7 of introducing a statewide sales tax would be the ability to externalize the tax burden to nonresidents. A greater portion of the sales tax could be exported to nonresidents in a state like Alaska, which depends highly on both tourists and seasonal workers (ITEP, 2016). The regressivity of a sales tax tends to hinder it from being used as a fiscal reform package. General sales taxes tend to have a heavier impact on low- and middle-income families than on high-income families, when looking at them as a percentage of household income. This is because a sales tax is based on consumption, and most low- and middle-income families spend most or all of what they earn, whereas high-income families can save and invest a share of their earnings, resulting in higher relative penalties on low- and middle-income families. Furthermore, since the amount of sales tax paid depends on the price of the goods being consumed, rural Alaskans who face a higher cost of living than families in urban areas would have to shoulder a disproportionate share of any statewide sales tax. The higher cost of living can be explained by looking at the city of Nome as an example, where residents pay 27% more than Anchorage residents for clothing, 37% more for personal care items, and 66% more for home furnishings and appliances (ITEP, 2016). Such a disparity exists across Alaska’s rural communities and may worsen if the prices of these products are raised through the introduction of a statewide sales tax. This concern, combined with the regressivity of a sales tax, makes a progressive income tax a more viable consideration. A Progressive Income Tax Proposal Despite that a progressive income tax structure is not solely sufficient to cover the projected differences between spending and revenue, the tax option is expected to yield approximately $500M annually (Braunlich, 2020). The proposal that is investigated here uses the tax rates from the ITEP to ensure their comprehensive analysis on the impact to Alaskans can be applied. The tax rates are comparable to those in the failed HB 115 from 2017, although its rates have been reduced across the board to bring its revenue yield down to $500M (Davis & Davis, 2017). Table 1 shows the tax rate structure that was proposed by ITEP. The tax would be levied on both residents and nonresidents. This is critical, as one of the benefits of taxation as a source of revenue is that it externalizes the tax burden on nonresidents, who make up a substantial portion of wage earners in the state. This tax structure would exempt PFD payments, and the exact numbers of how much revenue the tax structure generates will need to be calculated by the Department of Revenue, utilizing the most recent population and wage data. The income tax structure in this proposal, if implemented and executed properly, would meet the goal of increasing revenue to help Table 1 Proposed Progressive Income Tax Rate Structure Income Range ($) Tax Base Tax Bracket (%) Single Filers Married Filing Jointly Federal adjusted gross income with a $4000 exemption per person, an exemption for the PFD payouts, and various other modifications 0 0–10,300 0–20,600 1.8063 10,300–50,000 20,600–100,000 2.89 50,000–100,000 100,000–200,000 3.6125 100,000–200,000 200,000–400,000 4.335 200,000–250,000 400,000–500,000 5.0575 250,000 and up 500,000 and up Source: Davis & Davis, 2017.