Closing Large Business Tax Loopholes and Preparing for the Digital Economy

A Walker–Hoffbeck Position Paper

Alaska's long-term fiscal challenge will not be solved by a single policy or a single tax. It will be solved by modernizing outdated laws, treating taxpayers fairly, and building a revenue system that reflects today's economy.

Walker–Hoffbeck believes Alaska should begin by fixing the tax system it already has before asking Alaska families to shoulder additional burdens. Fairness means businesses of similar size and profitability should compete under the same rules and make a fair contribution toward the public services and infrastructure that support their success.

Closing the Pass-Through Entity Loophole

Pass-through entities (including S corporations, partnerships, and limited liability companies) play an important role in Alaska's economy. They are the business structure of choice for thousands of small businesses, family-owned companies, and entrepreneurs throughout the state.

Those businesses should continue to be protected.

However, under current law, some very large and highly profitable pass-through businesses can legally avoid paying Alaska corporate income tax simply because of how they are organized. Businesses generating millions of dollars in annual income should not receive fundamentally different tax treatment than competitors operating at the same scale under a different legal structure.

Walker–Hoffbeck supports closing this loophole for large pass-through businesses while continuing to protect small businesses and family-owned enterprises with annual income below $1 million.

A Meaningful Fiscal Reform

Closing this loophole is more than an issue of fairness. It is also a meaningful step toward improving Alaska's long-term fiscal outlook.

Published fiscal estimates indicate that closing this loophole could generate approximately $100 million annually in additional state revenue. That revenue can help fund public safety, education, transportation, and other essential services while reducing pressure to adopt broader taxes that would affect Alaska families.

Preparing for the Digital Economy

The economy has changed dramatically over the last two decades, but Alaska's tax system has not kept pace.

Today, billions of dollars in commerce occur online. Local businesses employ Alaskans, invest in their communities, and often collect local sales taxes where they operate. Yet much of today's internet commerce falls outside tax systems designed for a traditional brick-and-mortar economy.

Walker–Hoffbeck believes Alaska should modernize its tax laws so that large-scale internet commerce contributes fairly to the public services and infrastructure that support doing business in Alaska. The challenge is not whether online commerce should be treated fairly, but how to accomplish that without creating a statewide sales tax or reinstating a statewide personal income tax.

A Common-Sense Approach

Walker–Hoffbeck believes responsible fiscal policy begins with common sense.

Before considering broad-based taxes, Alaska should modernize outdated tax laws, eliminate unintended loopholes, and ensure that businesses competing in the same marketplace compete under the same rules.

Walker–Hoffbeck is committed to working with Alaska's business community, legislators, and the public to develop practical reforms that strengthen Alaska's fiscal future while preserving a competitive climate for investment, innovation, and job creation.