No sales, income taxes make Alaska a business-friendly state, report says

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(The Center Square) – Alaska’s lack of an income or sales tax makes the state friendly to businesses, but its corporate tax is a deterrent, according to a report released Tuesday.

The Tax Foundation’s State Business Tax Climate Index ranked Alaska third, behind Wyoming and South Dakota, which it tied for the top spot in income tax ratings. Alaska has held the same ranking since 2016.

The state ranked fifth for sales taxes. While Alaska does not impose a statewide income tax, local governments are allowed a sales tax of up to 1.81%.

Excise taxes on gasoline are low when compared to other states, according to the report. Alaska’s is 8.95 cents per gallon, while California drivers pay 77.9 cents.

Alaska did not fare as well in other measures, ranking 26th for corporate income taxes, which are 9.4%, and 27th for property taxes. And the state has the second-highest beer tax in the country at $1.07 a gallon.

The state’s unemployment tax ranking was near the bottom at 48, with Massachusetts, Rhode Island, Idaho, Kentucky, and Nevada.

“These states tend to have rate structures with high minimum and maximum rates and wage bases above the federal level,” the report said. “They also tend to feature more complicated experience formulas and charging methods, and have added benefits and surtaxes to their systems.”

Lawmakers considered other tax measures during the 2023 legislative session, including a statewide sales tax. Gov. Mike Dunleavy met privately with lawmakers to discuss it, House Majority Leader Dan Saddler said.

The state hoped to find other revenue sources to move it past its dependency on the oil industry and investments.

Another proposal would have taxed S-corporations, which would have brought in $140 million, lawmakers said.

None of the measures passed.

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