While there have been many disagreements in households and offices across Alaska this year, there is one issue on which we can all agree: Alaska’s state budget is in trouble, and it will only get worse if we continue to ignore it. One solution to the deficit being vociferously promoted throughout the state is new taxes. But with an economy weakened by the pandemic, related business closures, and low oil prices, taxing Alaskans or Alaska businesses is the absolute wrong solution. Implementing new taxes or raising existing taxes in Alaska would backfire, delaying a much-needed economic recovery and ultimately reducing revenue for the state over the long term.
Alaskan individuals, families and businesses are struggling to stay afloat, and increasing taxes or implementing new ones will only incentivize them to leave the state. Taxes will also discourage new businesses from opening in or relocating to Alaska. Out-migration is already a problem. Alaska’s population has been declining since 2012 and is expected to continue declining through 2045. If we want the economy to recover and to address the budget deficit, we need investment and job opportunities to grow, not relocate to the Lower 48.
If you want less of something, you tax it. That’s the logic behind taxes on cigarettes, soda and alcohol. Do we want fewer businesses, less investment and fewer career opportunities for Alaskans? Taxes penalize investment and productivity. Because of hunker-down orders in response to the pandemic, many businesses in Alaska have already had to permanently close, putting Alaskans out of work. Not only would increasing taxes on businesses hurt those that have managed to survive the past several months, but it would also prevent individuals from opening new businesses, hiring employees, and boosting the economy. Such opportunities would give Alaskans a chance to rebuild what they’ve lost this year, and give them a chance to keep living in the Last Frontier, rather than finding their futures Outside. Now is the time to help Alaskans rebuild by getting government out of their way, not increasing the burden of government in their lives.
From a practical standpoint, implementing new taxes would mean creating additional administrative costs for the state. New revenue collection processes would have to be created and administered. To collect taxes to address the budget deficit, the state would have to spend even more money. State overspending has created the massive budget deficit—spending more money is clearly not the answer.
While it’s true that new taxes would generate new revenue, that revenue will never materialize if we discourage the creation of businesses and jobs during this crisis. Instead, Alaska needs to find sustainable ways to address the deficit and right-size the state budget for future years. These could include implementing a reasonable spending cap, cutting back on unnecessary state spending, paying off state debt, and not accepting federal money that has expensive strings attached.
Alaskans deserve the freedom to rebuild their lives and businesses. But to do so, they must be free of new, burdensome taxes that disincentivize the economic growth that Alaska’s residents need to recover from the financial hardships of 2020. New taxes would only establish new regulatory and administrative barriers for hardworking Alaskans to overcome. Taxes are not the answer to our budget woes; the state must consider embracing the same austerity Alaskans have during these challenging times.
Melodie Wilterdink is an Anchorage resident and the vice president of operations and communications at Alaska Policy Forum.
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