OPINION: Dunleavy’s ideological vetoes are making Alaska’s tax structure less fair

Gov. Mike Dunleavy made a pledge and he’s stickin’ to it.

Too bad he’s putting national anti-tax politics above tax fairness in Alaska.

Specifically, he vetoed legislation this month that would have taxed car rentals arranged through online platforms the same as car rentals from brick-and-mortar agencies with local offices. And he vetoed legislation two years ago that would have taxed vape and e-cigarette products the same as traditional tobacco products.

The car rental fairness legislation passed with 51 out of 60 state senators and representatives in support. The vape tax bill in 2022 passed with 49 out of 60 voting yes. But that overwhelming support did not overwhelm the governor’s dislike for taxes.

“Unnecessary taxation of a new and growing industry is bad public policy,” he wrote in his veto message of the car rental legislation that would have settled a legal dispute going back several years.

“A tax increase on the people of Alaska is not something I can support,” he wrote in his veto statement against extending the tobacco tax to vape products. Yet it was not a tax increase, as he alleged, but merely catching up with technology and taxing all addictive nicotine the same, whether smoked, chewed or vaped.

Dunleavy’s addiction to a pledge of “no new taxes” has won him an honored listing on the Americans for Tax Reform website. But that supposed badge of courage has left him unable or unwilling to understand the difference between burdensome new taxes versus fair tax policy that updates old laws to match new technology, such as smokeless nicotine and car-sharing rental apps on smartphones.

The two tax bills were not about lighting up government spending; in total they might have raised a few million dollars a year. If anything, the car rental legislation would have made the state whole — it has been losing revenue as more renters use the tax-free apps.

There is no good reason why someone who gets a car from Avis or Budget or a local independent rental agency should be charged a 10% state tax — which has been in place more than 20 years — while a visitor who rents through an online platform like Turo can drive tax free.

The problem was that when the Alaska car rental tax was written into law, car-sharing platforms did not exist — and they have argued the law does not apply to them. The law works just fine for companies that own the cars they rent, but Turo does not own the cars. It handles the booking and payment for the car owner, much like Airbnb handles room and house rentals.

Turo took the position that the state needed to track down each individual car owner and get them to collect the tax from the customer. You can imagine how that has not worked out well. The Alaska Department of Revenue has avoided collection of the tax from hundreds of car owners, exposing the state to a lawsuit over selective tax enforcement.

After much legislative compromise, lawmakers passed the bill to redefine the rental transaction in law so that Turo would collect the tax. The company was on board, writing that the legislation “will allow for Turo and other car-sharing marketplaces to accurately collect and remit” the tax owed to the state.

“At its core … (the bill) is about fairness and efficiency … we are creating a more equitable system,” said Big Lake Republican Rep. Kevin McCabe, chair of the House Transportation Committee and as staunch an anti-tax conservative as there is.

Too bad the governor took a ride on his national pledge. His veto was the wrong turn.

Larry Persily is a longtime Alaska journalist, with breaks for federal, state and municipal public policy work in Alaska and Washington, D.C. He lives in Anchorage and is publisher of the Wrangell Sentinel weekly newspaper.

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