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It's time for Alaskans to put skin in the game, fund government through taxes

  • Author: Ed Rasmuson
  • Updated: June 25, 2016
  • Published April 6, 2016

When my father, Elmer Rasmuson, ran the National Bank of Alaska, he strongly believed that communities that invested in themselves were healthy communities. Communities and businesses that showed willingness to put their own skin in the game -- through public bonding or simply their own cash -- were partners the bank had the confidence to invest in.

Alaska once had the social will to put skin in the game. In 1949, the Legislature voted to implement a personal income tax to demonstrate readiness to become a state and leadership to govern our own affairs. It was repealed in 1980 when the state was flush with oil money and it appeared we could shift our bills to another payer.

Today we are now about $4 billion short of meeting our state budget and using savings to pay 75 percent of costs. Oil will not save us. There is neither the price nor the production that will return us to the good old days. Without a comprehensive plan that includes reducing government spending and developing new revenue, the leadership shown by our forefathers to build a state that invested in itself, that could control its own resources, and that could govern itself to prosperity could be for naught as we plunge headlong into a recession of our own making.

As someone who has invested in both private business and social enterprise across Alaska, I am confident that we cannot cut our way out of this deficit without demolishing our economy, casting Alaskans into desperate conditions and eroding the confidence of private investors.

There seems to be a promising movement in Juneau to cut spending and use some Permanent Fund earnings while keeping in place a reduced dividend. This is progress -- but progress that disproportionately impacts rural and low-income Alaskans and demands relatively little from corporate interests or higher-income Alaskans like me.

It's time to talk about taxes.

Some facts about taxes:

1.) Alaska is the only state that has neither a personal income tax nor statewide sales tax. In fact, Alaska has the lowest state tax burden of any state.

2.) State taxes can be deducted from federal income taxes -- that means money that would otherwise go to Washington, D.C., can be clawed back to stay in Alaska.

3.) Income taxes capture revenues from out-of-state workers who benefit from public services but pay nothing for them.

4.) At a rate of 1.5% of taxable income, an Alaska couple with one child, with a household income of $60,000 a year, would pay about $200 a year, according to the Institute on Taxation and Economic Policy.

5.) Under the tax structure described above, the top 20 percent of earners in the state would pay 80 percent of income taxes, according to ITEP.

5.) In Rasmuson Foundation-sponsored town hall meetings, the majority of Alaskans are saying loud and clear "tax us."

6.) Rasmuson Foundation polling also shows that support for sales tax is relatively strong across the state, even in communities with existing sales tax.

7.) Sales tax provides a mechanism to collect revenue from visitors to support the public infrastructure that they use.

8.) Alaskans are in favor of revising oil tax credits so that they work to stimulate investment, but not create a larger outflow of cash than the inflow of oil production taxes. Current projections show that we are upside-down with oil tax credits.

Rasmuson Foundation research shows that Alaskans are also willing to accept moderate increases in the motor fuels tax, alcohol and tobacco taxes, mining taxes and fishing taxes, as currently being discussed in the Legislature.

Proposed new taxes on alcohol will amount to about a dime per drink, and raise $40 million per year.

An increase in tobacco tax will add about $2 to a pack of cigarettes and raise up to $29 million per year.

Adjusting taxes on commercial fisheries will raise about $18 million per year.

Raising motor fuel taxes, which haven't changed in 45 years, will raise up to $50 million without affecting the cost of heating fuel.

And changing the mining tax structure could net up to $15 million a year.

We also need to revise our corporate income tax to share the burden among business of all sizes. The current tax structure, which hasn't changed since 1981, collects 92 percent of taxes from corporations with profits over $1 million per year. Doubling our corporate income tax could yield up to $150 million a year.

There is no doubt these decisions are difficult, but the solution is clear. Raising new revenue is not just about getting us through the immediate challenge of our continuing budget shortfall, it's about ensuring Alaska remains a great place to live and raise a family.

If we want to preserve the Alaska we love, we need a balanced, long-term solution to our budget problems, one that uses every tool we have. That means all Alaska citizens and industries stepping up to the plate. Nobody gets a free ride.

My dad always felt it was the responsibility of the present generation to provide for the next generation. If we don't do anything today, the next generation will suffer for it.

Ed Rasmuson is chairman of The Rasmuson Foundation, whose mission is to build a better Alaska. The foundation has awarded hundreds of millions in grants, mostly in arts and culture, health and social services.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com or click here to submit via any web browser.

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