While Alaska is facing an uncertain financial future, there are many good things about our state budget challenges. First, we have some budget reserves accounts. Second, we have the Permanent Fund that can generate revenue to help pay for critical government functions. And third, we have a unique opportunity to truly fund government fairly and establish a broad base of public involvement in what and how much government we need and want.
Former Gov. Jay Hammond bemoaned the fact that Alaska repealed its personal income tax, asserting that without people having to pay for government they would be less involved in what their government does. Clearly he had an excellent point. People who don't have to pay for government only focus on how government spending will benefit them. That is pretty much where Alaskans have been since the oil companies' development of our natural resources have funded up to 85 percent of our state government general fund programs. But we all know that has changed.
Gov. Bill Walker has proposed an Alaska personal income tax based on the complicated, cumbersome and corrupt federal income tax system. But if we really need a broad-based tax, we should adopt a tax that prevents politicians from handing out tax favors to corporations, organizations and their friends, thereby eliminating both hard and soft political corruption. We need a system that taxes all receipts generated in Alaska, regardless of the residency of the recipient. We need a system that precludes politicians from picking winners and losers or trying to tell Alaskans how to run their lives; a system that doesn't manipulate and control individual or business behaviors, but simply raises the necessary revenues to operate government while providing tax structure certainty. We need a system that is easy and inexpensive for the government to administer as well as a system that allows every taxpayer to easily and inexpensively comply. And to top it off, we need a system that future politicians cannot fundamentally change without the concurrence of the people of Alaska.
There is a system that meets all of the criteria and is genuinely fair.
The system we need is a constitutionally enshrined single rate tax on all receipts, regardless of the recipient. Gross receipts, not net income. If you live in Alaska or you receive revenue derived from activities in Alaska, then you pay the state of Alaska a flat percentage of those receipts off the top. No deductions, no credits, no special treatment for anyone. Off the top. At the same percentage rate for all entities and individuals. Period. Large corporations, small businesses, trusts, "nonprofits," political parties, hospitals, campaigns, every person and yes, even religious organizations. No good old boy exclusions or "special" deals for "special industries." Real fairness. Real certainty. And because it would be based on all gross receipts, the rate applied equally to all entities and persons could actually be small, perhaps even just 1 or 2 percent. Since it would be a small percentage, the impact on anyone or particular sector would also be small.
This proposal should not be confused with a sales tax or the so-called "Fair Tax" although there would be some similarities with both. Individuals and business would make decisions based on good business practices rather than the tax consequences or benefits. The free market would function much more effectively. Government couldn't grant or withhold tax-exempt status to some but not others. The cost of government would be reduced. The cost of tax preparation and legal challenges would be minimized for individuals and organizations. Money laundering and political campaigns would actually generate state revenue. Donors to charitable causes would donate based on their genuine desire to contribute, not based on the deductibility of their donation.
Most politicians don't have the stomach to genuinely reduce government
expenditures. But since everyone and every entity is impacted by the need for additional revenues to pay for various programs, everyone and every entity would be much more involved in telling their government what level of service they really need or want. Everyone would have "skin in the game," not just those that generate a certain level of net income.
The question is, do we really want fair and simple? Do we really want everyone to contribute? Are we tired of a corrupt tax system? My answer to all three questions is a resounding, "Yes." And this tax is the only one that would do all three.
Tom Williams of Juneau is a 39-year resident of Alaska. He's worked for aviation-related companies for the past 16 years, was director of two Department of Revenue divisions and served on the staff of the Senate Finance and Legislative Budget and Audit committees.
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