LEGISLATIVE SESSION
Analysis
Background
This proposed legislation creates a new broad-based education tax that would apply to resident and nonresident
individuals with wages or net earnings from self-employment that are attributable to a source in the state. Although it is
called an education tax it is a tax on individual income. It is called an education tax as the earnings are intended to be
appropriated to the Public Education Fund.
The tax rate would generally follow a progressive tax rate schedule depending on the individuals wages and net earnings
from self-employment. The tax ranges from a minimum of $50 a year for those individuals earning less than $20,000 to a
$500 tax for individuals earning over $500,000 a year.
The tax would be withheld from employees wages by the employer. The employer would remit the tax to the Department
of Revenue (Department). The proposed legislation provides that the Department can impose a civil penalty to an
employer who withholds the taxes from employees, but then fails to remit that tax to the Department. Self-employed
individuals would need to remit their tax directly to the Department.
If the tax is overpaid either by the individual or on behalf of the individual, the Department shall refund the overpayment
to the individual. The refunds cannot be applied for until the following calendar year in which the excess tax was paid.
Revenue Impact
At full implementation, revenue is estimated to be about $65 to $66 million annually. This estimate assumes about
406,000 wage earners and self-employed workers as the resident taxpayer base. This tax base, and the distribution among
tax brackets, is estimated based on the 2018 "Statistics of Income" report for Alaska published by the Internal Revenue
Service. It is assumed that about 81,000 non-residents will increase the tax base by approximately 20%. This 20%
adjustment is based in part on estimated nonresident employees per the Alaska Department of Labor's "Nonresidents
Working in Alaska" report. The tax base is expected to grow slowly over time based on expected population growth.
The FY2022 revenue estimate represents 75% of a full year of revenue given that the tax would take effect midway
through the fiscal year. This is a rough estimate, attempting to account for the fact that while the tax would be withheld
from an employee's first two paychecks, some employees may not have employment earnings in the first half of the
calendar year, and some solely self-employed individuals pay not pay the tax until later in the year.
As the tax combines elements of a flat per-person levy and a progressive bracket structure, the impact on Alaskans by
household will vary. Any impact will be partially mitigated, as state individual income taxes are deductible from federal
taxes. Thus, Alaskans who itemize their federal taxes would be able to reduce their federal tax liability by the amount of
their state tax multiplied by their marginal federal tax rate.
Implementation Cost
The $6 million capital request reflects an estimate for our contract with FAST Enterprises to develop a new module for this
tax type in our Tax Revenue Management System (TRMS). In addition to the tax return filing and examination functions,
the contractor will need to provide for the associated databases, forms, communications, and integration with our existing
imaging, accounting, and collections modules. There would also be an online component to allow individuals to file, pay,
and request refunds electronically.
This estimate assumes that the Department will receive capital funding for a TRMS Update (version 12) in the FY2022
budget. If that does not occur, this estimate will need to be increased by $5 million.
(Revised 1/13/2021 OMB/LFD) Page 2 of 3
HB189-DOR-TAX-04-30-21 Page 2 of 3 Control Code: PEzvw
 CSHB 189(W&M) - Fiscal Note 1
FISCAL NOTE ANALYSIS
STATE OF ALASKA BILL NO. HB 189
2021 LEGISLATIVE SESSION
Analysis
This proposed legislation does not require tax returns from the majority of the affected taxpayers (resident wage earners)
nor does it allow for paper returns. We estimate that the majority of the program would be automated through the
employer withholding process and therefore, would require minimal resources. We would need to add five new positions
to implement and administer this new tax program:
(1) Revenue Audit Supervisor
(2) Tax Technicians
(1) Auditor
(1) Accounting Technician
Additional travel is largely for public education efforts, as well as the need to train new staff on the tax management
system. Cost for Services reflects primarily internal "core services" paid to other state agencies, due to additional staff
within the Tax Division. Commodities reflect the initial outfit for a new employee for office and computer furnishings.
(Revised 1/13/2021 OMB/LFD) Page 3 of 3
HB189-DOR-TAX-04-30-21 Page 3 of 3 Control Code: PEzvw


Statutes affected:
HB0189A, AM HB 189, introduced 04/26/2021: 43.45.011, U.S.C, 43.45.031, 43.05.245, 43.45.041, 43.05.280, 23.20.165, 43.45.051, 43.45.061, 14.17.300, 43.45.099
HB0189B, AM CSHB 189(W&M), introduced 05/06/2021: 43.45.011, U.S.C, 43.45.031, 43.05.245, 43.45.041, 43.05.280, 23.20.165, 43.45.051, 43.45.061, 14.17.300, 43.45.099