Income tax paints bright line between left and right in Alaska

At this time of year, Alaskans should be more than a trifle jittery. The clock is ticking in Juneau and the Legislature's annual bout of delirium is revving up. This is when deals are floated, tested, rejected and then sealed in the dark of night. Things move fast.

What is at stake, even as profound philosophical differences between the political left and right play out, is the state's private economy and our paychecks. Democrats think you should hand over your income for their wants; Republicans want you to keep your income for your needs.

Some of the richest, most powerful Alaskans and businesses have tossed millions behind a consultant-driven, full-court press to persuade Alaskans and their lawmakers to embrace an income tax and welcome smaller Permanent Fund dividend checks.

[In bipartisan move, Alaska Senate diverts pipeline cash to schools, prosecutors, snowplows]

With the end of the Legislature's 121-day session looming Wednesday, there already is a buzz about extending the session by 10 days. It likely will be a long, hot summer for lawmakers as the Democrat-led House and the Republican-led Senate remain a continent apart on the question of how best to cinch up the state's multibillion-dollar budget gap.

They agree on only one thing: Using the Permanent Fund in some fashion to partially underwrite government — as Alaskans intended in 1976 when they created the fund. The two chambers are at odds on just about everything else, primarily oil tax credit policy — and reimposition of an income tax.

The Senate would make spending reductions, enact a spending cap and rely on restructuring the Permanent Fund — capping Alaskans' annual dividend at about $1,000 — to close all but a small slice of the gap, which for years could be covered by the state's reserves. It would allow time for oil production to ramp up, oil prices to rebound and further cuts to be made. An income tax is a nonstarter in the Senate.

The House wants a "modest, progressive" income tax — and the bureaucratic machinery to collect it — as one of four pillars supporting its fiscal plan. The other three pillars: About $85 million in cuts; changing the oil tax credits so industry will pay its "fair share," whatever that is; and, restructuring the Permanent Fund to fund government, while capping individual dividends at about $1,250.

[Alaska House votes to levy income tax, sends bill to a hostile Senate]

In an ill-advised bit of foot-stamping, House Democrats and their Republican fellow travelers included a poison pill in their package: If the Senate nixes the oil tax credits change and the income tax, their support for using the Permanent Fund to fund government evaporates.

An unimpressed Senate voted Friday to summarily kick the House's income tax pillar to the curb.

It was the perfect delineation of the bright line between left and right. Democrats put government first and were willing to shake down Alaskans to get funding to support it. Republicans want to support government we need without punishing working Alaskans. (Yes, cutting the Permanent Fund dividend hurts us all, but it never was intended to be an entitlement.)

The left does not seem to understand there are bad ideas, worse ideas and income taxes — and there is no such thing as a "modest, progressive" variety, at least on this planet. Alaskans already know that. A recent Dittman Research poll of 808 Alaskans found 58 percent of its respondents opposed an income tax.

They were right. An income tax is forever and grows with spending, which only blossoms as bureaucrats have ready, easy access to your paycheck. Worse, such a levy would siphon — depending upon who you talk to — anywhere from $220 million to $660 million out of an already sputtering private economy to pay for more government. That means jobs. Houses. Cars.

Alaska adopted an income tax in 1949. It started out at 10 percent of a taxpayer's federal income tax liability, but by 1975, it was changed to a progressive levy, and grew — with a top rate of 14.5 percent. It was repealed in 1980.

The push for a new income tax is predicated on the notion promulgated by Gov. Bill Walker and others that state government has been slashed to the bone. Hogwash. It still fields a Cadillac Medicaid plan. Its public employee unions are not hurting. It seems to have money for whatever it wants. The problem is that we still have more government than we can afford.

The National Association of State Budget Officers says for 2015, the most recent data available, Alaska's government spent more per capita on its 738,000 residents than any other state – $18,644. North Dakota was second, at $10,236, and Wyoming, third, at $15,077. To be fair, the size of Alaska's government has been trimmed over the past few years, and the state is somewhat unique in services it pays for, but its spending problem remains.

An income tax would fix none of that.

Paul Jenkins is editor of the AnchorageDailyPlanet.com, a division of Porcaro Communications.

The views expressed here are the writer's 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.