Assemblymember Johnson proposes adjusting Kenai Peninsula sales tax cap for inflation

The Kenai Peninsula Borough Finance Committee convened on July 8, 2025, to discuss a significant ordinance aimed at adjusting the sales tax cap for inflation. Assemblymember Johnson introduced the proposal, which seeks to amend KPB 5.18.430, a regulation that has not been updated since its inception in 1965. The committee plans to hold a public hearing on this matter on August 5, 2025.

Johnson highlighted that the original sales tax cap of $500 has lost substantial value over the past 60 years, equating to approximately $5,058 today when adjusted for inflation. He noted that this decline in value has shifted the tax burden onto property owners, leading to increased dissatisfaction among residents regarding their tax obligations. Johnson emphasized the need for a balance between property tax and sales tax, suggesting that adjusting the sales tax cap could alleviate some financial pressure on property owners.

During the discussion, committee members sought clarification on the proposal's implications. Johnson confirmed that the ordinance would not raise the sales tax cap but would instead maintain it at the current level, adjusted annually based on the Consumer Price Index (CPI). For instance, if the CPI for December 2024 is 2.2%, the cap would increase from $500 to approximately $511 starting January 1, 2025.

A key point of contention arose regarding whether changes to the sales tax cap would require a vote from the public. Johnson expressed his intention to ensure that any adjustments would go to the voters, despite the ordinance's current language suggesting otherwise. Legal counsel clarified that the existing regulation mandates voter approval for changes to the maximum tax, a requirement that the ordinance seeks to repeal.

The committee's discussions reflect ongoing concerns about tax fairness and the economic impact of inflation on residents. The upcoming public hearing is expected to provide further insights and community feedback on this important financial issue for the Kenai Peninsula Borough.