The 2005 gross state product was $39.9 billion. Its per-capita GSP for 2005 was $60,079, 3rd in the nation. Alaska's economy relies heavily on petroleum extraction, with more than 80% of the state's revenues derived from this industry. Alaska's main export product (excluding oil and natural gas) is seafood, primarily salmon, cod, pollock and crab. Agriculture represents only a fraction of the Alaskan economy. Agricultural production is primarily for consumption within the state and includes nursery stock, dairy products, vegetables, and livestock. Manufacturing is limited, with most foodstuffs and general goods imported from elsewhere. Employment is primarily in government and industries such as natural resource extraction, shipping, and transportation. Military bases are a significant component of the economy in both Fairbanks and Anchorage. Its industrial outputs are crude petroleum, natural gas, coal, gold, precious metals, zinc and other mining, seafood processing, timber and wood products. There is also a growing service and tourism sector. Tourists have contributed to the economy by supporting local lodging.
Alaska's economy is heavily dependent on increasingly expensive diesel fuel for heating, transportation, electric power and light. Though wind and hydroelectric power are abundant and underutilized, proposals for state-wide energy systems (e.g. with special low-cost electric interties) were judged uneconomical (at the time of the report, 2001) due to low (<$0.50/Gal) fuel prices, long distances and low population. The cost of a gallon of gas in urban Alaska today is usually $0.30-$0.60 higher than the national average; prices in rural areas are generally significantly higher but vary widely depending on transportation costs, seasonal usage peaks, nearby petroleum development infrastructure and many other factors.
The Alaska Permanent Fund is a legislatively controlled appropriation established in 1976 to manage a surplus in state petroleum revenues from the recently constructed Trans-Alaska Pipeline System. From its initial principal of $734,000, the fund has grown to $38 billion as a result of oil royalties and capital investment programs. Starting in 1982, dividends from the fund's annual growth have been paid out each year to eligible Alaskans, ranging from $331.29 in 1984 to $1963.86 in 2000.
Cost of living
The cost of goods in Alaska has long been higher than in the contiguous 48 states. This has changed for the most part in Anchorage and to a lesser extent in Fairbanks, where the cost of living has dropped somewhat in the past five years. Federal Government employees, particularly United States Postal Service (USPS) workers and active-duty military members, receive a Cost Of Living Allowance usually set at 25% of base pay because, while the cost of living has gone down, it is still one of the highest in the country.
The introduction of big-box stores in Anchorage, Fairbanks (Wal-Mart in March of 2004), and Juneau also did much to lower prices. However, rural Alaska suffers from extremely high prices for food and consumer goods, compared to the rest of the country due to the relatively limited transportation infrastructure. Many rural residents come in to these cities and purchase food and goods in bulk from warehouse clubs like Costco and Sam's Club. Some have embraced the free shipping offers of some online retailers to purchase items much more cheaply than they could in their own communities, if they are available at all.
Alaska has the lowest individual tax burden in the United States, and is one of only five states with no state sales tax and one of seven states that do not levy an individual income tax. To finance state government operations, Alaska depends primarily on petroleum revenues. The Department of Revenue Tax Division reports regularly on the state's revenue sources. The Department also issues an annual overview of its operations, including new state laws that directly affect the tax division.
While Alaska has no state sales tax, 89 municipalities collect a local sales tax, from 1% to 7%, typically 3% to 5%. Other local taxes levied include raw fish taxes, hotel, motel, and B&B Ă˘â‚¬Ĺ“bedĂ˘â‚¬Âť taxes, severance taxes, liquor and tobacco taxes, gaming (pull tabs) taxes, tire taxes and fuel transfer taxes. A percentage of revenue collected from certain state taxes and license fees (such as petroleum, aviation motor fuel, telephone cooperative) is shared with municipalities in Alaska.
Property taxes are relatively low, with only 25 of 161 incorporated municipalities or boroughs in the state assessing property taxes.Fairbanks has one of the highest property taxes in the state as no sales or income taxes are assessed in the Fairbanks North Star Borough (FNSB). A sales tax for the FNSB has been voted on many times, but has yet to be approved, leading law makers to increase taxes dramatically on other goods such as liquor and tobacco. The average per capita property tax paid in all municipalities, excluding oil and gas properties, was US$999 (2003 data).
In 2008 the Tax Foundation ranked Alaska as having the 4th most "business friendly" tax policy. Superior states were Wyoming, Nevada, and South Dakota.