The Haines Borough Assembly last week postponed taking action on an ordinance aimed at reducing expenses for long-term housing renters.
This spring, assembly member Sean Maidy proposed exempting sales tax from long-term residential rentals. The borough’s sales tax rate is 5.5 percent. A person or family paying $1,000 a month on rent pays an additional $55 in sales tax, if a landlord adds the cost to a tenants rent.
The assembly addressed the proposal at a committee meeting in May and it appeared in ordinance form during a public hearing on Aug. 7.
Sales tax on rent should be exempted because it’s punitive and regressive, Maidy said during the public hearing. “The property owner and the renter, they’re each paying a tax even though it’s only being inhabited by one,” Maidy said. “It could benefit the property renter because not having to pay the tax is up to $50 a month they could spend someplace else.”
Originally opposed to adding the exemption, Assembly member Tom Morphet expressed support during the meeting, although he wants to find a way to cover the borough’s loss in revenue should before he would vote for the exemption. “To me Mr. Maidy has raised a legitimate justice question,” Morphet said. “Are we taxing those young families and people trying to get a foothold here more than we are taxing older, established residents who may actually have the wherewithal to pay more?”
Sales tax on rent for more than 30 days yields around $70,000 a year, according to estimates from Haines Borough finance director Jila Stewart.
Assembly member Tresham Gregg also said he was concerned that there was no proposal to makeup the loss in tax revenue.
The borough recently adopted a tobacco excise tax, which is projected to raise at least $70,000, Maidy said. He also said the assembly shouldn’t assume the borough would lose $70,000.
In an effort to extract revenue from tourists and other transient people, but not from residents, the current ordinance only exempts the sales tax on housing that is rented for 9 months or longer. The borough lacks data that could provide an estimate on how much tax revenue it would lose in that time frame.
Assembly member Heather Lende said she’s unconvinced a landlord would decrease the cost of rent should the sales tax be removed. “They know the renter was paying it before so they probably can,” Lende said. “We have really no way to guarantee the savings is going to the renter.”
Assembly member Stephanie Scott wanted to make the ordinance’s language more clear and moved to postpone the discussion until the Sep. 11 regular meeting.
Petersburg and Juneau exempt sales tax on residential renters. Ketchikan exempts sales tax on rentals in excess of $1,000. Sitka, Wrangell and Skagway all charge sales tax on rent.